Skip to main content

To India's FM, informal sector, contributing 54% to GDP, isn't 'real' wealth creator

By Joe Athialy*
The press conference addressed by Finance Minister Nirmala Sitharaman on August 23 is an indication that, finally, the government acknowledges that the economy is crumbling and nearly hitting the rock bottom. That a 5 trillion dollar bubble can burst within two months of announcing it in the Union budget would be a record set for a long time to come!
So many reports of joblessness and a slowing down economy, retrenchment in many industries and concerns by economists did not stir up the government as much as the comments from some corporate sector leaders, ending with the Niti Aayog Vice Chairman Rajiv Kumar’s comments that the “ongoing stress in financial stress is unprecedented in the last 70 years”. One can only hope that these leaders will start speaking early enough next time and do not wait until we hit the bottom.
But the Minister started the press conference, explaining through a graph, that India’s growth is way far ahead of rest of the world. Apart from the fallacy of comparing the 2.6% growth of a 20 trillion dollar economy and 7% growth of a 2.7 trillion economy, one wonders if the economy is so rosy and “comfortably positioned” why did the Minister hold a press conference in a panicky mode and announced slew of measures aiming to revive the economy.
The Minister repeated time and again that the government “respects and honours wealth creators”. Sounds good. But who are the wealth creators as identified by the Minister? The corporations. Nobody else.
What about the informal sector, whose back was broken by demonetisation, where this crumble began? The sector contributes over 54% to the GDP and employs over 80% of India’s workforce.
Or agriculture, which has the potential to revive the economy, which contributes 15% to the GDP and around 600 million people directly or indirectly dependent on farming. There was nothing in Minister’s kitty for the sector.
Instead, pinning hope only in the corporate sector, the Minister reassured the Ease of Doing Business measures to continue, including self-certification and faster environmental clearance to projects.
With tax concessions and sops to the corporate sector and super rich – like withdrawal of angel tax for start-ups, withdrawal of enhanced surcharge levied on short-term and long-term capital gains and additional liquidity in non-banking financial companies (NBFCs) for sale of houses, vehicles and consumption goods (which is otherwise stagnant now) – the Minister expects a miracle from the sector to spin-out a magic to revive economy.
When the government is pushing so much for the corporate sector and its welfare, once cannot but recall the Oxfam inequality report released earlier this year. It said:
“Billionaire fortunes in India increased by 35 percent last year – Rs 2200 crore a day – while 13.6 crore Indians who make up the poorest 10 percent of the country continued to remain in debt since 2004.”
It also said:
“Last year, the wealth of top 1 percent in India increased by 39 percent whereas the wealth of bottom 50 percent increased at a dismal 3 percent. Getting the richest one percent in India to pay just 0.5 percent extra tax on their wealth could raise enough money to increase government spending on health by 50 percent.”
It takes a lot of insensitivity and miscalculation to believe that by helping the already wealthy 1%, some of them known to stack-up their profits in tax heavens, the economy can be revived and there is not even a pretention that the government is concerned about the “bottom 50%”.
Comical: The Minister thinks auto industry can be revived by lifting government ban to buy vehicles for its departments
Interestingly, after her predecessor claiming to crack a whip on tax evaders, probably because of the criticism her government received after the suicide of Siddhartha of Café Coffee Day, the Minister was singing a different tone, pacifying tax evaders. Any life lost is tragic, but one cannot forget that despite over 120 people dying because of demonetisation, there wasn’t even a whimper from the government, but a complete denial of it.
It’s a bit comical that the prescription the Minister had to boost demand and by which to revive the auto industry was to lift the government ban to buy vehicles for their departments. Seriously? If that’s a solution, maybe increasing consumption of vegetables by government officials may help the agriculture sector, more meat dishes may help meat industry and a glass of extra milk per day will help the dairy sector!
The banks are assured of a capital infusion to a tune of Rs. 5 lakh crore, which “will benefit all corporates, retail borrowers, micro, small and medium enterprises (MSMEs) and small traders” as the Minister said. The Minister was silent on the whopping Rs 10 lakh crore non-performing assets (NPAs) accumulated the past nearly 8-10 years because of excessive and unbridled lending.
Over 70% of the NPAs are caused by corporations and top 12 corporate NPAs cost exchequer twice as much as farm loan waivers. Without any measures to check the slide of NPAs, pouring in more money into banks to augment the lending will only deepen the pit where we are already.
Besides, there was nothing in what the Minister said, indicating recovery of bad loans from defaulters. By ensuring more lending and no commitment to recover bad loans, the Minister was sending a wrong signal, which will further choke the banking sector, and compelling to pump in more public money to help them survive.
Minister, the diagnosis of what is ailing the economy was wrong and hence it was the wrong steroids you injected on August 23.
---
*Source: Centre for Financial Accountability

Comments

Balveer Arora said…
Thé ‘réal’ ones are those who buy electoral bonds!
Kamal Chenoy said…
Demonetisation was a cruel lesson. The economy has yet not fully recovered. Electoral bonds, denied promises by the leadership to the rural areas are still under poor economic conditions. GST is no panacea. The leadership doesn’t realise that “wealth creation” among the poor and lower middle class is a myth.

TRENDING

India under Modi among top 10 autocratizing nations, on verge of 'losing' democracy status

By Rajiv Shah
A new report, prepared by a top Swedish institute studying liberal democracy, has observed that there has been a sharp “dive in press freedom along with increasing repression of civil society in India associated with the current Hindu-nationalist regime of Prime Minister Narendra Modi.” The report places India among the top 10 countries that “have autocratized the most”. Other countries that have been identified for rolling towards autocracy are -- Hungary, Turkey, Poland, Serbia, Brazil, Mali, Thailand, Nicaragua and Zambia.

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam*
RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Gujarat link of controversial US doctor who 'forced' WHO quiz Trump's wonder drug

By Rajiv Shah
A top American doctor, Sapan Sharankishor Desai, born and raised in the “affluent” North Shore (Chicago) region of Illinois by Indian parents, at one point of time involved in NGO activity through  dedicated to “improving” the lives of the impoverished in Gujarat, is in the eyes of a major international storm following his paper (retracted) in a “Lancet” questioning Donald Trump-promoted drug hydroxychloroquine.

Border conflict? RBI nod India's 'brotherly' help to China internationalise its currency

By Bhabani Shankar Nayak*
In the middle of a global pandemic, China started an unprovoked border conflict with India. It unraveled trust deficit and ties between the two neighbours. As thousands of Chinese troops tried occupying Indian territory, the Narendra Modi-led BJP government directs the Reserve Bank of India (RBI) to allow the Bank of China to start regular banking services in India. The Bank of China will now operate in India like any other commercial banks.

RSS supremo Deoras 'supported' Emergency, but Indira, Sanjay Gandhi 'didn't respond'

By Shamsul Islam*
National Emergency was imposed on the country by then Prime Minister Indira Gandhi on June 25-26, 1975, and it lasted for 19 months. This period is considered as ''dark times' for Indian democratic polity. Indira Gandhi claimed that due to Jaiprakash Narayan's call to the armed forces to disobey the 'illegal' orders of Congress rulers had created a situation of anarchy and there was danger to the existence of Indian Republic so there was no alternative but to impose Emergency under article 352 of the Constitution.

Clean chit to British rulers, Muslim League? Karnataka to have Veer Savarkar flyovers

By Shamsul Islam*
The BJP government of Karnataka led by BS Yediyurappa is going to honour Hindutva icon VD Savarkar by naming two of the newly built major flyovers in Bangalore and Mangalore after him. There was a huge uproar against this decision of the RSS-BJP government as many pro-Kannada organisations with opposition parties and liberal-secular organizations questioned the logic to ignore so many freedom fighters, social reformers and others from within the state.

Hurried nod to Western Ghat projects: 16 lakh Goans' water security 'jeopardised'

Counterview Desk
Taking strong exception to "virtual clearances" to eco-sensitive projects in the Western Ghats, the National Alliance of People’s Movements (NAPM) in a statement has said urged for a review of the four-lane highway, 400 KV transmission line and double tracking of the railway line through the Bhagwan Mahavir Wildlife Sanctuary and Mollem National Park in Goa.

Disturbing signal? Reliance 'shifting focus' away from Indian petrochemical sector

By NS Venkataraman*
Reliance Industries Ltd (RIL), a large Indian company, has expanded and grown in a spectacular manner during the last few decades, like of which no industrial group in India has performed before. RIL is now involved in multi various activities relating to petroleum refineries, petrochemicals, oil and gas exploration, coal bed methane, life sciences, retail business, communication network, (Jio platform) media/entertainment etc.

Case for nationalising India's healthcare system amidst 'strong' private control

Counterview Desk
A draft discussion note, prepared by Dr Maya Valecha, a Gujarat-based gynecologist and activist, sent to the People's Union for Civil Liberties (PUCL) as also a large number of activists, academics and professionals as an email alert, is all set to create a flutter among policy experts for its strong insistence on nationalizing India’s healthcare system.