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

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

How lead petitioner was rendered homeless when GM mustard matter came up in SC

By Rosamma Thomas*  On January 5, 2023, the Supreme Court stayed a December 20, 2022 direction of the Uttarakhand High Court to the Indian Railways and the district administration of Haldwani to use paramilitary forces to evict thousands of poor families occupying land that belonged to the railways.  Justice AS Oka remarked that it was not right to order the bringing in of paramilitary forces. The SC held that even those who had no rights, but were living there for years, needed to be rehabilitated. On December 21, 2022, just as she was getting ready to celebrate Christmas, researcher Aruna Rodrigues was abruptly evicted from her home in Mhow Cantonment, Madhya Pradesh – no eviction notice was served, and nearly 30 Indian Army soldiers bearing arms were part of the eviction process. What is noteworthy in this case is that the records establishing possession of the house date back to 1892 – the title deed with the name of Dr VP Cardoza, Rodrigues’ great grandfather, is dated November 14

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

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.

Tax buoyancy claims when less than 4% Indian dollar millionaires pay income tax

By Prasanna Mohanty  In FY18, the last year for which disaggregated income tax data is available, only 29,002 ITRs declared income above Rs 5 crore, while Credit Suisse said India had 7.25 lakh dollar millionaires (the wealth equivalent of Rs 8 crore and above) that year. Often enough, the Centre claims that demonetization in 2016 raised tax collections, improved tax efficiency, and expanded the tax base. Now RBI Monetary Policy Committee (MPC) member Ashima Goyal has also joined their ranks, attributing the “claims” of rising tax collections in the current fiscal year to “tax buoyancy” brought by the demonetisation . Do such claims have any basis in official records? The answer is unequivocal. The budget documents show the tax-to-GDP ratio (direct plus indirect tax) increased from 10.6% in FY16 (pre-demonetization) to 11.2% in FY17, remained there in FY18 (demonetization and GST fiscals), and then fell to 9.9% in FY20. In FY22, it improved to 10.8% and is estimated to drop to 10.7% in

Cyrus Mistry, PM Modi’s brother: What do these accidents have in common? Merc!

By Rosamma Thomas*  In September 2022, in an accident at Palghar near Mumbai, Cyrus Mistry, former chairman of the Tata Group, died in a road accident . On December 28, 2022, a road accident in Mysore left one of Prime Minister Narendra Modi’s brothers injured. What is common in these accidents? The car that crashed into the divider on the road, in both these cases, was manufactured by “prestigious” German manufacturer Mercedes Benz. One former dealer of Mercedes Benz cars in India has been raising issues of the threat to the lives of those riding these cars for many years now. Cama Motors, among the oldest dealers of foreign cars, having started business in pre-independence India, noted over 10 years ago that Mercedes Benz was indulging in corrupt practices . The cars are currently priced between Rs 41 lakh and Rs 2.92 crore in India; few people realize that the pride of owning a Merc comes at considerable risk to life. Cama Motors carefully documented several of the flaws on a websi

Gandhian unease at Mahadev Desai book launch: Sabarmati Ashram may lose free space

By Rajiv Shah  A simmering apprehension has gripped the Gandhians who continue to be trustees of the Sabarmati Ashram: the “limited freedom” to express one’s views under the Modi dispensation still available at the place which Mahatma Gandhi made his home from 1917 to 1930 may soon be taken away. Also known as Harijan Ashram, a meeting held for introducing yet-to-be-released book, “Mahadev Desai: Mahatma Gandhi's Frontline Reporter”, saw speaker and after speaker point towards “narrowing space” in Gujarat for Gandhians (as also others) to express themselves. Penned by veteran journalist Nachiketa Desai, grandson of Mahadev Desai, while the book was planned to be released on January 1 and the meeting saw several prominent personalities, including actor-director Nandita Das, her scholar-mother Varsha Das, British House of Lords member Bhikhu Parekh, among others, speak glowingly about the effort put in for bringing out the book, exchanges between speakers suggested it should be rele

Civil rights leaders allege corporate loot of resources, suppression of democratic rights

By Our Representative  Civil rights activists have alleged, quoting top intelligence officers as also multiple international forensic reports, that recent developments with regard to the Bhima Koregaon and the Citizenship Amendment Act-National Register of Citizens (CAA-NRC) cases suggest, there was "no connection between the Elgaar Parishad event and the Bhima Koregaon violence." Activists of the Campaign Against State Repression (CASR) told a media event at the HKS Surjeet Bhawan, New Delhi, that, despite this, several political prisoners continue to be behind bars on being accused under the anti-terror the draconian Unlawful Activities (Prevention) Act. Addressed by family members of the political prisoners, academics, as well as social activists, it was highlighted how cases were sought to be fabricated against progressive individuals, democratic activists and intellectuals, who spoke out against "corporate loot of Indian resources, suppression of basic democratic

Kerala natural rubber producers 'squeezed', attend to their plight: Govt of India told

By Rosamma Thomas   Babu Joseph, general secretary of the National Federation of Rubber Producers Societies (NFRPS) at a recent discussion at Mahatma Gandhi University, Kottayam, explained that it is high time the Union government paid greater heed to the troubles plaguing the rubber production sector in India – rubber is a strategic product, important for the military establishment and for industry, since natural rubber is still used in the manufacture of tyres for large vehicles and aeroplanes. Synthetic rubber is now quite widespread, but styrene, which is used in making synthetic rubber and plastics, and also butadiene, another major constituent of synthetic rubber, are both hazardous. Prolonged exposure to these even in recycled rubber can cause neurological damage. Kerala produces the bulk of India’s natural rubber. In 2019-20, Kerala’s share in the national production of rubber was over 74%. Over 20% of the gross cropped area in the state is under rubber cultivation, with total

How local NGO is using art, songs to teach children revive Sundarbans mangroves

By Sara Ahmed*  Located in the low-lying islands in the Bay of Bengal, the Sundarbans straddle the border between India and Bangladesh and cover more than 1 million hectares, making them the world’s largest single contiguous mangrove swamp . A Ramsar site added to the UNESCO World Heritage list in 1987, they are home to a wide range of critically endangered fauna, including the Bengal tiger, the Ganges dolphin , river terrapin, the estuarine crocodile and the Indian python, along with approximately 428 species of birds , 120 fish, 42 mammal, 35 reptile and 8 amphibian species. Having adapted to the saline estuarine conditions, more than 60 plant species can be found there. Historically, cyclones have posed a greater threat in the Bay of Bengal than they do in the Arabian sea, to India’s west. Between 1891 and 2018, there were 520 cyclones in the Bay of Bengal , compared to 126 in the Arabian Sea. On top of sucking up large amounts of greenhouse emissions , mangroves also act as the f