The spillover from the Greek crisis may not hit the Indian shores. But it has grave lessons for India, which too blindly follows the never-ending austerity measures.
In India, the term austerity is not commonly used. Instead, successive Finance Ministers, policy makers, mainline economists and TV anchors harp on reducing the worrying levels of fiscal deficit, the gap between government earnings and expenditures. Among a series of measures that are often talked about to bring in fiscal consolidation, the focus remains invariably on trimming the social spending.
Every time a panel discussion opens on any aspect of the country’s economy, the ire of the panelists is on the wasteful subsidies – the burgeoning food subsidy, fertilizer subsidy, LPG subsidies – and a horde of other subsidies like cheaper train fares, and public sector investments in public health, education, agriculture etc. The task therefore is two-prone. First, to drastically cut down the so-called wasteful subsidies. Secondly, to reduce the outlays for various social sectors that directly impacts the majority population.
The primary thrust of economic reforms is to cut down on social spending and shift the resources to corporate welfare. It is generally assumed that more financial support for corporate will lead to increased industrial output, increase in manufacturing, and growth in exports eventually leading to more job creation. Basing its flawed economic thinking on the failed concept of ‘trickle down’ the International Monetary Fund (IMF) has used the macroeconomic strategies to tie its debt restructuring plans with austerity.
Greece has shown that neither the concept of ‘trickle down’ nor the stringent austerity measures have helped. In India too, the results of the Social Economic and Caste Census 2011, which was unveiled by Finance Minister the other day, has conclusively shown that economic reforms have bypassed 70 per cent of the country’s population. With the highest income in 75 per cent rural households not exceeding Rs 5,000 per month, and 51 per cent households working as dehari mazdoor for their daily living, rural India presents a grim picture.
As if this is not enough, the outlays for social sectors have been slashed by Rs 4.39- lakh crore in Budget 2015-16. This includes a huge cut in budgetary provisions for Women and Child Development, Panchayati Raj, Mid-day Meal and Drinking Water and Sanitation sectors. Take agriculture, which engages 60 per cent of the rural population. The total outlay for agriculture is less than that of MNREGA. No wonder agriculture is faced with a terrible agrarian crisis.
While the poor are getting the boot, the thrust of the economic reforms is to move the resources for corporate welfare. Not only in Europe, In India too massive hidden subsidies, direct grants and tax breaks for the corporate are doled out by both the Central and State governments. Since 2004-05, Corporate India has been given tax concessions to the tune of Rs 42-lakh-crore. In addition, State governments have been providing more tax rebates every year. For instance, Punjab has in the past 4 years given tax concessions to the tune of Rs 900-crore to the industry. Regardless of such massive doles to the industry, the thrust of fiscal consolidation remains on cutting social sector spending.
Some economists say Rs 48,000-crore that goes as LPG subsidy, which they term as wasteful subsidy, is enough to remove poverty from India for one year. If that is true, Rs 42-lakh-crore could have wiped out poverty from India for the next 84 years !
Such massive tax concessions (I am not counting hidden subsidies and direct grants) were expected to boost industrial output, increase exports and lead to more job creation. Nothing of the sort happened. In the past 10 years, while economic growth has remained at an average of 7.3 per cent or more, only 1.5-crore jobs were created against a requirement of at least 1.2-crore newer jobs every year. And despite such massive tax concessions, industrial debt is higher than the debt of all the State governments put together. On top of it, the non-performing assets of the industry is also zooming with Rs 3.5-lakh-crore written-off as bad debt in the past five years. Moreover, privatisation of health and education is cutting a big hole in the pocket of the average citizen.
It’s Corporate India that needs austerity. Fiscal deficit can be wiped out simply by withdrawing the tax concessions to the industry. Instead, the need is to invest more in human assets. The sooner we learn this, the quicker will we be able to avoid a Greek tragedy. #
Will India be able to avoid a Green tragedy? ABPlive.in July 9, 2015.