The newly formed Economic Advisory Council has the onerous task to tailor the new economy. It must focus on the farm sector, tame the banks, cut robotisation and end Government austerity
The poor and the economy have taken the centre-stage of Indian politics. Prime Minister Narendra Modi felt concerned about the poor and announced the formation of an Economic Advisory Council (EAC) for their welfare. Union Finance Minister Arun Jaitley too looked for a package to revive the economy that has ‘dipped a bit’ without giving up fiscal austerity.
And, for a first in the Bharatiya Janata Party politics, a former Finance Minister and Senior BJP leader, Yashwant Sinha, fired salvos for a sagging economy. Sinha’s criticism came shortly after the United Nations found the economy to be on a freefall, worldwide, due to ‘austerity’ and ‘hyperglobalisation’ — a new coinage that marked the Trade and Development Report (TDR) of the United Nations Conference on Trade and Development. It means over financialisation (bankisation) and the correspondent woes of the world economy.
The TDR also signaled to give up austerity at Government levels — which is just contrary to what India has been doing. Possibly, all the above four — Modi, Jaitley, Sinha and the TDR — are correct. The country needs to look for a new economic path. It needs a new package. There has to be full scrutiny and solutions to the grave problems have to be found urgently.
Sinha and the TDR look for new path, so does Modi and Jaitley. There is consensus between them. On the other hand, former Prime Minister Manmohan Singh’s economic model was a big failure. The quandary is about how to find out the new path.
Will the new EAC, led by Niti Aayog member, Bibek Debroy, be able to find that out and give the right suggestionsIJ The question plagues everyone, right from the Prime Minister to the last man.
The EAC has to find out new moorings and dynamics for the Indian economy. Manmohan Singh failed to revive the economy because of what Congress vice president Rahul Gandhi termed, “failure to create jobs”. There was jobless growth. According to Gandhi, situation has worsened during the last three years.
So, what would be the EAC’s takeIJ How would it create jobsIJ The industrialised-manufacturing economy has failed to do it. If it has to look for new avenues, dynamics of the economy has to change. India remains moored in the farm sector but that is the most ignored.
The Indian farmer has to be the pivot of the economy. The importance of the farm sector has been indirectly recognised by the Government as it shelved the decision to prepone the financial year, which is linked to agricultural production.
The Government, in mid-September, realised that it will not get all data before the end of Kharif and Rabi seasons. That is the key. Over 54 to 58 per cent, according to official statistics, of the people are dependent on farms for their livelihood. It comes to approximately 75 crore people. Though the agriculture sector contributes to just 14 per cent of India’s Gross Domestic Product (GDP), almost the same as the manufacturing, with crop growth of a little over two per cent normally.
This hard fact is ignored. For the last 70 years, these large numbers are targeted to be separated from the farm sector. It has not and cannot happen. The new economy has to give these 75 crore people the firm support so that they stay and contribute to increase the GDP of this sector.
Till the advent of the British and their resort to permanent settlement, India was thriving on farm economy with poverty virtually a rarity.
India has to rediscover itself and make a vibrant economy that would transform the dream of Mahatma Gandhi and Deendayal Upadhyaya for the rise of the last man — the ‘antyodaya’.
The EAC has the onerous task to tailor out the new economy. But this cannot be achieved if banks become monsters. Bankisation, is the bane of the world economy, as also pointed out by the TDR.
Untamed finance is the continuing source of instability and inequality, according to the TDR. The UN body rejected claims that the financial system is safer, simpler and fairer. It condemned intensification of finance.
Is Sinha then right in criticising note ban, which in his perception, has led to slowing down of the economy to 5.7 per cent growth against desired over seven per centIJ
To some extent he is right. The banks are rising worldover with Government backing by creating fear psychosis of black economy and levying heavy charges and fraudulent deductions across the world. India is no exception.
Worldover, despite the 2007-08 crisis, the banking sector assets have more than doubled in most countries, the TDR notes, with peaks of over 300 per cent of GDP in the Organisation for Economic Co-operation and Development economies. The banks in developed countries have become mammoths with over $100 trillion accumulation. It exceeds global income.
India needs to be wary. The EAC has to correct it and tame the power of banks, their demands for unnecessary details like Aadhaar, mobile number, repeated know your customer (KYC) informations and unmitigated harassment.
In short, India, as many Eurpoeans, Americans and Japanese, want to be freed of the leash of banks and their instruments. It has to also to address the interests on deposits.
lower the interests to depositors, higher are their profits, which are often squandered away in credit to unscrupulous and rarely repaid.
Indians banks profligacy has led it to a trap of Rs 12 lakh crore non-performing assets, all earned from the poor depositors. Now the Government is recapitalising the banks with the same poor taxpayer’s money.
The EAC, for the sake of the poor, has to bring the banks out of the clutches of the Government.
The banks need to function like commercial entities and not Government departments. They have to service and not fleece with the backing of the Government. That would be a pro-poor approach to bring the banks back to health. The UN finds austerity of Governments a major issue for aggravating the economic crisis and the growing number of poor across the world, even in the most affluent United States.
It also warns against mixing automation and austerity. It has led to job crisis across the world. In India, this is reflected in the sudden sacking of thousands of workers from the information technology and some other sectors. The EAC has to ensure that robots do not replace well-paying jobs with the low wage ones. It raises profits of big companies and pauperises the workers or hits income distribution.
The EAC has to chart out a policy on robotisation so that India’s poor, Prime Minister Modi’s prime target, are not hurt. This is a great opportunity to redesign Indian economy. Its success with agri-focus can change the dynamics.
(The writer is a senior journalist)