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Even after neoliberal organizations, which have been vehemently opposed to government spending, recognized the need to increase government spending and provide cash assistance to marginalized people in order at least to restore the market forces after the Covid-19 attack; the BJP government has been stepping up its austerity measures, At the same time, there is no drop in profligate spending. Is the Parliament in a state of collapse? What is the urgency to allocate Rs. 2,000 crore for the Central Vista project to build a new parliament. The Ram Temple is also planned to be built at the cost of several hundred crores. The Govt has recently approved the purchase of military equipment worth Rs. 8,722 crore.

Nirmala Sitharaman at GST counsil meetingThe government has notified that global tenders will be disallowed in government procurement tenders up to 200 crore rupees, a move to be welcomed but not without flaws. Is it not a double standard to say global tenders up to 200 crores will not be allowed, but global tenders of 2,000 crores are welcome. If the upper limit is laid only based on cost, it would be to the advantage of big corporations, while small and micro enterprises are likely to be affected. The Govt ought to put forward a detailed regulation for corporations describing what are all the products to be procured locally and what is the minimum percentage of its total procurement to be bought locally.

The economy has deteriorated due to the badly enforced GST reform in taxation. The BJP government, by promising states to provide GST compensation to ensure 14% revenue growth to offset the loss of revenue to the states due to the implementation of the GST tax from 2017 to 2022, it snatched the states of their right to levy taxes, even two years before the promised period, it has betrayed the trust of the States and put them in a wretched state. The finance minister of the devotional BJP Government has put the blame on God, but she did not tell which god it was whether Ram or Allah. When the most pious BJP government is not even trustworthy to God, how shall we expect it to be trustworthy to ordinary people like us? Rs.12,250 crore GST arrears have to be paid to the TamilNadu govt by the Central Government. The Central Government has been providing GST compensation from the revenue collected from the Cess and surcharge.

This year, the central government has to pay Rs.3 lakh crore as GST compensation to the states, but the surcharge revenue of the central government is just Rs.65,000 crore, leaving a deficit of Rs.2.35 lakh crore. Since the Central Government has an obligation to pay this compensation, it should have taken a loan from the RBI and paid compensation to the States. But the Central government has given states two chances in order to shirk its responsibilities. One is that the states have to borrow from the RBI, which will be repaid later with the central government's GST compensation. The second option for the states is to borrow from the open market. The central government can monetize the fiscal deficit through the RBI, while states cannot borrow at low-interest rates like the central government. The states have to borrow at around 2 per cent higher interest rates than the central government. Imposing more debt on already financially afflicted states is what meant co-operative federalism to Indian Union.

The BJP government abolished wealth tax in 2016, then reduced corporate taxes from 30 per cent to 22 per cent, and upped the taxable income to 5 lakh. Most of the tax revenue in India comes from indirect taxes which increases the burden of the poor.

Recently the Prime Minister has introduced faceless assessment, an 'appeal' and a TaxPayers Charter to ensure that income-tax payers are treated with dignity. None of the taxpayers knows who his ‘Assessing Officer’ is. Similarly, the income tax officer does not know what his jurisdiction is. It is said that this will bring in transparency and shun away malpractice. Such an inaccessible, mysterious system is hailed by the BJP government as transparent. The most important aspect of this is said to be that the income-tax payer is seen as honest. He will not be treated in a way that disturbs his self-esteem. In India, income-tax payers constitute 1.6 percent of the population. The premise taken by the ruling class that the rich are all honest is just similar to the widespread premise that the private sector is efficient. Such compassion and concern shown to the 1.6 per cent is never given to the more than 90 per cent common people who bear the brunt of indirect taxes. This is one another example which highlights the class characteristic of the Indian state.

The Reserve Bank of India has made it a norm for all commercial banks, including foreign banks, to provide 40 per cent of their net bank loans for priority sector lending, while regional rural banks and small-scale banks are required to allocate 75 per cent of their net bank loans to priority sector lending. This priority category includes agriculture, vulnerable groups, small and micro enterprises, credit for exports, education, housing, and social infrastructure. Banks are required to lend 18 per cent to agriculture in this priority category, 7.5 per cent to micro-enterprises and 10 per cent to vulnerable groups such as Scheduled Castes and Scheduled Tribes. In March 2020, the RBI added non-bank financial institutions to the priority sector lending list as beneficiaries.

Recently, start-up companies, construction of solar-powered pumps, compressed biogas plants and healthcare schemes such as Ayushman Bharat are also included in this list by the RBI. If new users are to be added to the priority sector credit service, the net bank credit to be allocated to the priority sector must have to be further increased from 40 per cent. But, adding additional categories within the already reserved 40% credit would reduce the number of beneficiaries in each category and is not going to bring a progressive bank reform as portrayed. The RBI also reported that public sector banks are the best performing in priority sector lending; but the private banks and foreign banks are poor performers in PSL. This shows that public sector banks are better at adhering to social justice than private banks.

Despite that, the RBI has instructed six public sector banks to reduce the govt stake in them to 51%. The Prime Minister's Office has also ordered to reduce the govt stake in the four primary public sector banks. Such a move, in the long run, will end up in complete privatization of public sector banks which is contradictory to the norm of social justice.

Shares of private companies on the National Stock Exchange have risen to an all-time high of 44.43%, while government shares have fallen to an all-time low. Government shares have been steadily declining in 11 years due to privatization. Shares of the government, which stood at 22.71 per cent in June 2009, are now down to 6.36 per cent due to privatization. The value of shares of private companies listed on the National Stock Exchange rose to Rs 60.37 lakh crore from Rs 14.51 lakh crore in June 2009. Shares of Reliance Group have increased by Rs 2 lakh crore. Reliance Industries has risen to become the second largest company in the world after Apple. Adani has risen to become the world's largest solar power generation owner. The BJP government has leased airports in Jaipur, Thiruvananthapuram and Guwahati to the Adani Group for 50 years. Leasing of 6 more airports, including Trichirappalli is under consideration.

While India's real economy is paralyzed, the stock market seems to be booming as if it has little to do with the real economy. This is because as banks around the world have increased their liquidity, cash flow, due to recessionary situation, most of these credits have been invested in speculative financial sectors rather than in the productive manufacturing sector. The lending rate for non-financials has decreased.

India's foreign exchange reserves increased by $2.296 billion to $537.548 billion. India’s Central Bank is buying more dollars in the open market than any other bank in Asia. Why? Because such open market operations (OMOs) are being carried out by the Central Bank to prevent the rupee from appreciating due to the increased inflow of foreign investment.

We may think that it is better if the rupee appreciates. But the mainstream argument goes like this: if the rupee appreciates, it will destroy India's competitiveness for exports. But the rupee is not going to appreciate to the level of the dollar or the euro overnight just by foreign investment. The central bank must reconsider why it is taking such pains and risking its reserves for this. Germany's exports contribute 46.97% of its total GDP in 2019, it carries out its exports in euros, which is worth more than the dollar. It is true that in capitalism India should not be compared on a par with Germany; as the standard of capitalism is twofold, one for the ‘developed’ countries and the other for the ‘developing’ countries. It is worth reconsidering the theory that devaluing currency can increase export competitiveness and increase the country's revenue. It should not be forgotten that we are devaluing the overall GDP of the country by devaluing the currency. It should also be noted that India's exports have declined since the BJP came to power in 2014.

Rise of exports in India peaked at 25.43% in 2013 and fell to 22.97% in 2014. Exports fell by 18.7% in 2019. The BJP government laid bare India and opened to the global market with a full thrust, but investment in improving domestic productivity and technology has not increased. World trade was in decline even before the onset of Covid-19. The current export-oriented policy-making is irrelevant in today's economic scenario compounded by the pandemic crisis. If the rupee appreciates, investments in debt securities will increase, and India’s import bill and India's foreign debt would drop, and inflation would tend to be low.

Since most foreign investments are short-term profit-making finance capital, it is also said that open market operation by the central bank is imperative to prevent the rupee from sudden depreciation. This year alone, $6.5 billion has flowed out of India. The alternative is to control speculation. The solution lies in introducing capital controls to regulate foreign financial investment, not in reckless buying of dollars.

July Prices:

Consumer price inflation rose to 6.93 percent in July. Food inflation soared to 9.62 per cent, cereal prices increased by 6.96 per cent. In rural areas, Inflation rose to 7.04 per cent, and food prices rose by 9.89 percent. In urban areas, Inflation rose to 6.84 per cent, and food inflation rose to 9.05 per cent. In Tamilnadu, inflation reached 7.04%.

Index of Industrial Production for June:

The Index of Industrial Production, released by the National Statistics Office, fell to 16.6% in June. During the April-June period, it fell by (-) 35.9 percent. In the primary sectors production fell by (-) 19.8 per cent in the mining sector it fell by (-) 17.1 per cent in the manufacturing sector, it fell by (-) 10.0 per cent in the power sector. In use-based classification, the production of capital goods declined by (-) 36.9 per cent. Production of intermediate goods (-) fell by 25.1 per cent, construction by (-) 21.3 percent and durable consumer goods (-) by 35 per cent. It is only the production of non-durable consumer goods which increased by 14%. The production of all commodities except tobacco is in negative numbers.

Growth in July:

According to data released by the Ministry of Commerce and Industry on Monday, production in eight primary infrastructure sectors fell by (-) 9.6 per cent in July for the fifth consecutive month, as steel, refining and cement production dropped sharply. In July 2019, the output of eight primary sectors increased by 2.6 per cent. During the April-July period of 2019-20, the output of these primary sectors, which grew by 3.2 per cent, declined to (-) 20.5 per cent in the same period of 2020-21. Except fertilizer, every other sector, steel (-) 16.5%, refineries (-) 13.9%, cement (-) 13.5%, Natural Gas (-) 10.2%, coal (-) 5.7%, crude oil (-) 4.9% and electricity (-) 2.3%), recorded negative growth in July. Fertilizer production has increased from 1.5 per cent in July 2019 to 6.9 per cent in July 2020.

Indian economy in the first quarter:

According to data released by the National Statistics Office, India's gross domestic product (GDP) contracted by (-) 22.8 per cent in the first quarter of FY 2020-21. Experts commented that the biggest shortcoming in the first quarter GDP calculation was that it did not take into account informal sector data, as the June quarter value was calculated based on data obtained from listed companies and thus the GDP shortfall was underestimated. In the first quarter, steel consumption fell by (-) 56.8 per cent, and cement production dropped by (-) 38.3 per cent. Growth in the mining sector (-) 23.3%, manufacturing (-) 39.3%, construction (-) 50.3% and trade, transport and telecommunications (-) 47% declined negatively. Growth in the public administration, defence, and services sectors slowed to (-) 10.3%, gross fixed capital formation (in the GDP) got reduced to 47.5%. In G20, India recorded the highest economic contraction. It is only the agriculture sector which showed a growth of 3.4 per cent in the first quarter.

The area under cultivation during this Kharif period has increased by 7.2 per cent as compared to last year. But it should be noted that the liberal reforms introduced in the agricultural sector have prevented ordinary farmers from benefitting from it. CMIE in a survey recorded that between April and July, 1.8 crore people lost their jobs, and the wages of others fell. The country's overall unemployment rate, which was 7.43% in July increased to 8.35% in August. The International Labor Organization (ILO) stated that the Covid-19 had pushed 403 million Indians further into poverty, and 121 million have lost their jobs. It is shocking to know that in many states, foodgrains are not distributed by the public distribution system. More than 25 lakh families in Tamil Nadu have not yet received the Prime Minister's Kisan (farmer) assistance.

With declining incomes and unemployment, people are being pushed to take lower-wage jobs, and their consuming power is on the decline. What needs to be done to alleviate the suffering of the people, the Govt should increase its spending to create new employments and need to give handouts to improve the purchasing power of the people. But the BJP government is stubbornly continuing its so-called austerity measures. The BJP leadership has elevated India to become the third worst-affected country by Covid-19. No wonder if it soon reaches the first place.

Niti Aayog's first vice-chairman Arvind Panagariya has welcomed the BJP government's failure to provide more funds to alleviate the suffering of the people affected by the Covid-19 impact and the economic stagnation. He also asked the govt, not to give new debt schemes. He is up in arms against India's decision to raise tariffs saying that it is in contravention to the WTO norms. Neoliberalism has blinded him not to see the natives who suffer from free trade. He opposes the new education policy, saying he is not in favour of increasing education funding from 4 percent to 6 percent, he couldn’t tolerate even that nominal empty promise of the BJP Govt. What a Patriot! Is there a drop of nominal patriotism traced in what he said? Apparently, Arvind Panagariya is an adamant ‘Anti’-Indian. It is with the leadership of such ‘anti’-Indians that people are suffering from the twin morbidities of Covid-19 and the economic crisis.

- Samantha K.S.


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