Are many of the developed economies of Europe, USA and some others going to enter into
economic recession in the coming quarters? Has India been doing well in economic
development? Many other contemporary issues were discussed by Prabhat Patnayak,
professor emeritus, Jawaharlal Nehru University and a social activist, in his speech on the
occasion of 100th anniversary of All India Reserve Bank Employees’ Association in Kolkata.
Later he spoke to Kishore Kumar Biswas on some other relevant issues. The summery of
Patnayak’s views are given below:
Q) Do you think many developed economies are going to face technical recession in the
I cannot say whether they are going to face it or not. This is because technical recession is
defined as negative growth of GDP for consecutive two quarters. Any economy can avoid
being into technical recession even when it is in economie crisis. For example, it may so
happen for a crisis prone economy records negative growth of GDP in a particular quarter.
then it may have low positive growth in the next quarter. But in the next quarter it again has
negative growth of GDP. Then there can be no recession according to this definition. But the
economy may remain in crisis even for long period. What I said earlier was the world
capitalism has been under unprecedented crisis since World War II. Indian economy has also
been in unprecedented crisis since its independence.
Q) But India has been one of the highest achiever of growth in the world in this FY
That is a point to be noted. India is proudly said to have been an emerging economy, is now
among the highest growing economies and also a leader of G 20 countries. But at the same
time it is a country with largest number of poor people and its poverty has been growing. In
recently published Global Hunger Index India slips to 107 th among 121 countries. Of course
government India has rejected it on the ground of methodological imperfectness. But mind
that any method of any indexation can be questionable and one can quarrel with methodology
of any indexation. But outright rejection of hunger index of the government when hunger has
been increasing is very unfortunate.
Another point should be noted that hunger and poverty are closely related. This has been
accepted by the erstwhile Planning Commission while it defined base line to measuring
poverty level in the 1973-74 when studies on poverty started. Actually poverty has also been
increasing in India in the neo liberal period that was originated in 1991. In between 1993-94
to 2011-12 rural poverty increased from 58 to 68% and it also increased in urban areas. The
benchmark of measuring was defined on the basis of nutritional matter only. But after that
there is no income data to assess the movement of poverty.
Q) A few days ago Lawrence Karz, professor of economics of Harvard and a researcher on
labour economics told in an interview (Economic Times) that at present, in the USA,
inequality is least in 50 years. At the lower level, the wage rates are higher But the problem
lies with middle group........
I do not know that. But Joseph Stigliz said earlier that in the US economy the wage rates of
those days were lower that those of the early 1960s.
Q) Income inequality has been rising throughout the world. India is not an exception to that.
Why this has been so, particularly in India?
This is inherent in the neo liberal economic policies. In this policy finance is free to move
anywhere of the world. If capital can cross any countries border at any tome then every
governme t will will try to keep finance within the economy for its economic growth. The
economic policy of every country is finance happy. So this policy goes against the interest of
the peaseanry, the petty producers, fishermen, common workers and the like. Actually any
nation state is forced to make such policy.So the withdrawal of the protection of the common
people is the hall mark of the neo liberal regime. This why agricultural has been growingly
unprofitable, small craftsmen are not able to maintain their livelihood from their work. In the
organised sector casualization of work or temporary employment has been increased as more
people are engaged to work for same period of working hour with less earnings. Peasants are
growingly out of cultivation and many of them moving to the towns.
In the production sector each product has to compete with products of imported products. So
a producer requires in producing anything at cheaper rates. So he has to increase labout
productivity by employing appropriate capital intensive technology that requires less labour
per unit of production. Profits will be rising in this case. At the same time, unemployment has
been rising. So inequality has been rising. While India grew by 6% or 7% or 8% its
employment growth had fallen to 1% in the neo liberalism from 2% before the regime. That
means growth of employment has been less that population growth in India.
Q) How the ongoing inflation can be controlled?
One main reason is controlling inflation by raising interest rates. This means it will increase
the cost of borrowing money. So production is lowered. The biggest sufferer has been the
labours.a They lose their jobs when production is curtailed. There is no system of capping or
ceiling the prices of products. In USA, for example, in the inflation phase the profits of the
Q) What policy can be taken in India to reverse the situation?
I think by defying neo liberal economic order five policies should be implemented. In that
case economy will prosper and inequality will reasonably be lowered. These are 1) right to
food to all the citizens 2) right to employment, 3) right to quality health services, 4) right to
quality education up to class twelve (say) and 5) right to have universal pension by a
Q) How the government will finance it?
It requires additional fund of 7 to 10% of GDP. This can be had from two sources. One is
imposing property inheritance and the second has been imposing wealth tax from only a
small section (1 or 2%) of the rich population. In many countries there have been such taxes.