Hit the poor where it hurts

The hyper-inflation has turned vicious because in India the cartels are jacking up prices of basic goods

Kamal Nayan Kabra Delhi

Policy preferences are rarely stated so candidly by policy-makers as we see these days in India. Owing to multiple failures on every single count that matters to the masses, the credibility of the Left-backed UPA regime is at a very low  level. Indeed, instead of addressing these serious issues, the sectarian commitment to the liberalisation agenda is being repeatedly reiterated.

Lower and higher order policy goals too are announced, such as privileging growth — which is the source and mechanism of sky-rocketing profits in the corporate sector — and over inflation control — which is protecting the real purchasing power of the meager, uncertain income of over 85 crore Indians. Even an undergraduate knows that growth in the face of the highly skewed structure may mean nothing to most Indians.

The transition from a creeping inflation of long antiquity to a galloping one would hurt the majority (except for a tiny price-making part of the economy for whom high prices mean higher incomes). Yet, policy pundits in India merrily display a could-not-care-less attitude towards this critical issue.

Policy-makers linked to world capital or their Indian counterparts have declared that economic growth remains the overriding priority. Even inflation control is publicly downplayed. The entire neo-liberal establishment is gung-ho over the seven to nine per cent rate growth rate. 

Not to be left guessing about the real import of economic growth, be it total or per person gross domestic product, let's go to the high priest of conventional market economy wisdom, the London Economist. It said: "Investors care about GDP growth. Corporate profits depend on the absolute rate of growth of an economy. And companies wanting to invest abroad will favour markets that are expanding more rapidly." (March 15, 2008, p 92) Clearly, no such powerful, concentrated interest is there to back up employment growth, control emission to preserve the ecological balance, or have 'acceptable' levels of inflation.

One often hears 'policy people' making a distinction between policy instruments and policy outcomes, or resource outlays and the outcomes they produce. But frequently, market fundamentalism and its free for all competitive game with cartelisation is leading high prices (read high profits) and diversion of investment away from the essential needs of the people to the frivolities of the super rich.

Consequently, popular angst and the fear of electoral backlash have come to haunt the political establishment. Hence, policymakers are now forced to issue empty warnings about imminent recourse to the much-decried "administrative measures". These measures are the antithesis of the market mantra adopted by this very political establishment. After all, such steps amount to micro management of prices by a regime committed to "getting the prices right" simply by leaving them to the market forces and withdrawing from any interference with private decision-making spheres.

These postures may queer the pitch against investment flows and may invite capital strike — something neo-liberals are afraid of. Hence, quickly, the commitment to the pro-profit, pro-investment, pro-companies agenda of accelerating GDP growth is renewed, irrespective of its impact on balance of trade, inflation and 'distant realities' such as global warming.

According to this kind of mindset, the question is posed as: Is it not a fact that "the size of a country's GDP is the best measure of its economic clout," the single most important basis for economic and military dominance, as the US status and policy goals clearly show? Why bother about long-run issues, such as poverty, inequality, unemployment? That the great power status is accompanied by the ominous distinction of harbouring the largest number of poor, malnourished, illiterate people? Or that India's human development index ranking is abysmally low, even below our tiny neighbouring countries?

Free market forces just can't contain the sprinting price levels. Look at the farce. While monetary and fiscal measures become ineffective, especially the retail prices of the essentials of life (that directly make a big hole in the shallow pockets of the majority) our policy pundits are forced to issue stern warnings to speculators, oligopolies and hoarders to behave — or else! But will this wash with the people who have the voting rights to show the door to these brazenly inflation-happy politicians?

Predictably, pushed to the horns of a dilemma, Prime Minister Manmohan Singh was quick to reassure the 'relevant constituency' that the commitment to liberalisation will remain unchanged. Does one sense an overriding ideological fixation in such pronouncements?

It is rarely stated that the corporate lobbies eulogised by the regime as wealth creators do their economic miracles by making others undergo the privation of postponing or foregoing present consumption. (CEOs and big guns enjoy eight to nine figure rewards, irrespective of the performance of the company and with little need to justify their role in a competitive environment.) The performance of the companies is abated by huge tax write-offs equivalent to total tax payment by the entire corporate sector (almost touching Rs 300,000 crore now). They are not under any obligation to produce results that are commensurate with the bounties bestowed on them, let alone the inconvenient question of any social pay-off that can address social problems, especially of the excluded sections. Thus, the prime minister's reiteration to the agenda of growth is nothing but a commitment to the sectarian interests of multinationals and their domestic counterparts. One such company was given a loan of Rs 12,000 crore by the largest public sector bank in just five minutes in order to acquire a foreign company producing steel.

It is the company cartels that are jacking up prices of basic goods while they end up paying taxes at rates lower than the rate of income tax paid by most of their employees. It is the manufacturing prices, with a weight of around two-third in the wholesale price index that has the biggest responsibility, both directly and indirectly, in pushing up inflation.

Whether it is export mania, SEZs, or the mass displacement of tribals from their mineral-bearing lands and life-sustaining forests, the neo-liberal reforms have nothing to offer to the common person but perpetual penury for generations to come. The same is the case with the realty sector expansion. It places the choicest natural beauty locations, such as Lavasa in the Malabar region, in the lap of the black money-holders and creates scarcity and unaffordable prices for even bare tenements. One wonders what chances are there for around 2.5 crore shortage of dwelling units being met when scarce land and building materials are cornered by super deluxe luxury apartments and townships that are daily advertised and carry a price tag in eight digits and more.

The extent of perversity has crossed all limits. Witness the scenario of partial capital account convertibility. So many foreign locations, in Dubai or Singapore, are advertising real estate for the globalised tiny minority of the 'arrived Indians' who can pay the astronomical amounts for these 'heavens on earth' and mock the rest of the people forced to lead a precarious existence in slums with the Damocles' sword of demolitions hanging over their dingy dwellings.

One has just to contrast the incredible tragedies across India against the glamorous extravaganzas of the celebrities who can do anything for the filthy lucre, be it cricket auctions for astronomical sums, advertising for fashion and frivolities, the massive amounts spent by the rich on their family/personal celebrations, or the proliferation of innumerable car models turning our congested city roads into virtual killing fields. The message is clear: to the liberalisers, the people do not matter. They are bent on creating a nation of a few in which the rest have to be manipulated under our electoral multi-party democracy, with caste affiliation, bhumi putras, and majoritarianism masquerading as cultural nationalism.

We once had a government that strived to earn the name of a 'Developmental State' from the 1950s onwards. The moneybags sabotaged it and replaced it by a 'Growth Fundamentalist State'. The UPA government's commitment to market forces and foreign capital, even when it threatens the livelihood of millions of tiny vendors and hawkers, not to mention small retailers, is astounding in so far as the real constituency served by these policy-makers is so extremely small and narrow.

Obviously, both major political formations in India have two important sources of solace: they seem to be the only alternatives to each other and hence even when one is made to forgo political power the real constituency standing behind them continues to feel fine. And both seem to have an uncanny faith in the gamble of reposing faith in their art of winning elections even in the face of the extremely painful existential struggle the masses are forced to wage day in and day out.

If any fresh evidence is needed, one can witness the current hyper- inflation, much higher and much more vicious than revealed by the official wholesale price index. Undoubtedly, it is the creation of the pro- rich policies pursued by the government.