by BA and Venkatesh Sundaram
According to the Government of India, the economy has entered what has been termed as a `technical recession’ since the economy has registered a negative growth for a second quarter in a row. The first of these was a net shrinkage of real GDP by approximately 24% for the first quarter of the financial year 2020-21 followed by an approximate shrinkage of about 7% for the second quarter of the same financial year. It is said to be the first time that such a thing has happened since the Government started quoting quarterly figures in 1998. The previous contraction was as long ago as 1980. Economists will hope for some growth as people will dip into their savings which in turn are expected to spur growth followed by recovery.
These devastating quarters have been in the middle of the Covid era, which set in during the month of March 2020 with the announcement of the 21-day lockdown of the country. Lockdowns and slowdown and partial lifting of lockdowns have continued, and various sectors of the economy have been completely shattered with the death knell having been sounded for service sector, including travel and tourism, as well as restaurants and eateries. There has also been a slowdown in the IT sector, with work from home becoming the norm, whereas figures for real estate are hard to come by.
Writing in The New York Times (NYT) of 27th November 2020, Emily Schmall says in no uncertain terms that `…the latest data firmly establishes India’s position among the worst-performing major economies, despite government spending meant to blunt the pandemic’s impact.’ It may also be remembered that the reason why India is termed a major economy is because it has the world’s second largest population and is by no means major when considered on a per-capita basis.
Furthermore, many of the government schemes meant to spur growth and spending have been shown to be duds and damp squibs from the outset. One such package announced with much fanfare by the Finance Minister proved to be no more than a clever way of reallocating funds and just window dressing, whereas another scheme launched under the name of the PMCARES proved to be nothing more than a shady scheme for avoiding proper audit and circumventing checks and balance of the government itself. Thus, there is little credence to the belief that the government is in anyway serious about the pandemic’s effects on the economy for the vast majority of the Indian people.
The above said the NYT article has pointed out that one of the causes of the economic devastation is the result of “…thousands of small businesses severely battered by its long, hastily imposed lockdown”. The purpose of the lockdown should have been to improve basic availability of medical services for the population that was sure have been affected by the spreading of the infection due to the Covid-19 outbreak and for, say, rapid manufacture of kits for testing, and ventilators and other kinds of emergency equipment, triage centres and the like for treatment. For the most part, however, people had to turn to expensive private medical facilities alone, causing tremendous hardship to those affected by the disease as well as their families.
Thus, every single action of the government caused tremendous hardship to the people. Government assurances through some payouts to small businesses are so inadequate as to be barely requiring a mention. This was also compounded by the disastrous `migrant crises of the type never seen before in Indian history. Over 140 million persons lost their jobs, of which many have returned to work, although several million had not found any new employment. A survey carried out by the All India Manufacturers Organization in June says that one third of Micro, Small and Medium Enterprises (MSME) were beyond saving. This is particularly ironic because the Hon. Finance Minister dwelt on them for her package which has since been ridiculed as having no content. And yet, even before the Covid crisis, the economy had slowed down but still growing at about 5% after the heady days of over 10% growth some years ago.
It may be mentioned here that the biggest item in last annual budget, indeed year after year, is euphemistically called “tax expenditures”. About seven trillion rupees in the last budget, this is the value of tax concessions given in the budget to the biggest corporates! Like providing ‘infrastructure status’ to housing, tax holiday for some sectors, etc! The government at the Centre used the situation caused by the pandemic to steamroll three bills on agriculture through parliament – which had been demanded by the big corporates – and which crores of farmers are protesting vigorously against. Likewise, both the Central Government and various state governments like that of UP and others have used the terrible situation caused by the Covid pandemic to pass several Acts or ordinances restricting the rights of people to organise, imposing 12 -hour long shifts for workers and worse. Mergers of banks and privatisation of public sector industries are proceeding at breakneck speed. Thus, the situation is really rosy for the rich corporates Indian and foreign to enrich themselves at the cost of the majority of Indian people! All the schemes and packages announced by the government with a lot of fanfare have only benefited the moneybags. It is evident that both during the times of ‘heady’ growth as well as at the present time of recession, it is the big corporate houses who have emerged richer and stronger and it is the vast majority of our people who have been put to further hardships. Recent surveys have pointed out that the country has further slipped down on the Human Development Index and the nutrition levels of the population have further deteriorated.
The current situation requires everyone on the side of the common people to come to together and to understand the nuts and bolts of the economy. Understand what the content of the programme of liberalisation and privatisation is, what is the aim of mergers of banks, what is meant by ‘ease of business’, what are the various labour laws enacted, what is the consequence of the farm laws. Diverse sections of society must participate to pull India out of this economic mess, without which further disasters will await us every other year. What is needed are constitutional guarantees of food, clothing and shelter, education, and health for all, for economic security and of a safe future for everyone and the future generations. No amount of talk about economic growth without such yardsticks being combined and emphasised will get us anywhere.