Sunday, July 26, 2015
CSO’s New Growth Projections : Putting Credibility At Risk
India’s growth story is in news always. During the UPA- 2 tenure, it was in news for its so called ‘policy paralysis’. It was in news due to repeated downgrades of sovereign ratings by the so called guardians of international finance capital which forced the then Finance Minister Mr. Chidambarm to seek an exclusive audience to convince them that nothing is going wrong in country’s economy. He issued interim circulars to all the ministries and departments asking them to trim the public expenditure in the last quarter so that the fiscal deficit can be seen under control. It was every ones’ knowledge that the though India’s economy decoupled with the global economy and withstood the global financial crisis of 2008, but it came under the pressure due to the post crisis developments and consequences which had a profound impact on county’s growth trajectory. For about three years since 2011, the growth rate of economy crippled to mere 5 percent. All the sectors witnessed either stagnation or deceleration of growth.
Actually, for about 2 years, this decelerating growth rate became the punch bag for the opposition and neoliberal economic think tanks which was further fuelled by the Namo mantra of Gujrat model of development debate. This two year long debate undoubtedly helped the BJP to grab some focus on economic front and with elections in the offing kept the BJP in sound campaign basis. The results were there to see. Every one expected some turn around of economy under the new regime. But that did not happened. Even until January 30th, when the Central Statistical Organisation released its new series based estimates of national income and growth, all the international rating agencies and institutions like IMF pegged the growth rate for India at around 5 – 6 % only.
With the growth projections released by Central Statistical Organisation (CSO) basing on the new base year, the whole scenario has undergone a qualitative change. In the words of former economic adviser to Finance Minister, Shankar Acharya, “ Until two months, we thought we had pretty good idea (of country’s growth rate).Not, so after January 30, 2015, when the Central Statistical Organisation released its newly based estimates of national income and growth.” The new growth projections are obviously welcomed by the ruling BJP and its Finance Minister, while presenting his full budget on February 28th 2015 in Parliament, patted on his own back when he said, “based on the new series, real GDP growth is expected to accelerate to 7.4%, making India the fastest growing large economy in the world. The Central Statistics Office has recently released a new series for GDP, which involves a number of changes relative to the old series. Based on the new series, estimated GDP growth for 2014-15 is 7.4%. Growth in 2015-16 is expected to be between 8 to 8.5%. Aiming for a double-digit rate seems feasible very soon.” Even some economists went to credit that India is only the country growing at the rate that surpasses even in China. As usual, all this was attributed to Modi’s minimum government and maximum governance.
Here the question is how far the few months old BJP government with Modi at the helm fueled the confidence to encourage the economy to run so fast and in fact what are the measures that are so different from its predecessors. Except policy announcements of allowing unbridled foreign direct investments across the economy, nothing much has changed since the elections. Then what prompted the CSO to come to such conclusion about country’s economy is the big news circulating through the policy makers and academics who are trying to interpret the new data sets to understand the structure and trends in country’s economy. The gap between the actual reality on the ground and the projected estimation sare not matching at all in any aspect. That led to the warning by none other than Reserve Bank of India Governor who said except on the count of inflation, nothing seems believable in the CSO estimations.
Estimating nation’s economy has been underwent several changes over the period of time. As W.S Jevos (1835 – 1882) said, economics was calculus of pleasure and pain and mathematics was its method, for economic science dealt in quantities rather than qualities. Thus any study of economy includes it subjects – the people, their aspirations, well being and problems. To identify the problems and gauge the well being and estimate the aspirations, government needs bundles of statistical data grouped into quantities and decipher the trends. If the so called economic estimates are closer to the ground reality, would be well received and provides key inputs while government designs new policies. If the estimates are far from ground reality, not only the accounting agency’s credibility comes under risk but also the governments’ will be misguided while chalking out new policies. This is exactly what is happening in India today.
Before questioning the new estimates, let us understand the government’s accounting mechanism and practice. Government estimates basing on one particular year’s constant prices and that is generally known as base year. As new conditions and situations keeps on emerging in dialectical interacting not only with the different components of economy but also with different players of international economy, the vanguards of nation’s accounting system keeps on upgrading their basis for estimations. Some times, such upgrades includes changes in base year and some times changes in weightages for different sectors keeping in mind the sectoral contribution to economy. To capture and factor the everlasting changes into accounting the base year is used to be changed once in a decade. The independent India started its own accounting of nation’s economy having 1948-1949 as its base year. Until then, the Indian economy’s levers were controlled from London by the colonial administration. By 1967 the collection of nations accounts became a structured and regular process. 1960-61 financial year considered as base year for estimates of 1967. Likewise for 1988 year’s economic estimates, 1970-71 year became the base year. With on setting of new economic policies and closer integration of nation’s economy with international economy and change of sectoral composition of economy, the traditional weightage was modified to suit the changed situation. Accordingly for 1999 economic estimates 1993-94 was considered as the base year. In such a way for the current estimates of nation’s economy 2003-2004 economic year is being considered as the base year. For all accounting purposes, the accounts computed and compiled by the Reserve Bank of India, National Sample Survey and other related organizations
The current estimates of CSO were derived using 2011-12 as its base year. This change led to rise of eye brows in from several quarters. The CSO for a change, imputed the details from MAC 21 set of data relating to private corporate sector expenditure and consequential results. According to the new data released by CSO, though the economic growth stagnated around 5 % until 2012-13 financial years, it picked up and the growth rate reached 6.6 % surprisingly. Basing this estimation only the Finance Minister assured the nation that the growth in 2015-16 would be between 8 to 8.5%. But except the growth estimations, nothing is coming true, neither the industrial production nor the manufacturing sector growth, nor the primary sector growth, nor savings and investments. All the indicators such as exports, employment generation are continuing with their downward trend. Still the CSO is yet to come to terms with the criticism. The CSO is shielding itself by saying that this type of revision is required to adopt the changes as per the national accounting system adopted under the guidance of United Nations. Much light is yet to be shed on the actual condition of economy sans this hype generated by the CSO’s revised estimates. It is basing its estimates on the data furnished by the corporate sector to the Ministry of Corporate Affairs by way of voluntary disclosures. Though the new estimates expected the private sector investments would be around 6.89 crore but actually it did not exceeded 4 lakh crores, as per the newspaper reports. According to R. Nagaraj, who happened to be the non-official member, R. Nagarj, “ the revision of estimates between the two versions boosted investments for the same year by 34 percent”.
These new numbers would have had a different implications for economy as well as the policy making. Had that been the case this size of investment, there should have been growth in the manufacturing sector but the as latest as February’s index of industrial production failed to pass the test. The infrastructure sector stagnated and crippling. The economy is so entangled with the new type economy that the RBI under the chairmanship of none other than the poster boy of reforms, Raghuram Rajan warned the banks to lend to private sector involved in infrastructure sector. The service sector which became the back bone for the country’s economy saddled with the global developments. Despite the large scale privatization of precious national natural resources the mining sector which is key component of economy failed to take off. So called industrial hubs and SEZs confined themselves to amass the tax concessions and shoot up their reserves rather than shooting up economy, and employment. The private savings as well as spending touching a new low. The government spending, under the iron fist of fiscal fundamentalism, drastically decreased. This forced the votaries of neoliberal reforms to recommend for an escalated public spending, particularly government spending to shore up the confidence levels in economy. In such a situation, the figures and the data sets released by the nation’s premier accounting firm, CSO only puts its credibility at risk.
The Modi Government and Rural Poor
The Constitution of India guarantees socioeconomic security to the people of India. Directive Principles of State Policy elaborately prescribed the objectives of social security and prescribed measures for same. Since then, these directives guides the overall policies that are being implemented by the successive governments.
Article 38 of the Constitution mandates the governments, " (1) The State shall strive to promote
the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life. (2) The State shall, in particular, strive to minimize the inequalities in income, and endeavor to eliminate inequalities in status, facilities and opportunities not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations." with an objective " to secure a social order for the promotion of welfare of the people." Similarly, Article 47 of the Constitution says that it is the duty of State to raise the level of nutrition, standards of living of its people and improve public health. Specifically, Article 45 of the Constitution establishes the guiding principle of Integrated Child Development Scheme when it says, "Provision for early childhood care and education to children below the age of six years. "Given the need for employment, the Directive Principles have made a special mention of this. Article 41 focuses on Right to work as an important principle which should govern the policies of the States. Article 41 says, "The State shall, within the limits of its economic capacity and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old age, sickness and disablement, and in other cases of undeserved want."
The governments since 1991 paid scanty attention towards the necessity of socio-economic security as envisaged by the Constitution. The Modi led BJP’s defiance of Gandhi whose ideals shaped the Directive Principles and Ambedkar who drafted these ideals into rights, is well known. The BJP government, in its first full budget started destroying the socio-economic security guaranteed by the Constitution of India.
The NDA Government presented its first full budget for 2015-16 financial year. The interim budget presented in June 2014 can be considered as joint venture between UPA-II and NDA. This budget is prepared solely after NDA had its fullest command over the finances of the country during last year. Reflecting its command over the economy, the budget presentation began by saying that under dynamic Modi leadership they could give new direction to the nation’s economy. The Central Statistical Organisation’s revised estimates are being shown as a proof for strong revival of economy. Also he announced that we are only the country that even surpassed China in growth rate and poised achieve 10 percent growth rate within no time. This the government wants to achieve this growth at the cost of its people. It is evident from the reduced allocations for almost all the social security schemes and programs. India, approaching it Amrit Mahotsav of independence in 2022 still predominantly lives in villages. Agriculture is back bone for the rural economy which is catering the bare minimum needs for morethan two thirds of its population. The policy makers with neoliberal mind set neglected the constitutional mandate of providing social security to its people. We are talking about the social security not merely in terms of welfare schemes such as pensions and PDS. The social security in our understanding includes food security, employment security and social security in traditional sense. Let us consider the budget implications and future policy directions in this budget on all these three counts.
The slogan of minimum government and maximum governance attracted several new segments including some sections of first time voters who had bitter experience with the government authorities on various occasions. But we need to remind that the rural India as a whole having bitter experiences with the authorities since independence. The roots of these bitter experiences are in the policy prescriptions of the government but not in the individual functioning styles of few officials. The same reflected even after the BJP government came to power. The focus of policy direction has been shifted from rural India to urban, that too cosmopolitan landscape to be more precise. Thus the present budget provides minimum attention both at the level of policy and in terms of budget to several several social security schemes. These schemes are intended to deliver minimum relief to the rural poor. The attention towards welfare schemes and subsidies meant for Integrated Child Development Scheme (ICDS), Public Distribution System(PDS), fertilizer subsidy, subsidized gas cylinders, national social assistance program, Indira Avas Yojana (IAY) , sanitation, rural drinking water, rural roads and other several other programs and schemes are being considered as non priority areas. It is unfortunate that at a time when nearly about 16 lakhs children under 5 years age group are dying due to malnutrition, the central government cut down the budget for Integrated Child Development Scheme (ICDS) to half from its last year allocations.
The government claims that due to 14th Finance Commission recommendations, large amounts of funds have been transferred to states, now the responsibility of implementing these schemes are left to the state governments. It is to be noted that even after such a high pitch campaign of center transferring more funds to state governments, the actual transfers have been reduced from 6.2 % of GDP to 5.9 % of GDP between 2014-15 and 2015-16. This in fact compounds the problems of state governments by imposing new burdens on them. The union government cancelled 8 schemes and reduced budgetary support for another 24 schemes. Implementation of remaining schemes becomes state government’s responsibility.
In the mean time the funds earmarked for such schemes will be transferred to state gvernment’s kitty where they will be having discretion in utilizing these funds. All these schemes were formulated after a well laid out thought process and expert consultation to bridge the gaps in development. But the government that does not care much for such gaps in development which will fuel inequality distancing itself from this responsibility of ensuring social security. Moreover after transferring these schemes and their funds to the shoulders of state governments, the central government is not going to share the cost of revenue expenditure such as staff salaries. For any social security scheme, the expenditure will be considered as plan expenditure at the conceptualization stage and for few years till the systems are in place for its proper implementation. Once the scheme is in place for some years, then majority of the expenditure on that particular scheme becomes revenue expenditure, a kind of recurring expenditure. As on now, meeting this expenditure is the responsibility of central government. Not sharing this recurring expenditure by center means, the burden of implementing or discontinuing the said scheme purely lies on the stat e governments. Now let us consider the three key pillars of social security and their allotments in the budget. The first pillar is job security for the rural poor. The government’s attitude towards this major flagship program had been kept on changing since its inception.
During the tenure of UPA – 2, the MNREGA’s potential impact became evident on the rural economy and also at the same time the ruling class that commands rural India started annoyed with the fact that the MNREGA became a powerful tool in granting self respect to agricultural workers. It also facilitated the agricultural workers to demand for their legal wages and the rich farmers are forced to increase a portion of wages for agricultural workers. Not only that. Before the introduction of MNREGA, the rural poor are forced to migrate to urban centers in search of work at sub-minimum wages just to save their children from half empty stomachs. Thus the urban economic actors used to get the uninterrupted supply of man power at cheapest rates. Because of this low cost of labour power only, the present government under Modi inviting foreign companies to come to India not only to exploit the rich natural resources but also to exploit numerically strong labour power at fraction of wages. This is the rational behind the Make in India slogan.
But this situation had undergone a change with the implementation of MNREGA. As the MNREGA guarantees the employment with in their home village, rural workers reluctant to work for paltry payments in far off locations. Thus those sectors which are banking on the cheapest labour power are now facing constraints on their profits. Thus the ruling class alliance, both in rural India and urban India came together to scuttle the job guarantee program. This is evident from official data itself. The Act generated employment for 5,25,30,453 households in 2009 where as the same came down to 3,94,76552 which means during the last five years, the number beneficiary households came down by a whopping 1, 30, 53, 901 ! Average days of employment generated for each household under the Act came down drastically from 53.99 in 2009-10 to 37.74 days in 2014-15. Similarly the percentage of SC beneficiaries came down from 30.48 % in 2009-10 to 22.52 % in 2014-15. More interestingly the Outcome budget submitted by the Ministry of Rural Development to Parliament indicates that of the total allocations, Rs. 18,333.95 crores left unspent in 2010-11 financial year where as the unspent amount from MNREGA allocations stood at Rs. 14,545.47 crores by 2012-13 financial year. Even in 2014-15 financial year Rs. 4406.31 crores left unspent. The number of person days generated came down from 230.41 crores in 2012-13 to 164.11 crore days in 2014-15. The number of villages with nill expenditure under MNREGA program also went up from 25,155 to 31939 during the same period. This is how the ruling class started scuttling and diluting the premier employment security providing program MNREGA.
Let us consider the food security aspect during the last five years. It is clear that the National Food Security Act (NFSA) is yet to deliver its intended benefits to the eligible poor despite it was adopted by the Parliament two years back. The Act is officially under implementation only in 11 states that too without proper infrastructure for successful delivery of services. Though the last two years’ annual budgets are having provision for fund to implement NFSA, on the ground already existing targeted public distribution system also getting a raw deal from the governments. According to the Department related Parliamentary Standing Committee on Food and Consumer Affairs, and Public Distribution system, the total coverage under targeted public distribution system is limited to mere 65 % of beneficiaries where as the officially recognized number of BPL families are fare more than that. To implement the NFSA needs budgetary allocation of Rs. 1,31,086 crore where as the allocations for the financial year 2014-15 stands at Rs. 100505 crore, which is almost 25 % less than the requirement. The fund shortage for food security during 2012-13 stood at Rs. 32,743 crores. The Standing Committee itself found that shortage of funds for food subsidy rose from Rs. 32,743 crore in 2012- 13 to Rs. 53,458 crore in 2013-14 and may go upto Rs. 60,730 crore in current year. It is in this situation, the BJP government at the center appointed a high level committee under the chairmanship of former union minister for food and public distribution, Mr. Shanta Kumar who recommended for dismantling of the Food Corporation of India altogether, which is the back bone for country’s food security. The high level committee also recommended not to implement the National Food Security Act at its present form as it involves huge sums of subsidy. The WTO demands to de-regulate the agricultural produces market in third world countries. Accordingly the government preparing ground for meeting such commitments given to community of international financial capital. Financial constraint is not the real reason behind such recommendation. While on one hand, precious public money is being doled out to the corporate sector by way of tax concessions, it became a fashion for every one to criticize the social security schemes. With this kind of understanding towards the country’s food security, the government is trying its best to push the country to pre 1960’s era where in the nation experienced hunger deaths and roots of rural distress. This only will lead to dismantle the food security the country achieved at the cost of sweat and blood of farmers and agricultural workers of this country.
Finally let us consider third aspect of social security. This includes several schemes that are of income substitution and expenditure substitution in nature. The two key pillars above mentioned are completely different from the third set of schemes. Above mentioned two pillars are ensuring right to work and right to food irrespective of the caste, creed, gender, region and religion, APL/BPL differentiation. Also these two social and economic security measures are backed by law and the governments can not tweak at their will. Unlike these two, the income substituting and expenditure substituting schemes such as National Rural Livelihood Mission, formerly known as Sampoorn Gram Swarojgar Yojana, Indira Avas Yojana, Pradhan Mantri Gram Sadak Yojnana, National Old Age Pension schemes, Disability pension schemes and other such schemes. These are all being implemented at the will of governments’ of the day. The budgetary allocations are not being fully utilized. As we have shown in this bulletin, Rs. 9954 crores left unspent for the financial year 2010-11 for just three schemes, SGSY, IAY and PMGSY where as this amount went up to Rs. 12824 crores for the year 2012-13 and stands around Rs. 9516 crores left unutilized. Within this budget the allocations for old age pensions have been reduced by one thousand crores. Not only that. The government proposed to change IAY is being changed into repayment based model from subsidy/ grant based model. Thus the government is tweaking with all these income and expenditure substitution schemes which will impose larger burdens on the rural poor and agricultural workers. More over the government asking the corporate sector to share its social responsibility by spending peanuts from their profits. Already 124 villages have been adopted by Tata Trust in Krishna districts of Andhra Pradesh. In such villages, the role of Panchayati Raj institutions becomes irrelevant.This is the dangerous trend that is creeping into the policy making and participatory democracy. Already the central government is shifting its constitutional responsibility to the discretionary authority of states. It is withdrawing itself from legally backed social security programs whose implementation solely lies on the shoulder of central government. Thus the government wants to dismantle the existing structures to mitigate the inequality. The programs such as MNREGA are primarily oriented towards addressing the structural inequalities and marginalization. All this is going for a toss under NDA government. Thus the BJP government laying foundations for triple insecurities – employment insecurity, food insecurity and social insecurity. This is in this context we need to build the movement for social security. The aims of this movement shall be to strengthen the legally backed rights for their fullest possible implementation and the expand the base of income/expenditure substitution based schemes with more funds.
Manufacturing Billionaires : A Neoliberal Enterprise
Experience from India
The contrasting emergence of two Indias, quite opposite to each other is clearly evident ever than before. Though the process of inequality accelerated along with the implementation of neoliberal economic reforms since way back in 1991, it started establishing itself its cruel face during the last few years. A series of reports released by international organizations including Forbes, Global Wealth Data Book captured this contrasting images of India. The share of richest 1 % increased from 39 % to 49 % of total wealth produced and share of top 10 % increased from 66% to 74 % during this period. That means only 10 % of population commands 74 % of nation’s wealth and remaining 90 % of population distributes left over 36% of nations wealth, which shows magnitude of income inequalities. The world richest person Bill Gates and his family needs 218 years to spend all the wealth accumulated by him.
According to Oxfom, there are 153000 high net worth individuals in India in 2013 whose number is estimated to have gone up in 2014. A conservative estimation of world poor, on per capita income basis, is estimated to be 160 crores and out of that 44 crores are in India only. Thus, under the reforms era, India became home for about 40 % of world poor. Global wealth inequalities reached such a phenomenal proportion that a mere 1.5 % of tax imposed on the wealth owned by the world richest would yield $ 74 billion income for the governments, as estimated from Forbes data as on August 2014. This much of income would have helped UNESCO to bridge the education gap in the world poor countries, whose budget is falling short by an estimated $26 billion. Similarly World Health Organisation estimated that the world health budget is short by $37 billion. If the amount raised by imposing mere 1.5% of tax on the world richest is spent in income guarantee schemes for the poor, it is estimated that an average, 25 million families can be saved from poverty trap annually. This inequality is the result of finance capital induced globalization and the deepening intensity of globalization would result in much more deepening inequalities.
In sum, the reasons for such inequalities unseen in history lies in the biased development model that is under implementation in the world. The policies of globalization favored market over the governments, capital over the labour, technology over human skills, skilled over unskilled, cities over villages, industries over agriculture, speculation over manufacturing. According to the Asian Development Bank findings, the share of labour income in the net wealth produced declined from 36.5 % in 1993 to 21.8 % in 2012. The factors and process’ accelerating the over all inequality varies from country to country. In each country, these factors will be shaped according to their own political economy settings. Let us see how this process of inequality is being manufactured in India of late. Before that a brief presentation about the levels of inequalities in India
At the time of beginning of reforms in 1991, there are only two dollar billionaires in India and they owned only $ 3.2 billion net worth of assets. After two decades of economic reforms, their number increased to 46 and their combined net worth also rose to $ 176 billions. 85 people earning on an average 668 million a day where as 74 % percent of population that amounts to more than 100 crores having a person who earns Rs. 5000 a month. Net worth of billionaires in India increased by 15 times which is sufficient to eliminate poverty from India twice – that means about 70 crores of people can escape the poverty trap, if this inequality is contained. This is not an analysis by a Left intellectual or a Communist Leader. The head of International Monetary Fund (IMF) said this while addressing a gathering during her latest visit to Delhi. The successive governments in India are following the policy footsteps of the same organization. Starting from Monteksingh Ahluwalia to Arvind Pangaria, who is heading the newly created Niti Ayog to Raghuram Rajan, Reserve Bank of India Governor, all did their apprenticeship by serving IMF in various capacities. They are the people who crafted the economic policy which deepened globalization policies in India as well as accelerated the inequality. Results of these policies crafted under the guidance of neoliberal think tanks are here to see.
At the time of economic reforms, the percentage of poor, who could not earn daily income of $ 1.25 in India hovered around 40% mark which jumped to 75 %. This phenomena is once again confirmed by the findings of Socio Economic and Caste Census released recently. Even according to the 70th round of National Sample Survey Organisation confirmed that for about 41.2 % of rural population, principle source of income is wage labour where as 57.8 % are rural agricultural households, whose incomes are less than Rs. 5000 per month. The SECC survey placed this figure at 74%. Not only that. The percentage of growth of per capita income slowed down from 25.75 % in 2013-14 to 21.61 % 2014-15, as stated on record by minister for statistics and program implementation on July 22nd 2015 in Parliament. This reply is based on the revised Central Statistical Organisation’s data, whose authenticity is in doubt. Even at this scaled up estimates, per capita daily income could not make out to be half of $ 1.25 norm. If we go by the unrevised estimates, it would be more verse. Thus the accelerating economic reforms and further market integration would result in increase of widespread inequalities.
Let us consider below, some more details. In India, over the last twenty years, the cost of production decreased by 6 % and net profit of companies increased by same level. That means, the income of employees decreased and income of corporate increased. In volume wise, this decreased cost of production resulted in saving of Rs. 2.06 lakh crore rupees. And interestingly, during the same period, the profit of selected companies have gone up by Rs. 1.50 lakh crores. That means, what ever the labours loss is the gain for capital during this period. This is one factor that perpetrates the economic inequality in the country. More over, it is only the collateral benefit of new economic policies for Indian corporate and they are in addition to direct benefit handed out to these very corporates. These direct benefits in the name of tax foregone, became an effective instrument of wealth transfer from crores of poor people to handful of corporate companies. Let us try to understand how this is happening and how this is deepening the growing inequalities from the data available in the budget documents themselves.
The government of India granted several benefits that helped the Indian companies establish their hegemony not only over the domestic market but also having their hold in much wider world market. Similarly to support corporate sector in the name of withstanding the ongoing global capitalist crisis, government of India designed an intelligent policy tool, that is its willingness to forego the tax income otherwise which should have accrued to the government. Over the last eight years from 2007-08 to 2014-15, a total of 39, 47,731 crores of tax concessions were showered on the richest individuals and firms in India. In the table given in this bulletin, composition of subsidies and tax concessions and their percentage in GDP clearly establishes the unequal distribution of wealth and benefits by the government itself. During the same period a total of 14,43,943 crores were spent on account of various subsidies. The amount spent on subsidies is less than half of what the government stashed in the accounts of corporate in the name of tax foregone. Similarly the table also establishes the unequal distribution in terms of percentage to GDP as well. The percentage of total major subsidies also stand one third of what it is given to the rich and corporates. All these subsidies are considered to be part of non plan expenditure. The share of major subsidies decreased by 1.6 percentage in GDP during this period.
As the government and economists are passionate to explain the policy implications in terms of per capita as proof of their success. This is the attempt through which the neoliberal intellectuals are garnering the support from middle class and other vocal sections to globalization. We shall also try analyze per capita implications of major subsidies as well as the tax concessions by looking at the beneficiary base. According to official estimates itself, in India 40,38,05,000 are poor. This figure is derived basing on the Rangarajan committee estimates of poverty. . Though they are considered to be an underestimation, for the time being let us confine to this figure only for the sake of argument. The number of companies that benefited by tax concessions year wise data is also provided in the same table. For the year 2007-08, per capita benefit accrued to officially estimated poor in India through major subsidies stands at Rs. 1650.27 only. For the year 2014-15, the same stands at Rs. 6225.78. Where as for the same year, the benefit accrued per company due to tax concessions stands out to be Rs. 69,44,800, the same stands at Rs. 1,04,33,800 for the year 2014-15. In the year 2007-08, the poor could get only 0.000237th share of what the corporates benefited under tax concessions and the same stands at 0.000596th share for the year 2014-15. Because of this unequal distribution of nations’ wealth, the growth in per capita income also slowed down from 12.3 in 2013-14 to 10.1 in 2014-15.
Thus in 21st century, government became an effective instrument in the hands of neoliberals to ensure the reverse distribution of wealth which is otherwise known as accumulation. The accumulation process explained above is nothing but part and parcel of primitive accumulation. And it is the same time the number of billionaires increased abnormally and India occupied 4th position in growth of number of billionaires. This clearly indicates the fact that a new section of billionaires that are emerging in India are only emerging with the government propup and enormous loot of nation’s resources at the cost of keeping people hungry, undernourished, stunted and illiterate, jobless and with out minimum standards of dignified living. The income of billionaires is not increasing because of the growth in size of production and there by profits. Their income is growing just because the successive governments adhered to neoliberal understanding of budget management. Due to this the inequality is not only increasing between rural and urban but also with in rural and urban households. Thus under the neoliberal reforms, the wealth and benefits are being shifted from rural and urban, poor to rich, peasantry to corporates, asset less agricultural workers to asset holding classes. This shift is causing irreparable stress on rural India and increasing intensity of rural distress.
The constitutional mandate for governments in India is clearly enshrined in preamble which mandates equality of opportunity and the directive principles which mandates the governments to strive for minimizing the inequalities and an egalitarian order. But the outcome of the two decades of neoliberal polices in India is in clear contravention to aims and objective of constitution, which should be resisted at any cost. Social protection is only the cushion the poor can have against such growing in equality. Social security schemes and policies will play an important role in reducing poverty as well as minimizing the negative effects of inequality. Right to food, right to work, right to shelter and right to health and education are the key components of social security. Land distribution confers an economic and social security for the poor. Sufficient leverage and proper implementation of social protection can promote economic and social development by ensuring that people enjoy income security, efficient access to health, ability to manage risk and empowers them to take advantage of economic opportunities.
The global average on social security spending is on an average 8.8 % of GDP where as in India this is very low and is only 5.2 % of which includes 3.5 % spending by the state governments. The 12th Plan document recommended for increase in social security spending to 4.37% of Center’s GDP from existing levels. The demand for social security as right not as privilege must be widely canvassed. This is only the way to achieve the Millennium Development Goals by India. Unfortunately we are having a Niti Ayog members who terms these goals are unrealizable. This nothing but to disengage the government from its duty of achieving these goals. This is in tune with the Modi’s governance mantra – minimum government. The minimum government is going to hurt the rural poor and asset less class of agricultural workers more severely. The experiences of first year of Modi government is sufficient proof for that. That is why any struggle against the increasing inequalities must be organized around the slogan of social security to rural poor with enhanced public spending. This slogan shall work as basis for the mobilization of rural poor in coming days. Towards this end, we shall also mobilise the public opinion in support to the cause of rural poor.
Saturday, April 4, 2015
A question of food security
The country’s food security is seriously compromised by the report of the high level committee headed by former food and civil supplies minister Shanta Kumar. The timing of the constitution of the committee and release of its report are crucial. The WTO summit at Bali mandated the governments to stay off the market. The terms of reference were tuned to the mandate of WTO Bali summit, argues Veeraiah Konduri
The Narendra Modi government appears committed to removing any state intervention which hinders the free play of market forces. This is clear from its policy pronouncements, be it FDI in insurance, defense, railways, or privatization of Navaratna companies by incremental sale of shares. It also seems set to destroy all the protective systems which are kept in place in country’s endeavor of economic development.
Enough evidence comes from the High Level Committee appointed by the Prime Minister under the chairmanship of Shanta Kumar, former union minister for Food and Civil Supplies.
Constituted on 20th August 2014, the committee in its report made a scathing attack on the basis that brought FCI into existence. Thus the report is eyewash to re-route government’s predetermined policy orientation.
It is surprising that food security failed to get space in the elaborate terms of reference. Instead, there was a detailed recommendation about phasing out the public distribution system in its current form and change over to cash transfer scheme, whose efficacy is yet to be proved. Soon after it came to power, the Modi regime issued guidelines to state governments asking them to discontinue incentivizing the levy procurement.
The timing of the constitution of HLC and release of its report are crucial. The WTO summit at Bali mandated the governments to stay off the market. The terms of reference were tuned to the mandate of WTO Bali summit.
The procurement of levy rice by Food Corporation of India has been found one of such market distorting state interventions in India. There has been a suggestion to privatise procurement of agricultural produces. Procurement by private players is a vital link for establishing the back supply chain for the sustenance of large scale retailers such as Wallmart.
Thus, the withdrawing the state intervention in procuring agricultural commodities through various channels such as FCI, STC, MMTC, CCI is only to meet the dual tasks that feed the entry of private capital both foreign and domestic. Already certain vested interests have filed a petition in the Competition Commission of India seeking its intervention to study whether the FCI procurement amounts to restricting the entry of private players there by restricting the open market competition which in turn violates the law enacted by parliament.
committee, neither the experiences of 1960s’ severe drought and food scarcity nor falling production etc, from concluding “… the larger food management system, of which FCI is an integral part, has not delivered on its primary objectives very efficiently.”
A part of the recommendation on page 44 tabular format said, “Of course, FCI may not be directly responsible for many of these.” Why, then a recommendation that FCI be dissolved or unbundled? What is the logic behind this?
The FCI was set up in 1965 under Food Corporation Act 1964 against the backdrop of major shortage of grains, especially wheat. To face the eventual food crisis, the country, then, embarked on large scale import of Pl 480 which had its own implications in terms of foreign exchange management and price volatility in the global market. That was the time when the government looked inward and argued for self-sufficiency in food production. Accordingly the agrarian reforms were redirected towards enhancing the food production and embarking on the green revolution. This helped the newly emerging rich farmers’ community to go on producing to meet the nation’s requirement.
As time moved on, global and domestic economic conditions changed and the government embarked on reforms spree regime. Several reforms measures were unleashed during the last two and a half decades. The basic objective of these reforms is to delink the rationale of social responsibility underlying the series of economic decisions that were taken and institutions that came up during the era of mixed economy. Once we moved away from the rationale behind emergence of each institution, it won’t take much time to recommend, comment against the spirit and objectives of the institutions themselves. That is what the neoliberal elite in India is contributing nowadays.
The neoliberal elite picked up some holes in each of these institutions, mechanisms and processes. These holes are calculatedly developed over the period of time as part of government non committal response to meet the situation arising out of new developments. Now the same consequences of government’s ineptness is being used as basis for undermining the system itself. The HLC’s recommendation of handing over all procurement operations of wheat, paddy and rice to states is one in such direction. That means in effect, the responsibility of food security related management is left to the state governments that are already reeling under mountains of debts and deficits, courtesy, neoliberal reforms which undercut the income sources of state governments.Arguing that the MSP mechanism is benefiting few farmers, the HLC recommended to discontinue with this mechanism itself. In this direction, the HLC recommended that the Center should make it clear to states that in case of any bonus being given by them on top of MSP, it will not accept grain under the central pool beyond the quantity needed by the state for its own PDS and OWS.
Arguing that the MSP mechanism is benefiting few farmers, the HLC recommended to discontinue with this mechanism itself. In this direction, the HLC recommended that the Center should make it clear to states that in case of any bonus being given by them on top of MSP, it will not accept grain under the central pool beyond the quantity needed by the state for its own PDS and OWS.
The instrument of bonus on the top of MSP is being mastered by the state governments over the period of time in order to keep their ruling alliance with the farming community under the leadership of rich farmers intact. Now, the farming community is going to lose good quantities of benefit that is being showered on them occasionally by the state governments. But in the long run, it has the potential to change the ruling class alliances in rural India.
The most damaging recommendation is about the implementation of National Food Security Act. Though the NFSA was enacted almost two years before, it failed to come in to operation till now. The BJP in its poll campaign had promised to immediately implement NFSA. On the other hand, now through HLC recommendations it is going to put the food security commitments permanently in to the dustbin.
The HLC recommended that government takes a second look at NFSA, its commitments and implementation. The HLC report says, “Leakages in PDS range from 40 –50%, and in some states go as high as 60 – 70 %.” In this context, the HLC further goes on to recommend, “ GoI should defer implementation of NFSA in states that have not done end to end computerisaion, have not put the list of beneficiaries online for anyone to verify, and have not set up vigilance committees to check pilferage from PDS”.
At the same time, the HLC failed to go through the reasons behind such problems. It just pooled up the criticism of neoliberal elite against the social security measures in general and against the PDS in particular and proceeded to conclude that the whole system centering on FCI is wrong and it needs to be unbundled.