Supply-side policies failed, switch to demand stimulation: Bengal FM

Amit Mitra has written to Nirmala Sitharaman, urging her to take measures to increase demand in the economy as the supply-side policies have 'failed' to boost the manufacturing sector

West Bengal Finance Minister Amit Mitra has written to his counterpart at the Centre, Nirmala Sitharaman, urging her to take measures to increase demand in the economy as the supply-side policies have "failed" to boost the manufacturing sector.

Gross fixed capital formation, which was Rs 12.3 lakh crore in the first quarter of 2019-20, fell to Rs 10.2 lakh crore in the corresponding period of the current fiscal, - "a fall of an investment by Rs 2.1 lakh crore, despite your numerous packages and corporate tax cuts", he said in the four-page letter.

"I would like to draw your kind attention to the deep distress that the common people of our country are facing today. This distress is likely to deepen further over the coming year.

"Yet paradoxically, your government's propagandists are gloating over the 1st Quarter growth of 2021-22, which economists have found utterly misleading and other experts have called it a 'mirage'," Mitra said.

India's economic growth surged to 20.1 per cent in the April-June quarter of this fiscal, helped by a low base of the year-ago period.

The gross domestic product (GDP) had contracted by 24.4 per cent in the corresponding period last year, according to data released by the National Statistical Office.

"I now return to the misplaced euphoria among your government's spokespersons on the GDP/GVA (gross value added) growth in Quarter-1 of this financial year. I would like to point out that the growth of GVA in the Quarter-1 of this year represents a shortfall to the tune of 7.79 per cent compared to the Quarter 1 of 2019-20. Therefore, I would request you to restrain your spin doctors so that the reality is stated with utter objectivity," Mitra said.

He also said the economy has been witnessing chronic unemployment, unprecedented reverse migration of workers, the collapse of private consumption, persistent inflation cutting into meagre consumption expenditure of the poor and a fall in consumer sentiment.

"The nation is shocked to find that in the last month (August, 2021), the unemployment rate has again shot up to 8.32 per cent (as per Gol data) which implies that 3.6 crore people are jobless today...This is one and a half times the entire population of Australia," Mitra mentioned in his letter.

Citing a study of Azim Premji University, he said it revealed that "nearly half of the formal salaried workers have moved into informal work between late 2019 and late 2020'.

"You may not be aware that an unprecedented reverse migration of workers is taking place in India today, from factories to farms. This is a sign of distress where non-agricultural sectors are simply unable to provide employment.

"In fact, your government's periodic Labour Force Survey shows that such reverse migration to agriculture is cutting salaries of workers by half, for the lucky few who are able to find jobs as casual agricultural workers. We are reminded by Centre for Monitoring Indian Economy (CMIE) that 60 per cent of employment in manufacturing industries is in the unorganised sector."

With the wholesale price index rising by 12.13 per cent (average of May, June and July 2021) and the Consumer Price Index crossing the danger line of the RBI, this "persistent inflationary trend" has eaten into the consumption expenditure of the common people and reduced their real income, he claimed.

"Needless to say that the cruel rise in petrol and diesel prices and now, two consecutive increases in quick succession of cooking gas cylinders by Rs 25 on August 17 and again by Rs 25 on September 1, pushed the price of cooking gas cylinder to Rs 911. You can well imagine the plight of the common people in general and our homemakers in particular," he said.