IMF’s optimism about Indian economic growth indicates ‘bright spot’ for whom?


The International Monetary Fund (IMF) has heaped praise on the Indian economy amid fears of a global recession. IMF’s deputy managing director, Antoniette Sayeh, said that India is a relative bright spot in the world economy. She also added that India is growing at rates significantly faster than other major economies since India recorded a growth rate of 9.7% between April and September 2022, compared to China’s 2.2%. The Indian economy is expected to grow by 6.7% in the current financial year, which ends in March 2023, said she. (The Hindustan Times 06-01-23) Taking a cue from that, PM Modi, at a global investors summit in Madhya Pradesh on 11 January last, claimed that Indian economy to have ‘strong macroeconomic fundamentals’ and is expected to be among the fastest growing in the elite G-20 grouping, ‘‘Not just we Indians but every institution and expert in the world seems to be confident about this… the International Monetary Fund sees India as a bright spot in global economy…’’ the PM said. (Hindustan Times 11-01-23)

Fairy tale of trillion economy
In 2019, Prime Minister Narendra Modi famously envisioned that India would become a $5 trillion economy by 2024-25. Since then, several Union ministers and others in the government have spoken along similar or grander lines. In April 2022, the Union finance ministry said in a statement that India is ‘‘on its way to become a $ 5 trillion economy’’ without specifying by when. In December last year, external affairs minister S. Jaishankar said that India will not only become a $5 trillion economy by 2025 but also a significant manufacturing hub. The Centre for Economics and Business Research in its published report has predicted will become a $10 trillion economy by 2035 given the growth trajectory of its GDP. Earlier this year, Bibek Debroy, chairman of the Economic Advisory Council to the Prime Minister said that India’s GDP will be close to $20 trillion by 2047.

Who bats for PM’s optimism?
But the question which goes abegging is whom is this ‘bright spot’ for? Is it for millions of toiling Indians who have been pauperizing with every passing day or a handful of monopolists who are amassing fabulous wealth by ruthlessly exploiting the people? The answer is not far to seek as industrial tycoon Gautam Adani, who has recorded a meteoric rise in wealth accumulation over last 10 years to become the third richest person in the world, has come forward to bat for PM Modi. He had said at the 21st World Congress of Accountants last year that ‘‘India, which took 58 years to become a trillion dollar economy, will add an equivalent some to GDP every 12-18 months and will be the world’s second largest economy by 2050’’ (The Economic Times, 19-11-2022). Adani also said earlier that, ‘‘no one will go to bed empty stomach in India if it becomes $30 trillion economy by 2050’’ (The Indian Express, 22-04-2022). Surely, Adani and the ilk are reckoned as bright spot of Indian economy by IMF and not the 95% of Indian citizens most of who are now in hand-to-mouth condition.

Hoax of economic growth even on bourgeois parameters
First of all, how does a trillion dollar economy crown benefit the toiling millions bleeding white by ruthless capitalist exploitation? Has even a drop of trillion ocean soaked the have-nots or it continues to be an exclusive preserve of the handful of top monopolists and multi-nationals? Secondly, are the predictions of spectacular recovery in economic growth in the days to come based on objective reality or mere expressions of unfounded optimism? If one goes by the broad parameters based on which GDP or economic growth is worked out in textbook economy, future will not appear to be that bright. India registered a slowdown in its industrial growth to 1.4% in November from 4% in October. Poor rate of capital formation (net capital accumulation during an accounting period which refers to additions of capital goods, such as equipment, tools, transportation assets, and electricity or in other term, gross investment in real terms other than changes to inventories) is stated to be as one of the major constraints responsible for slow rate of industrial growth. But fact is in capitalist economy where maximization of profit of the capitalist owners of the means of production is the objective of production, industrial growth plummets if demand (read purchasing power of the people) in the market falls. But the bourgeois economists and executives never acknowledge this reality because that would bring to the fore the inherent flaw of capitalist economy. So, they point at poor capital formation without clarifying why it is so. Secondly, India’s current account deficit (i.e. imports are more than exports), another parameter of calculating GDP, hit a new all-time high in the July-September 2022 quarter, at $36.4 billion. Consequently, rupee is falling rapidly in relation to US dollar which is considered the safest and most redeemable currency in the world (based on the assumption that United States have ability to pay its debts). Union finance minister had ridiculed herself and her government a few days back by commenting that rupee is not falling, dollar is rising. But fact is Indian rupee ended 2022 as the worst-performing currency in all of Asia. And why are imports far more than exports particularly when the Prime Minister (PM) and his colleagues are pretending to have made significant progress in operationalizing the ‘‘Make in India’’ slogan? Again, quarters of bourgeois economy have a readymade but weird answer. They say that as interest is being progressively raised by the RBI to control inflation, people invest more than spending. So, circulation of money goes down in the market entailing fall in demand. Ok. We understand fall in domestic market demand. Then what are the goods and services imported so extensively and for whose consumption? Secondly, the PM himself says that free ration is provided to 80 crore Indians. That is an indirect admission of 80 crore Indian languishing in abject poverty. Official facts state that over 20 crore Indians go to sleep empty-stomach every day corroborating India’s rank of 107 out of 121 countries in global hunger index. Official unemployment rate which does not take into account under-employment, casual or contract employment, disguised employment (when part of the labor force is either left without work or is working in a redundant manner) or pseudo-employment like those who earn bread as free lancers, is 8.3%. No official data is available for job loss. But CMIE, a reputed data agency, in June last year, reported a decline of 1.3 crore from the total number of employed persons. We have seen during pandemic that in a flash, 12 crore migrant labourers (who are on contractual employment) became jobless. Over 7 lakh industries have closed down over the last 10 years throwing millions out of job. Even sophisticated IT companies have been retrenching people in thousands. Recruitment in banks and government departments is virtually nil. Vacancies created due to retirement are extinguished. According to a report, almost 20 million graduates and 50 lakh postgraduates are unemployed in India. Around 47% graduates in India are considered not suitable for employment. If one turns to rural India, poor peasants are deprived of remunerative price of their produce. Distress sale is galore. Consequently, peasants’ suicide is soaring in number having surpassed 4 lakhs. The PM who claimed to provide 2 crore jobs per annum is now tight-lipped over that. He is only distributing a few thousands of scheduled appointment letters in media glare to score brownie point before next election. In such a situation where people are starved of jobs and are deprived of any means of earning to eke out a bare living, what prompts the bourgeois economists to hold that demand is falling because people are saving more than spending? Bunkum par excellence!

Is Indian economy insulated from global economic downturn?
Moreover, the Indian authorities on the one hand are blaming slowdown of global economy, outbreak of pandemic and ongoing Russia-Ukraine war for not being able to achieve desired economic growth. That means they admit that Indian economy is tied with global economy and is affected by the ups and downs of external economies. But at the same time, they talk of India being insulated from global recession and other negative factors. Which one is correct? and when economy is progressively tumbling, the ministers and economists-columnists are only talking of the future being rosy, without however giving any convincing reason.

Jugglery of figures
Before discussing other points, it is needed to unravel the mystery behind 9.7% growth in July-September quarter, 2022. First of all, officially reported economic growth in July-September quarter was 6.3 per cent in the July-September quarter, down from 13.5 per cent in the previous quarter. But there is an inherent deception in such reporting. Say, if output falls, say, from 100 to 90, then the fall is 10%; and then if it recovers in next quarter to 100, then the increase is 11.1% (because of the lower base). The rate of increase (11.1%) being higher than the rate of fall (10%), it is celebrated as economy having been back to recovery path. Secondly, such growth figures are mostly on a year-on-year (yoy) basis. Illustratively, economic growth in April-June quarter 2021 was shown to be ‘‘deceptively high’’ level of 20%. Immediately, the government propaganda machine swung into action bragging that economic activity has been boosted by robust government capital expenditure, merchandise exports and demand from the farm sector. But what was the mystery? In the first two quarters of 2020-21, the growth was -24.4 per cent and -7.4 per cent respectively, as the country was under complete lockdown due to the outbreak of the Corona virus pandemic and all economic activities had come to a halt. Hence, a 20% growth was calculated based on a -24% fall in the corresponding period of previous year. If the economic slump is between -19 and -20%, it can be projected as a 20% growth when calculated on a yoy basis. So, was it a growth, or downturn? This is how people are fooled by distorted calculations based on wrong premises.

Futile attempt to deny economy being in stagflation
Secondly, as per classical bourgeois economics which the present experts still fall back upon to explain twists and turns of economy, rising inflation means absence of recession (stockpiling of unsold goods). But why is then recession in Indian economy? To shield the growing stagnation in economy, the bourgeois pundits are saying that a ‘‘partial recession’’ has set in and uneven recovery going forward. The World Bank estimates dip in India’s economic growth to 6.6% in the financial year (April to March) 2023-24 from an expected 6.9% in the current fiscal. The US has reportedly entered a recession in the summer of 2022. A global recession is expected to occur in 2023. As part of global imperialism-capitalism, India is not at all immune to the US or global recession. How come inflation and stagnation are occurring simultaneously? Unable to deny this reality that marks rot in dying capitalism and hence inexplicable in terms of textbook theories framed during the laissez faire period of capitalism which is outdated in the current era of imperialism and proletarian revolution. So, a British bourgeois politician named Iain Macleod first used the term ‘stagflation’ to define an economic condition when stagnant economic growth, high unemployment, and high inflation combine together. Basically, inflation plus stagnant growth equals stagflation.
The World Bank admits that global capitalist economy is grappling with a sharp deceleration in growth, coupled with rising inflation. A ‘‘perfect storm’’ of challenges could reverse years of economic development and threaten to tip the global economy into a recession, and potentially into stagflation, the head of the World Bank warned in end September 2022. (Fortune 29-09-22) But the fertile Indian brains continue to claim that despite high inflation coupled with growing recession, India has lower chance of being in ‘stagflation’ stage because of its resilience and robust recovery measures.

Cause of economic downturn is shrewdly attributed to pandemic
Often, the outbreak of pandemic provides the ruling quarters a readymade pretext of economic downfall. Here also, the facts are perjured. Between 2019-20 and 2021-22, the gross domestic product in real terms went up by just 1.5%. But population increased by 2% between these two years. So, per capita real GDP was lower in 2021-22 compared to 2019-20. So how is pandemic responsible for this decrease? Another figure taken into consideration for GDP calculation is final private consumption expenditure in real terms. It is claimed that this figure was about 1.5% higher in 2021-22 compared to 2019-20 and gross capital formation in real terms was 3.75%. (Citizen 20-06-22) Again, this has been highlighted as resilience of Indian economy to turn around. But the fact that has been suppressed is that gross capital formation figure went up because all projects which were held back because of pandemic had been bunched together to inflate the figure.

Common toiling masses and not the super-rich are bearing brunt of GST
There is another aspect which should not escape our notice. The government had drastically reduced corporate tax rate three years back stating that it would boost production. Again, we are back to square one. Capitalists would invest only if there is demand in the market. We have already shown that demand is falling because buying power of people is plummeting. Even number of middle class has come down from 9.6 crore to 6.6 crore meaning income of 3 crore middle-class families had a nosedive to bring them on par with the poor or semi-poor populace. So, production remains stagnant at the level of reproduction only. Since demand is not increasing, then tax concessions given to the capitalists are simply pocketed by them without their undertaking any additional investment. It is alleged that many capitalist owners have taken advantage of input tax credit under GST but did not pass on the benefit to the end customer by lowering price proportionately. As a result, common people paid higher price for goods and also bore the extra burden of GST. In the process, around Rs 1.25 lakh crores have been appropriated by the capitalist investors. Also, approximately 64 per cent of the total Rs 14.83 lakh crore in Goods and Services Tax (GST) came from bottom 50 per cent of the population in 2021-22, with only 3 per cent of GST coming from the top 10 per cent.

Inequality is soaring by leaps and bounds
As we have repeatedly mentioned, economic growth presupposes rising living standard of the people at large. That is possible only when there is a fair equity in distribution of generated wealth, employment meaning remunerative permanent job is available to all, prices are within affordable range and essentials like food, clothing, shelter do not elude the toiling masses constituting majority of the populace. But what is the spectacle of India? Rich is becoming richer and the poor poorer.
The richest one per cent in India now own more than 40 per cent of the country’s total wealth, while the bottom half of the population together share just 3 per cent of wealth. In August last, Gautam Adani, the industrial tycoon extremely close to the country’s PM, was declared the third richest person in the world with a net worth of $137.4 billion. Mukesh Ambani’s net worth is estimated at $93.8 billion. Cyrus Poonawalla, the vaccine king, with a net worth of $26 billion is the World’s richest healthcare billionaire. On the other hand, as per official data, there are 26.93 crore people living below the poverty line. Even there is hidden underestimation. The poverty line is based on the expenditure required to maintain a minimum level of health, education and nutritional outcome, an improvement over the older methodology that relied solely on the calories consumed. However, it does not consider if amenities, such as good quality education and healthcare, are available to all, Moreover, the poverty line is not about access. The rupee value of the minimum expenditure on food, education, health, etc., required to maintain the minimum acceptable standard of living is calculated using the NSSO (National Sample Survey Office) data on consumer expenditure.
Access comes into the picture when one talks about deprivation. For example, the Tendulkar Committee way back in 2011-12 recommended that those earning below Rs 816 in rural areas and Rs 1000 in urban areas per month are to be classified as below poverty line. Even today, that is the official benchmark. Can anyone stick to that benchmark today when inflation has gone up phenomenally over the last ten years? But, poverty line it is not the only criterion used to identify beneficiaries for welfare schemes. The Public Distribution System for food covers nearly 67% of the population (93.8 crore) who are reckoned as ‘deprived’. Households are included in the category of deprived or vulnerable if they fulfil certain conditions called the deprivation criteria. These criteria were determined separately for rural and urban areas. And as stated above, 80 crore people are identified as eligible for free ration.
So, one can well understand the extent of inequality. This is destined to be more in the days to come. No number of palliatives, sweet-coated words, colourful dream vending or repeated alluding to external causes for India’s domestic debacle euphemized as ‘‘performance less than expectation’’.

Let not common people duped by economic jargons and fake projections
Surely, objective reality points towards a ‘blood spot’, not ‘bright spot’. Whatever trillion economy India might become after 10, or 20 or 30 years, situation would only turn from bad to worse for the people. Both the ruling monopolists and their subservient BJP government are aware of that. So, cunningly, both PM Modi and Adani are deferring the timeline of advent of ‘‘acche din’’ by 10 or 20 years while boasting about achieving trillions of economy target.
The pathetic situation of the capitalist system is beyond words. On one side, it is desperately trying to control and regulate the expansionist appetite of the capitalists, just like straightening the dog’s tail, to mitigate the crisis. On the other side, it is trying to mobilize huge resources and find out new avenues, either within the country or abroad, for very extensive investment of capital to somehow stave off the accentuating market crisis endemic of the system. But it will only widen and aggravate the crisis, not abate it. But capitalist economy has no other option. It seeks to overcome one crisis just to fall into a more severe crisis the very next moment. Conventional textbooks and the newer theories advanced by the worrying bourgeois economists from time to time might fetch Nobel prize but have no answer to this cobweb of capitalist crisis. More the days will roll out, more aggravated will be the crisis brunt of which would have to be borne by the common oppressed masses. Remedy lies in revolutionary overthrow of decadent moribund capitalism for which necessary socio-economic conditions are to be fulfilled in right earnest by the vanguards of revolution.

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