Wednesday, March 5, 2014
Wednesday, December 11, 2013
Tuesday, March 10, 2009
Adhering to Neo-Liberalism: FRBM Act and Declining Fiscal Deficit
Neo-liberalism entails an economic philosophy where the state rescinds its role of catering to the interests of the people under its jurisdiction and transforms itself into an instrument of promoting the interests of global finance capital. This essentially at the policy level takes the form of an expenditure cut on the part of the state under the diktats of finance capital. In our country this expenditure cut has been given a legal status under the Fiscal Responsibility and Budget Management (FRBM) Act, which limits the fiscal deficit (difference between Government’s expenditure and taxes) to only 3% of GDP. This Act was passed by the NDA Government but the UPA Government too with its basic thrust in favour of neo-liberalism embraced it. As a result, during the UPA regime, the fiscal deficit continued to decline from 4.5% in 2003-04 to 2.7% in 2007-08. In 2008-09 as a result of the financial crisis and revenue deficit of the Government increasing, the fiscal deficit has shot up to 6% of GDP, which however is estimated to continue its declining trend from next year, with a commitment that the FRBM targets will be adhered to in the near future. (Budget Speech of Finance Minister, 2009-10).
Declining Development Expenditure
This declining fiscal deficit essentially means a decline in the expenditure of the Government. Now, within this expenditure of the Government, there are fixed expenditures like salaries and wages to the Government employees, (which has increased recently due to the 6th pay commission), interest payments and administrative costs of the Government. So if the Government decides to decrease its expenditure then this essentially means, given the fixed part of its expenses, a decline in the Government’s development expenditure. Therefore, it is not surprising that the expenditure of the UPA Government as a proportion of GDP, has actually declined from 7.09% in 2003-04 to 6.17% in 2006-07 and then marginally increased to 6.76% in 2007-08. (Handbook of Statistics on the Indian Economy, RBI) In other words, as a result of the basic adherence of the UPA Government to the policies of neo-liberalism, it has actually decreased the expenditure on development, as a proportion to GDP, which is most important for the aam admi. This declining expenditure on development has taken a huge toll, particularly, on education and health in India.
Expenditure on Education and Health: A Far Cry from NCMP
Increasing Public spending on education to at least 6% of GDP was a key commitment made in the NCMP. Far from increasing the public spending on education, there has actually been a decline in the expenditure GDP ratio from 3.94 to 3.24% of GDP between 2000-01 and 2006-07 (taking into account expenditure by all government departments on education). Within this, the share of the central Government has marginally increased from 0.48% to 0.75% of GDP. This abysmal level of expenditure on education in India is even less than countries like Tunisia, Jamaica, Maldives and even less than the Occupied Territories of Palestine. (Source: Human Development Report 2007-08). This is a terrible and shameful state of affairs in the country, which the UPA has done very little to overcome. It is shameful that the UPA Government has actually reduced the allocation for the Sarva Shiksha Abhiyaan (SSA) since 2007-08. In 2007-08, the total allocation for this scheme was Rs 12020.2 crore, which has decreased to Rs 11933 crore in the interim budget of 2009-10. This fact alone speaks volume about the UPA Government’s commitment towards universalizing education in the country.
In the face of this refusal by the Government to increase expenditure on education, what has happened is that private players have come in a big way in the education sector both in Primary as well as Higher education. The share of private unaided higher education institutions increased from 42.6% in 2001 to 63.21% in 2006. (Source: XI Five Year Plan, Vol. 2). The UPA Government has declined from enacting any legislation to control the fees and admissions in the private education sector. Therefore, what has essentially happened is that far from spending 6% of GDP in education, the UPA Government has decreased the expenditure and catered to the interests of private education providers, who are anything but the aam admi.
The aam admi in India is basically unhealthy because of the complete apathy on the part of the Government to increase allocation in the health sector. According to the National Family Health Survey (NFHS)-3,
46% of children below 3 years of age were under weight
Percentage of anemic children between 6-35 months increased to 79.2% in 2005-06, from 74.2 in 1996-97. Percentage of anemic married women increased to 56.2% in 2005-06, from 51.8 in 1996-97. Percentage of pregnant women who were anemic increased to 57.9% in 2005-06, from 49.7% in 1996-97. In other words, there has been a drastic increase in anemic persons in the population.
This reflects a decrease in the nutritional intakes of the population. In 2004-05, the average calorie intake in rural and urban areas was 2047 and 2020 Kcal respectively, which decreased from 2153 and 2071 Kcal respectively.
In the face of such glaring deficiencies in the health of the population, it was imperative that the Government increase its expenditure on health significantly to at least 2-3% of GDP, as promised in the NCMP. However, it is seen that the expenditure on health in the country was only 1.02% of GDP with the centre contributing only 0.34% of GDP. Such low level of public expenditure on GDP is amongst the lowest in the world. As a result of this abysmal level of public expenditure on education, the number of functioning Primary Health Care centres in the country decreased from 22842 in 2001 to 22370 in 2007. Percentage of vacant doctor posts in the Primary Health Centre has also increased from 13.36% in 2001 to 18.04% in 2007. (Source: How the UPA Spend Our Money, CBGA). In other words, under the UPA Government the aam admi could find less number of primary health care centres in his/her vicinity and even when s/he could find one, the probability of not finding a doctor in the health centre actually increased.
One of the main reasons for the defeat of the NDA Government in 2004 was the acute agrarian crisis in the country. In the NCMP, the UPA Government promised to improve the agrarian situation in the country. The reality after five years is however far from what the UPA Government promised.
Large number of farmers continued to commit suicides even after the UPA came to power. In the year 2006, 17060 farmers committed suicide which was slightly lower than 17131 farmers who committed suicide in 2005. In 2007, as many as 16632 farmers committed suicide. (Source: http://www.counterpunch.org/sainath02122009.html). The farmers committing suicide in such large numbers only show that the extent of agrarian crisis did not subside with the UPA coming to power.
In order to address this issue of growing agrarian distress and farmers’ suicide, the Government in the budget of 2008-09 announced debt waiver scheme for the farmers. While the debt waiver came too late, it had its own problems also. Firstly, there was no scheme announced to waive the loans of the farmers taken from private money lenders which constitute bulk of the loans of the farmers. Secondly, the uniform cut-off of two hectares discriminated against dry land, as against wetland, farmers since the plot sizes of dry land farmers are comparatively larger; indeed this uniform cut-off may even leave out large segments of the peasantry in crisis-hit regions like Vidarbha.
At the same time, there are other serious issues pertaining to agriculture in terms of a falling per capita availability of food grains. It is noteworthy that the per capita availability of food grains continued to decline under the UPA Government from 168.9 Kg per capita per annum in 2004 to 160.4 Kg per capita per annum in 2007. This is basically a reflection of growing problem of food security in the country which has been compounded by the reluctance of the UPA to universalize the Public Distribution System. Moreover, the total allocation on food security decreased from 1.16% of GDP in 2004-05 to 1.12% in 2008-09. (Source: How the UPA Spend Our Money, CBGA). All this points to the fact that under the UPA, it has become difficult for the population to access food in the country. This is indeed a travesty of the UPA commitment towards improving the conditions of the aam admi.
After many years, the country reeled under double digit inflation rate under the UPA Government. This inflation was a result of the denial of the UPA to come out of the neo-liberal paradigm and strengthen the Public Distribution System and ban futures trading in essential commodities. Moreover, the UPA’s stubborn refusal to cut the excise duties on petroleum products also increased the price of petrol and diesel in the country. The sky rocketing price rise has subsided now, only with the advent of recessionary trends in the Indian economy as a result of the global economic crisis.
Denial Mode on Economic Crisis
Ever since the economic crisis hit the world and India, the UPA Government has been on a denial mode. Firstly, they claimed that India was insulated from the crisis, which was completely false as the data of the Indian economy showed the imminent slow down and job losses in the economy. Even then, the basic policy thrust of the UPA continued to be neo-liberal and market oriented when the entire world, particularly the advanced capitalist countries, were falling back upon public investment and Keynesian measures to reverse the global recessionary trend. This is most evident in the fact that the UPA Government announced its decision of increasing the FDI ceiling in the insurance sector when the entire world was in a financial crisis, which spread precisely because of such policies aimed at opening up the financial sector.
Secondly, the response of the UPA Government to deal with the crisis is grossly inadequate. The basic thrust of the UPA has been in terms of announcing tax cuts and interest rate cuts in the economy aimed at luring the people to spend more thereby increasing demand. However, in times of recession when the confidence on the economy is low, such tax and interest rate cuts does not increase demand, simply because the public hold on to their cash balances and do not spend more in anticipation of an uncertain and bleak future. What was needed was direct investment and demand injection on the part of the Government. In this regard the UPA only announced a direct fiscal stimulus which was only 0.5% of India’s GDP, which was a paltry sum compared to the enormity of the crisis. As a result of the UPA’s reluctance to deal with the crisis, lakhs of people have lost their jobs and many had to suffer pay cuts. In other words, the ideological commitment of the UPA towards neo-liberalism continues while the aam admi suffers.
The policies of the UPA Government led by the Congress party are clearly enmeshed within the overall contours of anti-people neo-liberalism benefiting the rich at the cost of the aam admi. It is time to defeat the forces of neo-liberalism and rally behind an alternative set of pro-people policies which can be provided only by an alternative political formation led by the Left. The need of the hour is to defeat the communal BJP led NDA as well as the UPA and fight for a secular, democratic and pro-people political alternative to the BJP and the Congress.
Tuesday, January 27, 2009
In all these analyses there is an effort on the part of the elite media to deny the existence of the poor. Basking in the glory of ‘Shining India’ and record number of billionaires in the country, the Indian elite simply want to wish away the existence of the poor. The fact of the matter however is a bit different. The trajectory of economic reforms in India has been such that the increase in the number of billionaires in the country has been at the cost of pushing to the margin even larger number of people. Even official statistics admit that the pace of reducing poverty has greatly come down in India in the post-reform period. On the other hand, it has been pointed out by noted economist Prof. Utsa Patnaik that the official poverty figures are wrong and poverty in India has actually increased drastically in the post reform period. Since the film is based on Mumbai, the following quote from Prof. Utsa Patnaik’s article will not be inappropriate;
“Urban Maharashtra is the most expensive place for the poor where they have fared worst. There is a massive rise from 52.5 percent to 85 percent in the population unable to access through their spending, even 2100 calories per day, the official urban nutrition norm. Over half the urban population has gone below the lowest nutritional level, 1800 calories compared to just over a quarter a decade earlier. In-migration from rural areas and other states does not explain the scale of the worsening which is mainly on account of the people already there.”
It is ironic that no Bollywood film, in the recent past, of any fame has even tried to capture this growing misery of the people of Mumbai and it takes a Meera Nair or a Danny Boyle to do so. Ever since the reforms we have seen that the focus of Bollywood movies sharply shifted towards a celebration of NRI lives and lives of the super-rich creating a fantasy world devoid of the ugliness of poverty, slums or malnourished children. In this respect, it is welcome that Slumdog has moved out of this strait jacket and focused on the underbelly of Mumbai.
The scenes of the film depicting the miseries of the slum children, particularly that of Jamal the protagonist and his brother, with some fine camera work and editing is indeed worthy of praise. The depiction of the children doing all kinds of work starting from begging to selling different commodities to stealing to working as guide in the Taj Mahal and the entry of Jamal’s elder brother into the world of organized crime have been superbly filmed. Particularly, the shot where Jamal was trying to steal a roti from the window of a running train while he was hanging from the roof with a rope held by his brother was superbly done. All this indeed is the reality of urban India where our everyday existence bears testimony to all that was shown in the film.
These slices of reality in the film are squeezed between the fantasy run of Jamal who won Rs 10 million in ‘Who Will be a Millionaire?’ or ‘Kaun Banega Crorepati?’. This dream run of Jamal is so out of the ordinary for a slum-dweller that he is hounded and tortured by the police under the prejudice that he has cheated in the show. In response, Jamal says that how each and every answer that he gave was a result of his experiences with life as a poor slum dwelling child in Mumbai. For example when asked what does Ram carry in his right hand, Jamal remembers the Mumbai riots and a figure of Ram, when the Muslim locality was attacked by Hindutva brigade and gives the correct answer that Ram carries a bow and arrow in his right hand. In this sense every answer that he gives is a result of a remarkable set of coincidences whereby each one of them is linked to some or the other experience of his miserable life. In this entire drama that is played out in the sets of ‘Who Wants to be a Millionaire?’, we also get a glimpse of the malice of the rich to the poor, in the character of Anil Kapoor, the anchor of the show. His continuous jabs at Jamal for being a Chaywallah and prompting him the wrong answer of a question only exposes the hatred of the rich for the poor. In the end however, the underdog wins the game stunning all and to the cheers of the poor while at the same time winning back his lady love. Slumdog in its essence then is a well made rag to riches movie, with some superb camera work, editing, script, acting and direction.
The problem of the film however lies elsewhere. Firstly, it is true that Slumdog was never intended to be a documentary film on Mumbai’s poverty, it is not proper to judge the film as to how well poverty has been depicted. Rather the point is that the poverty in the film is shown from a distance. With adoption of the narrative style of flashback, the viewer in some sense is put as a distant observer from the crushing poverty of Jamal, both in time as well as space. The poverty of Jamal is a memory and hence is at a distance, moreover this memory is unfolded not in the slums but in the police station or the sets of ‘Who wants to be a millionaire?’ when Jamal is on the threshold of money and fame through his participation in the TV show.
The importance of this TV show should not be missed. ‘Kaun Banega Crorepati?’ has been an iconic TV show in post-liberalization India. In this show anybody can become a millionaire provided s/he answers a set of questions from general knowledge. Huge amount of money and instant fame awaits the winner of the show. Essentially speaking this show is a cultural product of post-liberalization India. It portrays the ambition of the common man to be a millionaire in the shortest possible way. The show was a huge success in India not only because it was hosted by the legendary Amitabh Bachan but because people identified with those who were contesting and their desire to win the promised money. In the film, this TV show turns out to be the path to salvation for Jamal, or anybody like Jamal who have witnessed crushing poverty.
Jamal is also aptly aided by one of the most important economic symbol of contemporary India, the call centre of the booming BPO industry. Jamal who used to work in the call centre as a chaywallah managed to learn some English and also remembers the names of streets in London, courtesy his association with the call centre.
This is the fantasy that is created in the film, namely that anybody in India with the help of luck and basic intelligence can do well and live a better life. The real problem of the film does not lie with the depiction of poverty or the underbelly of India. The problem lies in the basic fact that the film ignores the questions of the exploitative power structures inherent in Indian society which are directly responsible for the mass poverty that we witness today. Rather the film endorses the symbols of neo-liberalism as an emancipatory tool for the poor. The conflict between Shining India and Suffering India is reduced to null and void where the Suffering India clings on to Shining India for its upliftment. In this sense then, the triumph of Jamal in the film is not only a triumph of the Slumdog but also is posited as a moral triumph of Shining India, where the deep fissures between rich and poor and the coercion of capitalism is sought to be kept under the carpet.
The movie then in its essence while remaining unquestioning to the existent structures of power, which are the causes of massive poverty, portrays poverty in its many faced ‘ugliness’. The absence of any attack or question on the basic structures of society and economy endears it to the liberals in the West where it turns out to be a massive hit and favourite. In India however, the elites are agitated simply because the movie portrays the existent underbelly of every glittery city in the country, which they have tried so hard to forget in their collective amnesia of the poor.
Thursday, December 25, 2008
The Mid Year review of the Indian economy was placed in Parliament on
· The overall outlook for the economy is that of cautioned optimism.
· The report forecasts a 7-8% growth rate of
· The fiscal deficit target of 2.5% of
· Inflation rate will ease even further
· It is projected that exports will be adversely affected.
(Source: Review calls for more rate cuts, reforms: Inflation To Continue Fall, Growth To Ease, The Economic Times,
This report comes in the background of the global financial crisis which has also adversely affected the growth prospects of the Indian economy. In this context, we have already seen that the Government has announced a stimulus package, which is aimed at strengthening the economy. It is in this context that the conclusions of the report and its recommendations have to be judged.
As far as the issue of growth is concerned, the report is somewhat optimistic because of five main factors in the Indian economy. Firstly, it is said in the report that the share of services in
Based on the above analysis of the functioning of the Indian economy, the following policy prescriptions have been deduced:
- Since, the threat of inflation has subsided, based on a tight monetary policy, the need of the hour is to pursue an expansionary monetary policy. It is argued that the RBI should announce further cut in the different interest rates. The basic logic behind this is that with the loosening of the monetary policy, money supply or liquidity will increase in the economy on the basis of which, demand will increase.
- It has been mooted in the report as well as several other policy documents of the Government, that infrastructure is a very important element in the overall growth strategy. Therefore, it has been argued that all policy and institutional impediments to private sector investment in infrastructure sector should be removed.
- A logical part of the previous strategy is the Government’s advocacy for accelerating all the pending policy reforms. This is supposed to induce the animal spirits of the investors which will sustain the growth process in the economy.
(Source: The Economic Times,
Let us now look into each aspect of the abovementioned points. Before going into the policy issues, let us first highlight the problems that are plaguing the Indian economy. As a result of the global financial crisis, the Indian stock market has been extremely adversely affected with
The second important aspect of the crisis in
Firstly, it is clear from the above that there has been a general problem of demand in the Indian economy, with services also facing a problem of demand. For example, the IT sector, which is the fastest growing sector within the services sector has taken a hit because of the global financial crisis. It is also wrong to visualize the services sector as a homogeneous block, which it is not. While IT is a part of services sector so are housemaids. In case of economic slowdowns it might so happen that people unable to find meaningful jobs crowd in lower end services. This will show itself as a bulging service sector but the well being of the people will hardly increase. So, the argument that since
Secondly, the entire question of monetary policy has been exaggerated in the policy circles in
As far as the question of infrastructure is concerned, two points need to be noted. Firstly, it is nobody’s case to argue against infrastructure building in
The suggestion for even more liberalization of the Indian economy is completely untimely and misplaced. A majority of the problems of the Indian economy today is not in spite of but because of globalization. This is evident from the fact that the problems in the global economy have been imported into the Indian economy as a result of the policies of globalization and liberalization. Even after this, the fact that
The Government’s biggest lacuna in this report as well as its other responses to the crisis is the fact there has been no concern for the unorganized workers and other marginalized sections of the population who are facing the brunt of this crisis. There is very little or no effort on the part of the Government to put purchasing power in the hands of the poor through higher Government spending. The biggest impediment to this is the FRBM Act. In the absence of Government spending as well as higher purchasing power of the poor, the role of the engine of economic growth and sustaining demand automatically goes to the rich and the corporate sector. Thus if the Government is not concerned enough about the rich and their well being and still wants to ensure higher growth, then it is bound to rely more and more on the rich and the corporate sector. As a result the policies of the Government are aimed at wooing the corporate sector to invest or the rich to consume more. The interest cuts on homes, car loans, the demand for removing all constraints on private sector investment in infrastructure are aimed at precisely this. While this may or may not improve the growth in the country, the poor are clearly left out of its benefits. This is because even the employment generated on the basis of the demand pattern of the rich is low and the infrastructure projects in