Monday

16


March , 2020
‘Strong steps to increase domestic demand could be a solution to the economic slowdownʼ : Amit Bhaduri
11:45 am

B.E. Bureau


Professor Amit Bhaduri was educated in Presidency College and Calcutta University, MIT, USA and Cambridge University. He is a critique of mainstream neo-classical economic theory. He is also an activist and strong critique of corporate led economic growth and development terrorismʼ.

He recently gave up his emeritus Professorship of JNU, New Delhi. He speaks with BE’s Kishore Kumar Biswas about various crucial aspects of the Indianeconomy. Excerpts:

Q. Many social scientists and other observers including former RBI governor professor Raghuram Rajan, think that BJP led present Union is more interested in fulfilling its political ideology rather than solving economic problems of the country. Many people consider the present government as a fascist government. What is your opinion about this?

A. Those who think that fascism has already come in India they are looking at the oppressive side of the government of what is happening and so on, its idea of homogeneity in religion, emergence of a strong leader, etc. If one considers the emergence of Hitler of Germany, there had been an employment programme there. Road construction had been emphasised, which led to huge employment generation.

Additionally, rearmament of Germany also gave huge employment scope. Germany had a reached full employment economy from an economic disastrous state that had been there a few years ago. In that situation, racial pride of the Germans became popular. But at the present situation in India, we see many similar things but without  the good economic prosperity. The present government has not solved any major economic problem of the country. In Germany at that time, the government had a hold on economic prosperity that helped  the country to go for war.    

Q. If we come to ongoing slowdown of the Indian economy,  many economists  think  that the economy is facing a structural problem of growth. But government considers that it is only a cyclical problem and will automatically revive. How do you see the ongoing status of the economy?

A. There are two things. One is the structure of the economy and another is what have been the changes in economic policy. In one sense, the economic policy of the present government is worse than that of Manmohan Singh government as the Modi government has inflicted additional damages to the economy. One of this is demonetisation
which helped their election funding and their public image. It damaged the informal economy greatly, but it did not
damage the formal economy. This shifted the balance of the economy in favour of the formal sector.

The second damage has been that they have done almost nothing, except yearly payment of ` 6,000 to farmers and
some small things about agriculture. We know that if agriculture is not developed the demand of the economy will not be generated. It is known that about 92% of the people are either dependent on agriculture or in other unorganised sectors. They are worse off in this regime due to their poverty and also because of the current government policy. This is the main cause of economic slowdown.

Q. How to revive the situation…………

A. Actually at this moment, it is irreversible. Even if the government wants to revive agriculture and wants to take positives steps, the end results will take time. On the other hand, the damage due to demonetisation can not be
revived easily by the government. In that sense, the Indian economy has been facing a structural problem and it has no immediate solution.

Q. But can government do it by implementing demand management policies like………..

A. The observers consider tackling such a situation by the Keynesian policy of  pumping money to the economy by the government. This should be done. But it can not be continued for long because government is tied with the corporate sector, particularly, with a small section of corporates. Corporates are not pleased with that policy as it will affect the market of those corporates. At times, government tries to increase the corporate expenditure and take various policies like corporate tax concessions. But that is not working to improve investment and employment in the economy

In this situation government has to spend money in a decentralised way in the agriculture and rural sector through extensive use of employment guarantee schemes. I do not think any other way to tackle the situation.

Q. Do you think the present slowdown of the economy is related to weakness of the globalisation process?

A. Indian economy has some impact of the global economic process but the present problem is related to its own economic policy. Globalisation means corporate led economic prosperity and it minimises the role of the state that started in 1991. In the globalisation process, the policy is to increase the competitiveness in the international market. For this you need better quality control of the domestic products, in-time delivery of products and so on.

The employment generation will be less in this process as labour productivity is increased by more mechanisation and so on. As a result when GDP increases by say 8% or more but employment increases by small amount. It was even less than 1% in many years. In fact, this policy has been taken by all the governments – the Congress, BJP and even the left parties. They have no other alternative.

Q. What are the other alternatives that you suggest?

A. The domestic demand should be increased in a way so that the domestic industries produce more items to meet its own demands in a better way. Better cycles, more cycle rickshaws, pump sets and so on should be produced to meet the local demands, instead of producing items like bullet trains. Actually we have to consider the domestic economy first.

Q. Do you think the Congress government would have different way of running the Indian economy?

A. Actually many people say that the present Union government prefers Hindutva ideology, This government prefers corporate growth with ‘Hindu’ majoritarianism. This is by and large true. On the other hand, the Congress
led government preferred corporate led growth without Hindu majoritarianism. In a situation where growth has faltered, people unrest is rising. With recent loss of BJP in many state elections, the party  is consolidating on Hindu majority votes.

Q. But Congress proposed that the policy of NYAY (Nyuntam Aay Yojana) would have reversed the
economic slowdown, had the Congress led government  won in  last Union election?

A. The basic income scheme was first implemented in conservative regime in Austria in 1940s. This is Austrian economics. The citizens will be given a basic income level. They will not have any involvement in economic
development. The business leaders will decide how the economy will move but state will provide a basic income
to citizens. In our country it will not be a suitable programme. It will be totally a patron-client relationship.
As it will be done through the bureaucracy there will arise a huge corruption. I think it would be a pretty idiotic scheme in the Indian context. In this policy there would be no involvement of the common people.

Economic development without people’s involvement may lead even to more corporatisation. A section of people think that something could be done in favour of poor very quickly while they are in power. Actually those who think in this way are mainly anti-communists or non-communists.

 

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