India'sreform economists are a funny lot. They don'tmind the czars of industry feted with public money but they cannot stand any kind of subsidy or bonanza for the poor living under the poverty line. They believe that if the industry is pampered and protected the economy will grow double digit and the trickle down effect will cancel out poverty.
So the reform wizards who used to criticise budgetary support to public sector units now fervently plead to institute stimulation package for the private sector from tax-payers money. These people who advocated retrenchment and compulsory retirement of the banking, insurance and other public sector and government employees are now pleading for packages so that the jobs in the private sector are saved even for half the pay. (The jobs will not be saved in the private sector. That is another story).
How times change. The votaries of public sector VRS (voluntary retirement scheme) are telling captains of industry to feed the excess staff. For this, the government will foot the bill. Queer logic. These gentlemen who used to write volumes asking for better salary in government and public sector so that they will attract and retain talent are now cribbing that the pay commission recommendations have been implemented creating more budgetary deficit.
Their opposition to schemes under Bharat Nirman, which include NREGS, in which lakhs of crores of public money has gone down the drain is understandable. But millions of people under the poverty line have gained some employment under these schemes in the states where they were efficiently implemented. Their opposition to the Rs 73,000 crore loan waiver which shattered the financial health of the Indian public sector and cooperative banks is valid. But the relief the loan waiver scheme offered to the debt-trapped rural farmer at least in some states also cannot be ignored.
The same people who oppose NREGS and loan waiver freebies are in the front demanding tax holidays for the booming IT Industry.(The IT is in trouble these days but for almost two decades they thrived, and made huge profits without paying any tax and we have any number of Satyam like scandals.) These pro-reform economists also will not grudge the fact that every year the government is waiving billions in tax holiday when it sanctions hundreds of SEZs, again throwing away public wealth for private capital.
The freebies the government at every level offers to the industry is countless, incalculable. The money, the industry owes to the public sector banks, written off as NPAs(non-performing assets) is more than the cumulative budget of many rich Indian states. That does not bother our reform economists. Still they grudge, food, kerosene and education subsidy in a country where according to government estimate more than 700 million people live on less than Rs. 50 a day. In the last five years under the UPA, 55 million people were pushed under the poverty line.
Happily jet fuel price was slashed by seven per cent on March 1, 2009. But the airlines said, they won'tlower fares, rather they were planning to increase fares by Rs 800, from April, according to a report. The March 1 slashing of fuel price was the eleventh reduction in aviation turbine fuel(ATF), since September 2008, helping it slide by around 61 per cent since August last when crude oil price in the international market was at a peak of above $ 150 per barrel. The crude is now selling at $38 per barrel. The private operators still demanding more government support are saying that they will try to cover losses. This is the argument we hear from public sector and private oil companies?who make astronomical profits?and are still selling petrol and diesel for public consumption at peak-time price.
On record, ATF price make up nearly 40 per cent of airlines operating costs. Naturally, the airlines should have considerably reduced the fares. Even low-cost airlines that till recently made air travel affordable for the ordinary people, and offered stiff competition to full service carriers like Jet and Kingfisher with a fare war too have succumbed to the pressure from the sharks in the industry. The reformers will not explain why the airlines industry was the first to queue up for government bailout threatening job and salary squeeze when the meltdown started in the west.
This question is pertinent because not a drop of tear was shed when millions of craftsmen, artisans, skilled and unskilled labourers lost their daily wage in the small scale, village and cottage industry under the onslaught of reform and globalisation in rural India in the last decade. They migrated making the great human exodus from villages to the cities further choking the already over crowded Indian urban landscape. They provided cheap labour for the sahibs in the cities. Then the argument was that agriculture cannot support the teeming millions in the villages and that at least 30 per cent of the Indian rural-population should migrate to the cities. India'sdependence on farm sector has to come down for sustaining the nine per cent growth, it was argued. The growth was not sustained but suddenly we had a food crisis with falling food production, high food price and scarcity leading to more urban poverty than rural prosperity.
Of course, there is remarkable improvement in the country'soverall growth performance as a result of liberalisation. And this piece is not a critique of private enterprise or economic liberalisation. Managing poverty, unemployment and disparity cannot be left to crony capitalism. Globalisation has accentuated inequalities. The poor state of infrastructure, low levels of human development indicators and high incidence of poverty demand a strategy for spending large amounts of money on social amenities, rural development and removal of poverty. These are the areas identified as growth propellers even in the latest US bailout package.
There is a realisation in developed economies that putting more money into the industrialists? coffers will not work. Massive public work with the government taking over the responsibility of providing useful work at a living wage to all those who need it should form part of the booster package. More tax cut to benefit the industry will not spur investment. Most likely it will go into long gestation in banks, unless investment elimate is created. Increased rural demand only can instill this confidence. For this investment in infrastructure and social amenities should visit rural sector. The industry has got used to a no risk and high profit paradigm because of the big capital-politician nexus.
There is now salary cut in all sun rise sectors of Indian industry. Nothing wrong with it. Salaries, that are unreasonably high have to come down in a market economy, when there is a glut in the employment market. It is a good time to recruit and fortunately there is no fear of brain drain. The whiz kids who failed or lost jobs in the cushioned Wall Street corridors are now back in India either scouting for high-end jobs or still more lucrative pastures in politics. Indian political system will be doomed with this talent over reach that is soon going to invade the election scene.
The sixth pay commission was very partial to the bureaucracy, particularly to the central administrative service. Yet, many IAS officers have told this writer that if offered a ticket, preferably Rajya Sabha , they will resign from the IAS. That is the lure of politics. And politicians? fetish for the capitalist is legendary.Equally unnerving is their disdain for the commoner. They hate the mention of the word poor. The raging deficit debate in the country, in this poll season need to factor in these unsavory aspects.
(The views expressed in this column are personal. The writer can be contacted at [email protected])