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Recently, PM Modi congratulated India for achieving its target of reaching $400 billion from exports in the current fiscal for the first time. It can certainly be seen as a landmark in the line of Atma Nirbhar Bharat. Similarly, in July 2021, PM Modi India wrote on Twitter – “India had doubled its tiger population four years ahead of schedule.” It indicates that on the environmental front, India has also been doing well. Also, India has successfully balanced world politics. Apart from this, recently IMF lauded India’s PM Gareeb Kalyan Yojna for protecting India from a situation of extreme poverty.
The objective of all these development should be ended with the progress of the Indian public at large. But people’s development is not in sync with the above developments as per our expectations from the current establishment. COVID-19 pandemic has affected different aspects of human beings. To some extent, it has given the opportunity for the government of India as well as provincial governments to take advantage of it. This phenomenon is neither new nor unique to India. It has been almost the same across the globe.
Pandemic: A protector to the government
Nearly two years back, on March 24, 2020, PM Modi called for a complete lockdown of the entire nation for 21 days in an order to contain the COVID-19 pandemic. People got scared and a kind of lawlessness was created. People started hoarding grains, and goods went out of stock. However, on this front, the government worked well in ensuring the proper supply of goods. But migrants in general and daily wage earners, in particular, were sandwiched between the governance system of ‘source state’ and ‘destination state’. They decided to walk toward villages for thousands of kilometers on bare feet without the active support of the government.
In my opinion, it was the second failure of the NDA-led government after demonetization. I said failure not mistake because we are well aware that villages still work as a shock absorber to global financial instabilities. During the Global economic crisis of 2008, India’s economy was not significantly affected because people went back to their villages and there they got some money through programs like MGNREGA. Over the years, the government has reduced financial allocation to MGNREGA. But during the lockdown, the pandemic compelled the government to give an additional allocation of Rs 40,000 crore to the previously allotted Rs 61,500 crore.
However, the government launched PM Garib Kalyan Yojna to defeat COVID-19 pandemic. To some extent, it was successful in protecting the people standing in lower strata. But it has ignored the middle class. In fact, it became an excuse to hide failures. That’s why we didn’t witness the effect of anti-incumbency in the last 5 state elections. People felt justified with the reason. For instance, we have witnessed people crying on road with cycles but were not criticizing the government for its failures. It indicates that the integral state (state along with the civil society – Gramsci) plays an important role in maintaining the hegemony of the party system.
Excessive contraction and shrinking public policy
In a time of crisis, it is advised to adopt the counter-cyclic policy. We can take a case study of the UK, whenever economic growth was down in history, then the British had increased their government expenditure. It doesn’t mean that on the one hand, spending is increased in the form of a new package, and on the other hand, spending is curtained to make it equal. Otherwise, it would become a zero-sum game and would not contribute to any significant effect on society. For example, the Government of India has suspended financial concession to senior citizens on the Indian railway which has still not been re-activated.
Similarly, the Government of India put a pause on LPG gas subsidy. Like senior citizen’s concession, it is still on hold. It is popularly advocated that Direct Benefit Transfer (DBT) has a positive side of curtailing corruption by directly putting money into the beneficiary’s account. But it has a negative side also as we have been witnessing in the case of LPG subsidy. It gives direct control to the government. It has now become a new normal to purchase goods at market price. It won’t affect them very much if the government suddenly stops transferring money into their account. Thus, subsidy through account gives the intangible feeling that suppresses the feeling of protests.
Additionally, fuel prices are skyrocketed. We know that fuel price is closely related to everyone’s life. It leads to an increase in the prices of milk and vegetables. It has a spillover effect on other products as well. Currently, companies are either increasing the prices of their goods or decreasing the quantity for keeping the price the same due to cost-push inflation. Thus, increasing inflation and at the same time decreasing purchasing power will push to a deadlock in the Indian economy. This deadlock is explained by Marx famously that capitalism contained the seeds of its own destruction. Such inflation is also called regressive taxation where a beggar is also compelled to pay during price rise.
In the process of contraction, along with ignoring social justice by stopping financial concession to senior citizens, some of the unjust commercial practices are also followed by the Indian Railway. The Competition Commission of India (CCI) along with the consumer court has to take this into confidence. For example, very high charges are imposed in case of cancellation of a ticket, and no charge is returned in case of a Tatkal ticket cancellation. Similarly, in the case of cancellation of a normal ticket, the processing fee and taxes are not refunded apart from cancellation charges. While returning goods, even e-commerce places like Amazon and Flipkart refund shipping charges.
Liability of economic failure on the masses
Banking is a financial intermediary. It is an important driver of economic growth in India. People put their savings money in banks and that saving is translated into investment by the business class. Interest received by the bank is distributed between the bank as profit and the public as the interest earned. But the corruption in the banking system ended with zombie lending. It means they are giving loans to those firms that are unable to meet interest obligations from their income.
Consequently, banks face non-performing assets (NPA). Most of the NPA is generated in a public bank. It is compensated in two ways – First, the government uses taxed money to protect banks from failure (E.g. Mission Indradhanush). Second, Banks reduce the interest rate on public savings. Thus, the liability of failure in the case of NPA is shifted to the people. However, over a period of time, public deposit depreciates in banks. For example, in May 2022, the inflation rate is 6.7% but the saving rate in the State Bank of India (SBI) is merely 2.7%. Overall saving money put in SBI bank depreciates by 4% per annum (6.7% – 2.7%).
Similarly, Government demonetized the old currently. But demonetization didn’t add any significant value to our economic system. Rather it increased unnecessary costs, hamper small businesses, created a crisis for currency crunch, and create panic among people about the availability of currency. But the reform taken in the direction of GST (Goods and Services Tax) was a revolutionary step in the Indian economy. It was the need of the time. But the way the government implemented this scheme could be improved. Proper communication, rational thinking behind tax slabs, and fulfilling promises to compensate state governments (14% compounded annual growth rate in revenues) could be addressed in a more proper way.
Rising unemployment and declining purchasing power
Unemployment in India is increasing. According to the Centre for Monitoring Indian Economy (CMIE) data, the unemployment rate in the country grew to 7.83% in April 2022. With the New Economic Reform of 1991, people from villages started migrating to cities for better job opportunities and ensuring a standard of life. It reduces the possibility of disguised unemployment in the agriculture sector. The manufacturing sector is job intensive sector. However, the service sector can give high growth but won’t absorb much of the unemployment from the market.
But the present dispensation prefers “ends” instead of “means”. For them, data on high growth is more important than other factors. That’s why during the lockdown the government preferred to cut expenses in spite of the fact that India’s forex reserve was increasing even during that distressing period also. Due to policy paralysis, the automotive sector is on the decline. In 2016, Government aims to become a 100% e-vehicle nation by 2030. It created a kind of chaos in the minds of consumers as well as producers. However, later government restructure its objective and targeted sales penetration of 30% for private cars by 2030.
Similarly, the government directly jumped from BS-IV norms to BS-VI norms without any proper incentives. People didn’t purchase much in that period because they were waiting for the BS-VI norm vehicles. Additionally, this newer technology has increased the price of the vehicle, and that reduced demand in the market. Increasing prices of even general goods are not in sync with earnings. RBI report says that nearly 22% of the Indian population lives under the BPL tag. It means those people are not able to earn Rs23/day in villages and Rs32/day in cities. It can be relatively understood that a poor people (Under BPL) has to work 10 days to just buy a liter of mustard oil (Rs 220 per liter) provided he will not spend a single coin on the other stuff.
On the same line, the purchasing power of old age people is also declining. People in old age used to get pensions. They were in a position to spend on their health with pension money. But under the new pension scheme (NPS), the responsibility to the government has loosed. Their share will depend on the market. Their money is invested in the share market. Thus, it creates a situation of uncertain old age. Simultaneously, the government is decreasing its share of EFP (Employees’ Provident Fund). EPFO decided to lower the interest rates on PF deposits to an over four-decade low of 8.1% for its about 5 crore subscribers.
There is a need to revise the strategy of the Indian government. They should formulate policy in the interest of the greater masses. However, the government has taken some good steps like refraining from joining RCEP (Regional Comprehensive Economic Partnership) to protect the interest of dairy farmers. Thus, Gandhi’s idea of the Talisman can be the guiding lamp for the current dispensation. It means before formulating any policy, we have to just think about whether this action would help the people standing in lower strata or not.