Severity of economic crisis and the futile attempt to hide it


Which are the parameters that the bourgeois economists base their analysis of progress or regress of economy on? Number one—growth rate of GDP. Number two — growth rate of industrial production. Number three — rate of unemployment. Number four — state of market demand. Broadly these are the four major ones. Added to this, what is referred to quite often these days is the stock market index. If one looks at any of these parameters, it would be established beyond doubt that the country’s economy is not only in tailspin but in severe crisis. For the most part, we will only refer to the published figures, comments of the economists, experts, columnists and bureaucrats belonging to the circle of ruling dispensation as well as defenders of the prevailing capitalist economy.

Confirmations by official parameters

First is GDP growth rate. As per official figure, it has tumbled down to 5% baffling all the ‘experts’ and government spokesmen who were hitherto busy showing how Indian economy was poised to overtake other countries in its pace of growth. Even RBI governor admitted that such drastic fall “has come to him as a surprise, worse than all predictions”. Both World Bank and International Monetary Fund (IMF) have significantly slashed India’s GDP growth rate prediction. Next is industrial production.  For the April-June 2019 period, the Index of Industrial Production (IIP) had slipped 7 per cent lower compared to corresponding period in the last fiscal year. Growth of eight core sector industries— coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity – has dipped by 2.1%. Two Purchasing Power Manager’s Index (PMI) surveys conducted by IHS Markit indicate a slowdown in both services and manufacturing activities which constitute bulk of GDP growth. Officially, 6.8 lakh industries are reported to have closed down throwing lakhs out of job. Demonetisation, the much clamoured flop, gobbled up thousands of jobs in cash-based industries especially in the unorganised and small-trade sectors and agriculture. According to a Consumer Pyramids Household Survey by the Centre for the Monitoring of the Indian Economy (CMIE), nearly two million jobs were lost between January and August because of demonetisation. The cascading impact of job loss at such magnitude also dealt a blow to other means of livelihood in the neighbourhood. Besides this government-sponsored blow on jobs, many small and medium-scale companies have been forced to lay off lakhs of employees over the past few months to reduce production costs and volume. A report shows that 4.70 crore jobs were lost between 2011-12 to 2017-18. Automobile sector which has been facing deep wounds for the last 10 months on account of declining demand, has already shed over 3,50,000 jobs. Indian Railways is reported to be  planning to hive off 3 lakh employees. North Indian Textile Mills Association (NITMA)  apprehends that over 50 lakhs employees and workers might be jobless because of ongoing recession. 605 spinning mills have shut down across India. Tamil Nadu  Open-end Spinning Mills Association estimates that 1.2 lakh workers have already lost their jobs in the previous year. Contractual employees (mid-to-junior level) everywhere are the first casualties. Obviously, with spurt in job loss coupled with rapidly shrinking job opportunities, unemployment is soaring alarmingly.  It has already come to light that unemployment is at 45 years’ low, a record indeed! Earlier, several instances came to light on  how joblessness is compelling hundreds of highly qualified candidates including doctorates, rank-holder engineers and post-graduates to accept lowly paid jobs like those of peons or sweepers. It was reported in the media only in October last that as many as 1,59,278 candidates had appeared for 1,149 for posts of  peons and bailiffs in Gujarat.  Among those who qualified in the test and were appointed there were seven doctors, 450 engineers and 543 post-graduates. If one adds the number of unemployed with those under-employed and casually employed, the figure would be astoundingly high.  More than 80 percent of Indians work in jobs without regular pay, or social benefits, according to the International Labour Organization. In the cities, they are employed as street vendors, construction workers and in small kirana shops, or as labourers on farms and in fields, without any job security or subsistence level emoluments. Finally, rapid fall of demand in the market has no more remained a secret. Data show consumption expenditure which is at the core of domestic demand is registering sharp decline. Sales of Hindustan Lever, one of the biggest fast moving consumer goods (FMCG) company in India are reported flat. Britannia’s Managing Director opined that people are thinking twice even before buying a five-rupee biscuit pack. In fact, it is a common observation that the industrial and other productions are slowing down, if not shut down, because there is no taker in the market meaning no demand. As consumer demand slumped, industries are announcing more and more layoffs and production cuts to further peril of the economy.

A glance at the basics

Why is there no demand? Because the consumers, meaning the common people, lack purchasing power to buy goods at the prevailing prices. Why are the people lacking purchasing power? Because they are progressively denied bare means to earn the money needed to purchase even the basic necessities of life, let alone buying other items of utility. With job loss, unemployment, pseudo-employment and under-employment mounting with every passing hour—courtesy the endemic law of capitalist economy, avenues for earning by the common toiling people—the workers-peasants-middle-class— are squeezing further. So, these multitudes of common masses are losing buying power. Losing buying power by common people means absence of market for the goods. Since there is no market for selling goods, the capitalists or industrialists, in modern terminology ‘investors’, are shying away from deploying capital in productive sectors. So, the existing industries are closing down one after another while no fresh investment is forthcoming. In capitalism, the owner capitalist class invest capital to earn maximum profit. If scope for profit maximization diminishes or is abolished altogether in a particular industry, no capitalist or industrialist or promoter—whichever term may be used to denote them—would come forward to invest fresh capital. As a class, they, particularly in the present stage of decadent moribund capitalism, are least bothered if the common people are starved of basic necessities and pushed to the precipice of total ruination. What they are concerned about is profit, multiplication of wealth. If they find no buyers of any goods at the price determined by them, they slash the volume of production leading to less supply. This increases the prices further and pushes out more buyers from the market and thereby deepens the crisis more.

Secondly, with scope for profit maximization depleting in productive sectors, the capital remaining idle in the hands of the capitalists are channelized in non-productive areas like arms manufacturing, usury and speculation. Since the government is nothing but a caretaker of the capitalist state, it is used for boosting militarization of the economy as is evident in all imperialist-capitalist countries, India included. And then a bulk of the capital is pumped in stock market or capital market speculation. If more money is injected in share market to chase limited number of shares, prices of the shares or stocks climb up. For example, earlier, say, Rs 1,00,000 was chasing 100 shares. So average cost per share was Rs 1000. Now if Rs 4,00,000 lakhs are infused afresh in the share market, Rs 5,00, 000 would chase the same 100 shares or stocks changing hands through sale and purchase and average price per share would jump to Rs 5000. Hence, stock market index would go up. Pointing towards this artificial jacking up of share market, the economists-columnists-experts owing allegiance to the capitalist system try to claim that the ‘economy is on the move’. But a careful observation would reveal that such rise of  stock market index is a sign of disease and not health of the economy. This speculative jump or slide of a select group of shares basketed to form the index has no link with or effect on common economic life of the people and the country. Hence, citing upswing of stock market index to buttress optimism about economy is a misnomer, if not a ploy to hoodwink people.

Prescribing medicine of headache for containing dysentery

Now, how is the government trying to lift the economy from its sagging mode? As we have shown above, problem is of lack of demand triggered by dipping buying power of the masses. But the government is trying to pose as if problem lies in lack of investment. So, it is pretending to give a boost to investment by lowering corporate tax, liberalizing Foreign Direct Investment (FDI), opening more and more Special Economic Zones (SEZs) with plethora of concessions including tax waivers, handing over the essential public welfare sectors like education, healthcare, civic activities, railways, road, and water transport, electricity generation and distribution and so forth to the monopoly houses on a silver platter for running on a commercial basis through more ruthless exploitation of the common countrymen. Just the other day, corporate tax was reduced from 34.94% to 25.17% which would cost the exchequer as high as Rs 1.45 lakh crores. Prior to that, the government announced  the ‘Remission of Duties or Taxes on Export Product’ (RODTEP) scheme to boost the exports which would entail forgone revenue  of around Rs 50,000 crore. If this stimulus, instead of being gifted to the industrial houses, was used for subsidizing agricultural inputs, spending more on social and public welfare sectors like education, healthcare, electricity, transport etc., increasing maximum support price of crops and withdrawing additional cess on fuel,  it would have given some relief to the suffering people. But then the government’s focus is on the corporates, not the tormented countrymen. A very rough calculation would show that if one takes into account all the following measures like the revenue foregone because of cut in corporate tax, Special Economic Zones (SEZ) not taken off, deduction of export profits of units located in SEZs, deduction of profits of undertakings engaged in generation, transmission and distribution of power as well as deduction of profits of industrial undertakings derived from production of mineral oil and natural gas and non-recovery of direct tax, the figure of tax loss by the government per year would be around Rs 10 lakh crores (Rs 10 trillion) per year. Not only this much. On the pretext of boosting investment by the industrial houses, the government is benevolently waiving bank loan defaults by them and continuously reducing bank interest rate. Four years back, the total debt of India’s top 10 corporate borrowers alone was Rs 731,000 crore, nearly four times the amount of farm loans. Indian banks wrote off a record Rs 2.54 lakh crore of bad loans in Financial Year (FY)2019 to show reduced NPAs on their books, a trend that continues into FY2020 as well. And then, to compensate the loss, the government in the last 10 years has infused fresh capital of Rs 3.8 lakh crore to the public sector banks (PSBs) from government exchequer. Yet, there is no sign of increased credit offtake by the industries since there is no avenue for fund deployment other than speculation and arms production. SBI Chairman himself admitted that the bank is sitting on Rs 1 lakh crore to lend for investments but finds no candidate.  Ahead of the last Union budget in July 2019, investment in new projects was stated to have plunged to a 15-year low as per data provided by the Centre for Monitoring Indian Economy (CMIE). Nowhere in the world, slashing of bank interest rate has boosted investment. On the contrary, continuous lowering of bank interest rate is eating into the returns common savers particularly retired persons earn from their hard earned money deposited in the banks. This is further making a dent in their buying  power.  Clearly, the government is giving one-sided emphasis on so called boosting of investment by wooing the monopoly houses and corporate behemoths instead of trying to increase income of the common man, and has been peddling in stunts and gimmicks like demonetization and GST to make things far worse. While the problem is of falling income of the people at large, the government’s diagnosis is that giving more and more concessions to the industrial houses and corporate barons would cure the ailment of the economy. How prudent the diagnosis is! Even if it is assumed that there is a spurt in investment from domestic capitalists or through FDI route, would that ipso facto create jobs, as claimed, and generate income for the common workers? History of last three to four decades would say an emphatic “NO”. Whatever few industries are set up are high-tech ones, that means capital-intensive or sophisticated technology-based, needing hardly any manpower. So, a new term “jobless growth’ has already found currency in the parlance of bourgeois economics now. And more the exchequer loses revenue because of plethora of tax concessions, waivers and exemptions to the industrial houses and big business, more curtailed is the allocation of funds towards whatever miniscule public welfare is undertaken by the government causing people at large to suffer more and more. This escalated misery and penury is captured in the Global Hunger Index where India ranks 102 out of 117, peasants’ suicide exceeding 3.5 lakhs, suicide of retrenched workers is going up, number of migrant labours soaring, continued influx of landless jobless peasants into the town areas increasing the umber of beggars and footpath-dwellers and retrenched factory workers ending life by consuming poison or hanging. Obviously, when the underprivileged are dragged to the dregs, prosperity is skewed in favour of the privileged. Under the current rule, Mukesh Ambani and Gautam  Adani, two leading monopolists, are reported to have doubled their wealth in five years. According to Forbes India figures, while Mukesh turned out to be the richest Indian by increasing his wealth by 118% (from Rs 1.68 lakh crore to Rs 3.65 lakh crores), Adani’s wealth zoomed up by 121% from Rs 50.4 thousand crore to a breath-taking Rs 1.1 lakh crore. Gautam Adani who is stated to be owing Rs 72, 000 crores to the banks has been granted fresh bank loan to the tune of Rs 3000 crores for buying mines in Australia. The number of billionaires in India more than doubled to 119 between 2013 and 2018. And the country will lead the global growth in ultra high net worth individuals, with its numbers rising 39 percent to 2,697 by 2023, the researchers estimate. Thus, prosperity and ‘favourable’ treatments are vulgarly skewed in favour of the privileged at the cost of death, starvation, deprivation, destitution, wails and woes of the multitudes of oppressed countrymen. Is it something to be celebrated over?

A section of ruling circle has also been trying to impress that the hiccups of Indian economy are attributable to global economic slowdown. They hasten to add that since Indian economy is driven more by internal factors — consumption, supported by demographics and investments, supported by the need for infrastructure — rather than trade, there is no apprehension of  its slipping into a recession. But a global recession will have an adverse impact on growth due to slowing international demand and increased competition from imports, they contend. Both the contentions are euphemized deceptions. We have already seen the peril of the ‘internal factors’ driving Indian economy. Secondly, if our economy is claimed to be a robust one spurred on by internal consumption, how can ‘slowing international demand and increased competition from imports’ have so much of adverse effect as to cripple it? Absurdity par excellence! Fact is that economy of India as well as other capitalist-imperialist countries are governed by the rules of capitalism and hence the crisis endemic of obsolete capitalism is surfacing everywhere with virulence.

 Ruling dispensation refusing to acknowledge economic crisis

So, unable to deny the stark reality even after a slew of manipulations, calibrations, suppressions and diversions, the ruling dispensation is now trying to either refuse to acknowledge that economy is in severe crisis or to evade responsibility by beating about the bush and making ludicrous comments. While most people in the country are concerned about layoffs, job losses and the lack of employment generation, and the impact this is having on India’s young people, Railways and Commerce Minister Piyush Goyal commented two years back that the decrease in employment opportunities is a “very good sign”. Recently, he described the ongoing economic slowdown as a structural adjustment, periodic in nature and said he is not unduly perturbed by the slowdown. “Times are good, profits are welcome”, he added. 

When the inconvenient fact of plummeting GDP rate was put forward before him at a press conference last September, he responded that ‘math never helped Einstein discover gravity’. Likewise, addressing of late a media conference in Chennai, Finance Minister Nirmala Sitharaman Skirted the questions on falling GDP numbers, job losses and the overall slowdown in the economy and refused to acknowledge the growing concerns over the state of Indian economy’s health. Instead, she said that they respect the wealth creators and hence she is talking to the industrial barons, taking their inputs and suggestions and responding to what they expect from the government. Once again, it is clear that the government finds ‘friends and philosophers’ only among the corporate tycoons whose wealth is soaring in tandem with the distress of the myriads of toiling countrymen and would continue to be driven by the latter’s needs and wants. 

Making a strong case for escapism, Mohan Bhagwat, the RSS chief said there was “too much discussion” about the “so-called” slowdown. ‘It was this excessive discussion”, he said, ‘that was leading to a decline in economic activity. In other words, if only we stopped talking about the slowdown, business activity will pick up. Just like we go to the movies to feel we can all be superheroes’. While addressing an RSS meet, he also said that Gross Domestic Product (GDP) is a “faulty” parameter to judge economy” and “the country is growing”. Most bizarre has been his definition of recession.  “An economist told me that you call it recession only when you report growth rate of below zero. But we are having a growth rate of around 5 per cent. One can show concern towards it, but there is no need to discuss it,” he said. We do not know which economist he was talking about and how the well-known economists would react to such an iconoclastic comment.

Even Circles of Establishment miffed by this appalling ‘bypassing’ of the real issues

Thus, the government and its mentors have been posing as if they have plucked out all the prickly issues which have created a negative perception and eroded trust. But if a tyre is losing air pressure, removing nails from the road ahead will not stop the air from leaking.
The appalling ‘bypassing’ of the poor and downtrodden and moves on the part of the government to fatten the swelling coffer of the handful of super-rich — akin to the proverbial saying of “Carrying coal to New Castle”—have irked even a section of those belonging to the quarters of establishment. Expressing concern at the demand crunch coupled with a slump in macro parameters, Raghuram Rajan, former RBI governor opined  that “ill-conceived demonetisation and the poorly executed GST roll-out” are the two key reasons behind the economic slowdown. “To my mind, there is no greater cardinal sin in finance than the misuse of the common man’s hard-earned savings. It seems brutally unfair that we have allowed a system of loan waivers and write-offs every now and again, but yet we do not have a robust enough financial system to protect the honest common man’s savings,” commented Deepak Parekh, HDFC Bank Chairman.   Economist Parakala Prabhakar, who is the husband of Finance Minister Nirmala Sitharaman, also expressed that the Narendra Modi-led government has not shown willingness to frame its new policies. Accusing the government of being in denial mode, he wrote, “While the government is still in denial mode, data flowing uninterruptedly into the public domain show that sector after sector is staring at a seriously challenging situation.” Hitting out at the Centre, he blamed BJP’s “inexplicable reluctance” as the reason behind the issue. Arvind Subramanian, who was till last year one of the Prime Minister’s  most senior economic advisers, has taken a dig at the government for overestimating growth by several percentage points through manipulation in calculation methodology and held that hitherto projected 7% economic growth is actually 4.5% . Nobel laureate Amartya Sen had again kicked up a storm last year after he reportedly said, “India has taken a step in the wrong direction after 2014.” Abhijit Banerjee, the latest Nobel Laureate, had observed six months back that there was some mystery that surrounds the growth numbers, the investment numbers were down, the rise in reported unemployment was real and job seekers wanted job security, good pay, benefits which  are scarce, which is why 2.5 crore applied for 90,000 low level railways jobs. He also quipped that ‘pakoda (fried vegetables) selling’, as observed by the Prime Minister, was no employment and pointed out that average farming family has long given up making a full living from agriculture. He also said “It looks very much like we are in a Keynesian downspin. Meaning, there’s not enough demand. People aren’t buying food. So, if I had to pick one thing the government should do is put cash in the hands of the poor. Through higher support prices for crops, through NREGS (National Rural Employment Guarantee Scheme)…” “I think a bunch of money in the hands of lower income people will start up a demand. So the biscuit companies won’t start closing. The biscuit companies closing is a really bad sign,” he said.

Capitalist economy is in crisis, people bearing the brunt

But, the most significant remark has come from Raghuram Rajan when he during his interview to BBC Radio 4’s  in last March warned that capitalism is under “serious threat” of a ‘revolt’ as the economic and political system has stopped providing for the people.” This is where the entire bourgeois economist fraternity is alarmed . So, all of them are busy prescribing empiric medicines to cure the ailment. It is true that right at this moment, the task imperative is to boost demand for which providing enough and appropriate avenues for income to common people in the form of creating gainful permanent jobs, advisably by setting up labour-intensive industries in the public sector, is necessary as was once done under public pressure. Secondly, there ought to be a corruption-free nexus-free crop procurement system at remunerative price from the peasants and boost buying power of the rural masses. That is what, the theorists of ‘poverty alleviation’  are also stressing on taking a cue from the Keynesian prescripts which, in order to rescue global capitalist economy from the Great Depression in the early 1930s, had also stated that “there is no automatic self-righting mechanism tending to establish full employment in an unplanned private enterprise economy”. So Keynes stressed on more government initiative in boosting purchasing power of the people and stimulate demand to pull up the sagging economy. True that as an immediate corrective measure in our country, it is needed to boost buying power of the people and thereby stem their growing pauperization a bit.  But that would not solve the problem which stems from the worn-out capitalist system itself. Keynes’ proposition, in the ultimate analysis, was a theory which sought to rewrite operative aspects of capitalist economy in order to stave off the crisis engulfing it in its decadent moribund stage. What needs to be kept in mind is that it was Keynesian model which paved the way for neo-liberalization now spelling disaster in people’s life. Recent developments in Chile bear eloquent testimony to that. In a number of Latin American countries, influence of Keynes and his Latin American proponent Raul Prebisch was forced during the 1970s to give way to liberal-monetarist principles of Milton Friedman. Chile was one of them. Even 5 years back, Chilean government boasted of “historical increase in public investment” and pledged to pump more money into developing certain remote regions and consolidate social welfare schemes. But then there is a fundamental difference between giving a man a fish to feed him once and teaching him how to fish so that he may become more self-reliant. Capitalism can ill-afford to make a man self-reliant since it is enmeshed in its own cobweb. The moot point is that poverty cannot be alleviated by keeping the source breeding it day in and day out, that is, the capitalist economic system based on exploitation of man by man by way of appropriation of labour power and consequential inequality in distribution of produced wealth andpremised on profit maximization for handful of capitalist owners. Following inexorable course of history, capitalism has become obsolete, reactionary and breeding all crises, the brunt of which is borne by the common masses. So, is witnessed worldwide spurt in people’s protest against capitalist-imperialist oppression which can only be led to their logical culmination by overthrowing capitalism by revolution under leadership of a correct proletarian revolutionary party.  Let us end by quoting great Lenin who clearly pointed out the truth: “ if capitalism…could raise the standard of living of the masses, which are still poverty-stricken and half-starved everywhere in spite of the amazing advance of technical knowledge , then capitalism would not be capitalism….unevenness of development and semi-starvation of the masses are fundamental, inevitable conditions and prerequisites of this (capitalist) mode of production.” (Imperialism , the Highest Stage of Capitalism) 

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