An effort at projecting optimism

Tapan Sen / New Delhi July 3, 2009, 0:03 IST

The kind of situation that has been spelt out in the Economic Survey (ES) is an effort at projecting optimism in the midst of a gloomy reality. Efforts at underestimating and playing down the impact of the global recession on Indian economy is altogether misplaced. The GDP growth rate projection has already declined to 6.7 per cent from last year’s 9 per cent, placing per capita growth at 4.6 per cent. This deceleration is seen in almost all sectors including manufacturing which has declined to nearly 2.4 per cent. The gloom continues in the form of sharp decline in non-food credit from the financial institutions reflecting the continuing slowdown. Agriculture sector growth has declined to 1.6 per cent from last year’s 4.6 per cent.

The decline in agriculture is notable because this provides livelihood to India’s 52 per cent population.

This crisis can’t be addressed by merely demonstrating optimism. The key is to expand the size of the domestic market and generate effective demand to offset the decline in export sector that remains low because other countries are victims of worldwide recession. We have to stress on demand management. Unfortunately, the prescription of Economic Survey has not adequately focused on the demand management and instead, the obsession with supply side management still rules the thought process. This is evident from Survey suggestions like decontrolling fuel prices and fertiliser prices. There are proposals also to remove the price control regime for drugs. In agriculture, the Survey talks about lifting the restrictions on futures trading and thereby encouraging the speculative forces in the commodity market.

There are proposals to increase FDI in insurance, defence and retails. All these steps overlook demand management in the form of generating employment and increasing the purchasing power of the people. The need of the hour is to curb speculative activities so that the resources can be harnessed in real economic activities.

The impact of the global recession was stated to be low in India due to better regulations in the public sector framework which didn’t allow Indian finance to join the big financial giants that finally led to global meltdown. The Economic Survey proposes to take away this basic strength of the Indian economy by making way of creeping privatisation in the share of the PSUs. The PSUs have a surplus of Rs 4,85,000 crores that remains highly underutilised. The utilisation of this fund is around 12 per cent.

One of the main impacts of the global slowdown has been the massive job loss and wage cuts both in export and non-export sector. there is no indication how this trend will be arrested.

Stimulus packages were targeted for employers without any concern for job protection. If the direction proposed by the ES continues, the prospect of recovery is destined to be bleak.

The author is CPI(M) member in Rajya Sabha and National Secretary CITU