High inflation, rising unemployment inevitable outcome of Modi govt’s neo-liberal policies

It is true that the whole world was engulfed by the adverse economic consequences of Covid pandemic during 2020-21 and 2021-22 and that even during 2022-23, there are lingering effects of the calamity. Most of the countries around the world are suffering, as does India, from economic dislocations in various sectors at various production points, which directly impact the marginalised sections of society everywhere.

The lockdowns translated directly into loss of jobs, savings/purchasing power in the working classes; conservation of earnings (by not spending) by the middle and upper middle classes, and the lack of demand in the market was quite obvious. Yet, governmental functionaries at the ministerial and/or bureaucratic level claimed to have seen the ‘green shoots’ in the economy and could actually envisage V-shaped recovery, without bothering to explain where from the demand will come.

Looking at the slack recovery and facing the situation of sluggish private consumption demand, the Union government is trying to push its own capital expenditure and that of the state governments to save the recovery process.

At the G-20 meeting of finance ministers and central bank governors in Bali on July 15, 2022, Indian finance minister Nirmala Sitharaman declared that “prospects of India’s long-term growth are embedded in public capital expenditure.” Ironically, during a Budget presentation, she herself spoke of how the private sector will help the government to withdraw from the economic initiative!

Now, when the whole economy is being privatised, why is it that the demand is not being privatized? Though the minister may not say so, John Menard Keynes explained in 1936 that the market economy suffers from inadequate demand because people becoming rich do not consume in proportion to the rising income, and the poor people cannot consume for want of income. Keynes therefore recommended creation of demand through increased public expenditure.

Today, inequalities in India have increased so much that the richer classes do not proportionately consume and public expenditure comes as a handy solution.

In a privatised and/ or privatising economy, the richer classes persuade the government not to raise tax rates on them but, for more developmental funds, either raise indirect taxes (like GST) or borrow from the market. At present, the government of India seems to be doing both these things.

The International Monetary Fund (IMF) has reported that governments the world over have borrowed beyond their repaying capacity. It shows that in India, with a debt GDP ratio of 89.6 percent, taxation of lower and middle classes would mean more sacrifices. ‘Bharat Bandh’ on July 17, 2022 by the traders to protest against five per cent GST on even the lowest level, that is unbranded goods is the example of things to take shape in the future. Obviously, the ‘consumer protest wings’ of the pro-people political parties need to be more alert and active in the future.

Inflation is supposed to have two types of consequences, tonic and toxic. The tonic effect offers mildly rising prices, profits, production, employment, etc, and hence is preferred by almost all. But if prices further rise and stay in the upper zone, the demand stagnates, which leads to stagnation in production, employment, erosion of consumption standards, disturbs macro-stability and may even threaten political stability.

The government of India has fixed the target of four per cent inflation and a margin of (plus/minus) two per cent, which means a zone of two per cent to six percent. During the financial year 2022-23, the rate of inflation is reportedly likely to be about seven per cent, that is above the upper limit fixed by the government for itself. The government and the corporate sector are worried about the situation, but the worst sufferers are the Micro-Small-Medium enterprises (MSMEs) and the urban, resourceless labouring classes.

Slow recovery, the accumulated inequality, nearly at the top in the world, low employment generation, accumulated unemployment are all the elements which join up to create the economic atmosphere of uncertainty and volatility.

The present unemployment rate, as published by the Centre for Monitoring Indian Economy (CMIE) on July 16, 2022, stood at 6.9 percent for rural areas, 7.7 per cent for urban areas and 7.1 per cent for the nation as a whole. These rates are pretty high and embarrassing for the government which came to power assuring to create two crore jobs per year.

Equally ridiculous is the quality of jobs as offered to Agniveers by the government. That even then thousands of young men are applying only underlines the compulsion of the situation.

The fact is that the Modi government has committed itself to privatisation of all the public sector undertakings. That it makes the first attack on employment to ensure profitability speaks loudly about the future unemployment!

The most worrisome feature of the quality of future employment is the destruction of permanency of jobs, which spells instability of economic life of the workers and the recently created labour codes have provided that the employer may appoint a person, at however high a post, on contract for a specific period. This deprives the workers of promotions, retirement benefits, etc. In a sense, this makes all the labourers casual — recruited and retrenched at will.

The government of India, through the NITI Aayog, published on June 27, 2022 the first-of-its-kind report titled ‘India’s Booming Gig and Platform Economy’. The following quote from it is an eloquent comment on the aspirant world economic power. The report says “…in 2020-21, 77 lakh (7.7 million) workers were engaged in the gig economy. They constituted 2.6 per cent of the non-agricultural workforce or 1.5 per cent of the total workforce in India. The gig workforce is expected to expand to 2.35 crore (23.5 million) workers by 2029-30… Trend shows the concentration of workers of the lowly skilled and highly skilled is increasing.” Hats off to the economy in which highly skilled workers also become gig workers.

But there is no dearth of supporters of even the lack of economic security. The other day, the young and the controversially firebrand leader of BJP Tejaswi Surya commented in a TV discussion that “economic security is the old, 20th century concept of socialism.’ We should be thankful to him because he acknowledges that economic security to workers is given by socialism and not by market economy.

Economic security, incidentally, is a cherished goal of the Constitution of India.

(IPA Service)

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