“It’s no measure of health to be well-adjusted to a profoundly sick society” J. Krishnamurthy
“How can we translate this perspective into knowledge practices?” Boaventura de Sousa Santos
A Curtain Raiser
In 1991, India truly entered the neo-liberal age of market driven economic ordering on the back of a consensual degree that was, at the time accompanied by deep sighs of relief; a thankfulness that the old order of ‘democratic socialism’ with its emphasis on state-controlled and -run enterprises, with the private sector playing a junior but admittedly important role, and with its protections, variously fought for and won by organized labour and resistance to monopoly captialism’s worst excesses could be finally laid to rest.
The UPA government that ushered in these “reforms” was however mindful of the need for caution, to tread with care and not allow a Thatcher-type radicalisation to create systemic distress among the weak and underprivileged. Welfare schemes lingered; at some point later as the new millennium rolled in, some more were introduced though reluctantly by successive governments, such as the employment guarantee schemes, right to education; labour “reforms” were bruited about but policymakers reared on the neo-liberal consensus did not yield to the temptation to put them into practice despite the dearly held belief that such changes were the key to the advance of the organized economy and that Little Big Number, the GDP. And, the secular fabric, for whatever it was worth after the traumas of Partition, held together an idea of India as a composite and thereby rich culture. .
What we are witnessing now is a pervert telos of that future promised by the reforms of 1991 and the embrace of the neo-liberal order. Since 2014, the advance of neo-liberalism abetted and cheered on even by liberal public intellectuals and media has gathered momentum by a central government and its state level cohorts who have made no effort to mask their conviction in the concentration of capital in the hands of a club of oligarchs; the intimacy of policymaking to the centers of capital has created what some scholars have called a Poligarchy. The old chestnuts have been pulled out; labour law-reform has rendered the working people fully vulnerable to the exploitation by employers; as Subodh Varma points out, the new labour codes were introduced during the pandemic when labour had lost its hold on jobs indeed on their lives. And the urban middle class has cheered on, blinded by their trust in the discourse that the growth in the GDP number or in the size of corporate empires was nothing more than a reflection of an enhancement of their own prosperity.
The ecstatic embrace of the neo-liberal order, the reluctance to continue the old welfare schemes, the politicization of free handouts like toilets for women that have the odour of transactional charity, and the co-option of the middle class into an economic order stacked against them, has deepened those abyssal lines dividing the country into the small coterie of the rich, the poligarchs, and the vast majority of the growing poor and dispossessed and the unemployed. In this sense, India has truly marched in the footsteps of the world’s oldest democracy where economic inequalities mount frightfully. In the world’s largest ‘democracy’ however, something else happened; Over the last eight years the fragile secular fabric has been torn asunder to the point where abyssal lines have appeared amongst the dispossessed, the non-Poligarchs themselves. Mobocracy, a form of mob rule, is replacing the rule of law, itself weaponised by a government whose ideological mission has become increasingly evident in its tolerance of intolerance and hatred against the Other, be it Muslim, dalit or women.
The privileging of such violence, manifest in the benign indifference or casual benediction by the State creates new schisms, abyssal lines in our terms of discourse, indeed our epistemologies as well. It renders the emergence of an epistemology of the oppressed, of the have-nots all the more tenuous; it engenders a sense of righteous well-being among the majority community, the Hindus, that at long last, history’s wrongs and injustices are being righted by a mobocracy and its patronage by the State apparatus. At play are both Hannah Arendt’s idea of “de-factualisation” where single, stray facts aquire the nature of truths and Guy Debord’s idea of the Spectacle shrouding us in a veil of illusions, both of which prevent us from viewing the layered “realities” in any other way than that disseminated by the reigning hegemonic ideology. The very notion of “privilege” acquires, as in the words of Humpty-Dumpty to Alice, those meanings that emanate from whatever or whoever is “master.” For the frothing-at-the-mouth Hindu out for Muslim blood, the ‘privilege’ of mobocracy does not allow for a glimpse of another reality in which his life condition is really no better than the victim’s. Consciousness determines Being.
Perhaps the “privileged” middle class Indians should step back and listen to the words of Varma in the two essays that follow; words that show us a reality of a society riven by deepening schisms, of intersectional violence, the growing tolerance of intolerance, a State power that is doubling over to render democracy and its norms, mere myths, where the idea of being Indian becomes self-alienating. The journey into India’s heart of darkness, its moral sickness could start here. Perhaps we might just get a sense of the shithole we have adjusted ourselves in. —The Beacon
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Subodh Varma
The trend was visible from last year but the scale of profits reported by India’s listed companies after the financial year ended in March this year is nothing short of mind-boggling. According to latest data by CMIE or Centre for Monitoring Indian Economy, companies listed at the BSE (formerly known as Bombay Stock Exchange) have reported a collective profit of Rs.9.3 lakh crore (1 lakh crore rupees is approximately USD 12.8 billion) in 2021-22. This is over 70% more than the previous year and nearly three times more than the average profit earned every year for a decade before the pandemic, that is, between 2010-11 and 2019-20. (See chart)
Even in the first year of the pandemic, 2020-21, the profit of these listed companies had touched a record of Rs.5.5 lakh crore, more than double the preceding year. But the profits accumulated in the second pandemic year have beaten all records.
These estimates are based on the financial statements of 3,288 listed companies that had published their statements for the quarter ended March 2022, by May 30, 2022. There are about 4,700 companies in all. CMIE says that the results of the remaining 1,500 companies are unlikely “to make a material difference to the analysis” because these 3,288 companies accounted for over 90% of the total sales of all listed companies in the previous quarter.
Earlier this year, a briefing by Oxfam had pointed out that during the pandemic (March 2020 to November 2021) incomes of 84% of households in the country declined but the number of Indian billionaires grew from 102 to 142 and their collective wealth increased from Rs. 23.14 lakh crore ($313 billion) to Rs. 53.16 lakh crore ($719 billion).
More than 46 million Indians, meanwhile, are estimated to have fallen into extreme poverty in 2020 (nearly half of the global new poor, according to the United Nations.) “The stark wealth inequality in India is a result of an economic system rigged in favour of the super-rich over the poor and marginalised,” the study added.
The CMIE report is thus confirming what seems to be a bizarre but bitter reality – the pandemic has been fantastic for the corporate sector.
Why these super profits?
There appear to be several reasons behind this unprecedented profit-making. Of late, especially in the last quarter, increasing prices have helped jack up profits, although it reduced profit margins (profits as a share of sales revenue). Analyzing the last quarter, CMIE says that “raw material costs shot up by 40.1 per cent year-on-year; power and fuel costs were up even higher, by 47 per cent and purchase of goods was up by 30 per cent.” This means that the operating cost of companies increased. What did not keep pace was the wage bill, that is, the costs incurred by companies for payment of wages and salaries. The wage bill grew at a “relatively modest” 13.3%, according to CMIE data. If an average inflation of 7-8% is factored in, then the wage increase is meager.
This has happened because during the pandemic, a large number of workers were thrown out and all have not been re-inducted. New appointments are being given lower wages, and contractual labor has increased. This also implies that labor productivity would have increased, since a less number of workers are doing the same work. In short, labor has become cheaper and more work is being squeezed out of them. This is a sure-shot way of increasing profits, practiced everywhere in the world.
But merely cutting labor costs is not enough to explain the phenomenal increase in profits. There must be other factors at work too. What these factors are is something that is puzzling commentators.
It is clear that sales have increased dramatically in recent months compared with the earlier period of the pandemic. This is a process of returning to the normal. High prices combined with these higher volumes will mean higher profits.
Another factor is that the Narendra Modi government has provided a slew of tax cuts, rebates, concessions and exemptions, as also various debt restructurings and even cheaper credit, to the corporate sector during the pandemic. The cumulative effect of these is, perhaps, becoming evident in the bottom lines of corporate balance sheets now.
Tax Cuts and Other Concessions
The biggest gift given by the government to the corporate sector was the cut in corporate tax in 2019. The corporate tax rate was slashed from 30% to 22% (35% to 26% if surcharges etc included). In effect, this meant that the government gave a gift of an estimated Rs.1.45 lakh crore to the corporate sector. The government asserted that this would spur investment which would create more jobs, more demand, and ultimately boost the whole economy.
As elsewhere in the world, nothing of this sort happened – the jobs situation continued to worsen, investment too remained patchy. But, meanwhile, the bounty has helped boost corporate profits, evidently.
The Modi government has been very kind to the corporate sector consistently, even apart from the corporate tax cut. Between 2014-15 and 2020-21, it gave various rebates, concessions and waivers worth Rs.6.15 lakh crore to corporate tax payers, euphemistically called ‘tax incentives’, according to Union Budget documents (available in Annexure 7 of the Receipts Budget). These were earlier known as ‘revenue foregone’ which was a better description.
Similarly, Rs 10.72 lakh crore worth of loans have been written off by banks, mostly public sector banks, which presumably act on the directives of the government. Of this, as much as Rs.2.03 lakh crore was written off during the first year of the pandemic, 2020-21. That’s the last year till which data is available.
Legal changes help corporates
The Modi government has also created the most conducive atmosphere for corporates, again especially during the pandemic years. This included the passage of the four Labour Codes that establish hire and fire as an acceptable policy for employers, fixed term (or contractual) employment, changes in the way minimum wages can be calculated, and almost complete dismantling of the monitoring machinery for compliance with labor laws.
Although the rules are yet to be framed by State governments under these new Codes because of strong resistance from workers, under cover of the pandemic, many State governments went ahead and issued sweeping notifications or ordinances suspending various labor rights.
A combination of these gifts from the government has had the desired effect of boosting profits to unheard of levels. Inevitably, it has also led to deepening inequality, decimation of purchasing power of people due to low wages, and relentless unemployment. How the government will deal with the blowback of this remains to be seen.
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In the meanwhile for the majority…economic distress: Rising Prices and Unemployment: Journey into the Night.
“Twenty years of schoolin’/ and not even the day shift” Bob Dylan (misread)
“You might be Suffering from Capitalism” Vivan Marwaha (p58)
Subodh Varma
Recently released estimates of the country’s economic output show that people are not spending enough. The only reason this can be is because they do not have sufficient income, and their buying power is limited. On the other hand, prices of all essential commodities are increasing at a disturbingly high rate. This will further restrict spending. Industrial production has grown at a snail’s pace, and with people not having enough to spend, demand will continue to be low and industrial output too will languish. Bank credit for large industries is growing very slowly. So, prospects of any check on raging unemployment continue to be bleak because there is unlikely to be a fresh investment that would create jobs.
It is an ominous situation – and the Modi government, which is celebrating eight years of ‘sushasan’ (good governance), appears to be indifferent to it. All its neoliberal prescriptions have failed spectacularly – tax cuts to the corporate sector did not spur new investment, squeezing funds on welfare schemes did not encourage private capital to move in, and putting public sector units for sale has not received many takers and hence not much disinvestment funds, opening up various sectors to foreign direct investment has not led to any boost to the economy and employment.
In fact, the government’s policies have led to a tanking economy and widespread distress for people that free food grains distribution will not salve..
NO BUYING POWER
The provisional estimates for Gross Domestic Product (GDP) for the fiscal year 2021-22 show that per capita Private Final Consumption Expenditure (PFCE) was Rs.61,215, down from Rs.61,594 two years ago, in 2019-20. During the pandemic year 2020-21, it had slipped to Rs.57,279. PFCE represents spending by all non-governmental entities and hence includes all families besides business entities. Comparing it with two years ago is sensible because it shows that the spending has still not recovered to pre-pandemic levels (see chart below).
What this means is that for a majority of the people of this country, there is no increase in their buying power. This is because either earnings have fallen very low or they are unemployed. High prices further rob them of their meagre earnings. As a result, demand for products and services will remain low. PFCE forms the most substantial part of the economy, toting up 56.9% of GDP, the same as in 2019-20. Hence the entire economy cannot revive unless private consumption spending picks up.
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What about government spending, which could have provided the requisite demand? Government spending (called Government Final Consumption Expenditure or GFCE) increased slightly in the pandemic year to 11.3% of GDP, but it has since declined in 2021-22 to 10.7%. In other words, the government has started pulling its hands back and restricting its expenditure. So much for the talk of all the beneficial schemes that one hears endlessly from the Modi government! Government spending would be the only way this crisis can be resolved, but the Modi government is shackled by its neoliberal dogmas, unable to lift itself out of the paralysis.
INDUSTRIAL PRODUCTION SLUMP
As shown in the graph below, the Index of Industrial Production (IIP) has been showing very weak growth for the past year.
The high growth rate for May 2021 and, to some extent, for the following three months are merely because growth is being computed in comparison to a year ago since then – and a year ago was May 2020, the lockdown that stopped all industrial activity. The next few months also reflect this base effect as the comparison is with the slowly reviving industrial activity in those months of 2020. However, once the base effect goes away, the real situation emerges – the IIP slumps to a very weak, almost negligible growth of 1-2% every month.
IIP measures a basket of different types of industrial output. If one looks only at the manufacturing sector, which forms the backbone of the economy, the growth is even weaker. For instance, in March 2022, when the overall index grew at 1.9%, the manufacturing sector grew at just 0.9%.
All this is meant to show that the industrial sector – especially the big corporate sector is not growing, thus causing the increase in unemployment and the prevalence of insecure, low paying jobs in agriculture or the informal sector.
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The likelihood of growth in the coming months is bleak because, as we saw earlier, demand is low. This is confirmed by the fact that bank credit to the large industry is growing at a measly pace, according to RBI data. Loans outstanding to large industry increased by just 1.6% between April 2021 and April 2022. In the previous year, credit had slumped by -3.6% because of the pandemic. Credit to the MSME sector has grown by leaps and bounds, driven by the easy credit made available by the government to that sector as part of its pandemic management strategy. However, since there has been hardly any demand, the sector is still facing a crisis.
RISING PRICES & UNEMPLOYMENT
This situation becomes even more desperate for people because of rising prices and continuing joblessness.
Prices of essential items of use – from food to fuels – have risen inexorably over the past years. This has led to cutbacks in consumption. Retail inflation, that is, the rise in prices of what common people pay for various commodities or services, was recorded at 7.73% in April 2022. Within this general rise in prices, food items have increased more, topping off at 8.03% in the same month.
As shown in the chart below, based on data from the Reserve Bank of India, retail inflation has zoomed up since September last year.
2021-22 has become the year with the highest average yearly wholesale price increase in the past decade at 13%. Much of this increase is driven by fuel prices, which accounted for 25% of the jump in wholesale prices. Petrol and diesel prices have risen mainly due to the imposition of excise duties by the Modi government, which saw this as an easy way of raising resources. Price rise is actually direct robbery – it is the transfer of resources from the pockets of common people to rich traders and industrialists.
Meanwhile, unemployment continues unabated, having remained over 6.5% since September 2018, that is for 44 months continuously, according to CMIE. This includes the almost 25% rate of unemployment that was hit in April 2020, as the lockdown was imposed unexpectedly in India. In May 2022, average unemployment was clocked at 7.2%, while urban unemployment was higher, still at 8.2%.
The combination of these features has become an unbearable burden on the Indian people – and there appears to be no hope of any relief soon because the Modi government is only planning more of the same policy prescriptions.
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Notes The two essays by Subodh Varma courtesy Newsclick - https://www.newsclick.in/record-profits-boost-corporate-sector-pandemic -- https://www.newsclick.in/ominous-economic-distress-no-buying-power-no-jobs-rising-prices
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