Alarming slowdown of the economic growth
The growth rate of the GDP(Gross Domestic
Product) of India slipped to 6.1 per cent in the Q3(third quarter, that is
October to December 2011) of 2011-12 against the 8.3 per cent growth rate
witnessed in the same period, October-December 2010. This is the 6th
time that the growth rate declined, in the last 7 quarters. This proves the
seriousness of the economic slowdown. The worrying factor is that the growth
rate in manufacturing sector fell down to 0.4 per cent in October-December 2011
against 7.8 per cent during the same period in 2010. Thus there is virtually no
growth in the manufacturing sector. The
mining sector witnessed a drastic slow
down with a growth rate of 3.1 per cent in October –December 2011 compared to
the same period in 2010. Despite a bumper harvest, said to be due to the effect
of a higher growth in 2010, stood at 2.7 percent during October –December 2011
compared to 11 per cent in the same period in 2010. The growth rate of GDP as a
whole for the period April-December 2011
is 6.9 per cent compared to 8.1 percent during the same period in 2010. The
growth rate in construction sector fell down to 7.2 per cent in
October-December 2011 as compared to the 8.7 per cent growth rate during the
same period in 2010. The services sector ( IT, telecom services, tourism,
hotels, etc) also witnessed a slow down with a growth rate of 9.9 per cent in
October-December 2011 compared to the 11.2 per cent growth during the same
period in 2012. The actual growth rate
for 2011-12 could even be lower than the 6.9 per cent predicted by the
Government. (In 2010-11, the growth rate was 8.4 per cent).
The wrong reasons mentioned by Corporates
The
Corporate news papers are mentioning the following factors as the reasons for this slow down in
the economy:
a)
The
Reserve Bank increased the interest rates to curtail inflation (Meaning it
prevented circulation of more money by increasing interest rates). It acted as
a disincentive for investing in industries by taking loan. Thus it reduced the
confidence of the investor!
b)
Continued
hike in the international oil prices resulted in increasing the cost and
reducing the profit and hence acted as a disincentive for the investors
c)
The
demand for goods was slack at home and abroad. Due to the slowdown of the
economies of the advanced capitalist countries, exports to those countries
suffered.
The wrong prescription by the Corporates and
their ideologues
Basing their argument on the above said
factors, the Corporate media, the economists favoring the Corporates are
prescribing the lowering of interest rates by the Reserve Bank so that the
Corporates will get bank loans at reduced interest rates and hence invest more
in industries and will thus help the growth. The various Associations
representing the Corporates like CII(Confederation of Indian Industries), FICCI
(Federation Of Indian Chambers Of Commerce and Industries), ASSOCHAM (Associated
Chambers of Commerce and Industry of
India) are demanding the Government to implement reforms in a fast manner for
increasing the growth of the economy. The reforms they want are reducing the
interest rates, allowing more and more FDI, reducing the taxes and duties on
the Corporates and allowing them to take over the assets of the PSUs and the
natural resources at throw away prices. They are also pressurizing the Government to
allow more and more space to the Corporates in the agriculture. The sum and
substance of these proposals is that the Corporates should be granted more and
more incentives to encourage them to produce more.
But these Corporates, their media and the
economists supporting them are thinking about the supply side only and forgetting
about the demand side. The slow down in the economy is due to the slow down in
the demand ultimately. The slow down in the demand is due to the reduced
purchasing power available with the vast majority of the population. Without
strengthening the demand, what is the use of producing, when what will be
produced will not be purchased?
The prescription of the Working Class
Hence against these demands of the Corporates
and their pen pushers aimed to loot the economy, the central trade unions have
suggested the following measures in their meeting with the Finance Minister
Pranab Mukherjee on 16th January 2012:
1.
Stop
the price rise of essential commodities by banning the speculation and forward
trading in the essential commodities and by strengthening the public distribution
system and by reducing the prices of the petroleum products.
2.
Remove
the ban on recruitment and provide employment. Link the stimulus package given
to the Corporates with the conditions for banning retrenchment, lay offs,
closures, wage cuts and job cuts.
3.
Statutory
minimum wages be ensured to the crores of the workers in the unorganized sector.
4.
The
MNREGA(Mahatma Gandhi Rural Employment Guarantee Act) be extended to urban
areas and 200 days employment in a year be ensured along with provision of
statutory minimum wages
5.
The
PSUs are having a cash reserve of Rs 6 lakh crores. They should be allowed to utilize
these reserves for their expansion and development so that more jobs are
created.There should be no disinvestment of PSUs.
6.
The
proposed reforms in banking and insurance sector for allowing more and more FDI
thereby causing danger to the stability of our financial system should be
withdrawn.
7.
Budgetary
support should be given to the traditional sectors like jute, textiles,
plantations, handloom, coir etc.
8.
The
rate of interest on EPF, GPF and savings by ordinary people etc should be enhanced.All should be ensured
pension in their old age.
9.
Income
tax exemption for salried persons should be raised to Rsx 3 lakhs per annum and
fring benefits like housing, medical and educational facuilities should be
exempted from the income tax in totality.
10.
The
resources for all these activities be raised by increasing duties on imported
power plant equipments, imposing wind fall tax on petroleum products exported
from stand alone refineries, increasing the taxes on the rich and affluent
sections having the capacity to pay a higher taX. The Corporate service sector,
traders, wholesale business, private hospitals and institutions should be
brought under broader and higher tax
net. The export duty on iron ore exports should be increased. Effective
measures should be taken to unearth the huge accumulation of black money within
and outside the country. The huge amount of Rs 3 lakh crores unpaid tax from
the Corporates should be collected. The huge tax concessions given to the
Corporates should be stopped. The huge amount of unpaid loans should be
collected from the Corporates by the
Nationalized Banks. Serrvice Tax should be imposed on ITES, outsourcing sector,
educational institutions and health services running on commercial basis.
Similarly it is also necessary to
help the peasants by extending loans at reduced interest rates, by investing
more for developing irrigation, by ensuring remunerative prices to their
products etc.
If these steps favoring the workers,
peasants and common people are taken, it will result in increasing their
purchasing capacity and hence the demand. If the demand is thus increased, there
will be growth in the market and hence the scope for growth in the economy.
The attitude of the Government
But the Government under the
pressure of the Indian and foreign big corporate is not going to consider the demands
of the trade unions and peasants, except announcing some small concessions here
and there in the coming budget and propagate it as a pro-people measure. The
main thrust of the budget will be to favor the Corporates at the cost of the
people and it will result in further slow down in the economy and consequent
hardships to the workers and peasants. The remedy prescribed by the Corporates
and their ideologists is more dangerous than the disease.
Struggles against the wrong policies
should be intensified to save the economy
Thanx for sharing this informative post. This is the slowest growth rate after the year 2008.
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