Achchhe din has arrived!
The new government has already removed the governance roadblocks that were stifling India's true economic potential and it was working on "as big reforms as we possibly need".
We have got the right ingredients, we got the right government. Why shouldn't everybody be positive about India? I am very positive.
Mr. Aditya Puri, Managing Director of HDFC Bank, in an interview given to PTI, which appeared in newspapers on December 7, 2014
Sometimes a mere remark can explain a lot which a thousand words may find difficult to express. The statement of Mr. Aditya Puri, a prominent member of the big bourgeoisie camp, has such a quality. There was never any doubt that a large section of the big bourgeoisie backed the BJP led by Narendra Modi from the very beginning of preparation of last parliamentary election and they were extremely eager to see Modi in the post of PM. The big bourgeoisie had a single aim: another big onslaught of so-called economic reforms[1]. Whatever be the reasons behind their inability, it is an undeniable fact that though the previous UPA government initiated the process of these big reforms, they could not introduce those measures in totality, as desired by the big bourgeoisie. So it was clear to the advanced sections of proletariat, and even progressive, democratic intelligentsia that first task of the new government would be to usher in the "big reforms" as the "masters" "possibly need". The first Budget of Mr. Jaitley frustrated some sections of the representatives of big bourgeoisie who asked vociferously- 'then where lies the difference between UPA and NDA government'. One bourgeois economist even bitterly commented in a reputed national daily that it was "not a radical Modi budget but a Chidambaram budget with saffron lipstick added". However, the last few months have made it clear that the government is preparing in a big way to introduce a series of well planned reform measures on a wide scale and in an orchestrated manner, and thereby preparing to launch a vicious, all-out attack on the workers, peasants and other toiling, poor masses of our country. To be exact, they have already started the offensive and in all probability will gradually reach the crescendo in the next budget of 2015. Mr. Jaitley has recently stated "Reforms have to take place all 365 days in a year. But then Budget is an important occasion to highlight that. ?A "whole set of second generation reforms" will be unveiled in the next Union Budget."[2] The news report also added that Mr. Jaitley promised "a lot of exciting time ahead". Indeed, it will be very much exciting for the big bourgeoisie.
The onslaught: in brief
The broad contour of the second generation reforms as planned by the ruling classes is not unknown. The big bourgeoisie is demanding openly for these measures for last few years, from around 2011. FICCI even had placed a sort of charter of demands to the then central government.[3] The Bourgeois media was leaving no stone unturned in expressing the requirements of the corporate houses. Even the captains of Indian big businesses were openly arguing for some measures. So, the major requirements of the Indian big bourgeoisie and their foreign mentors were more or less clear. From recent reports and statements of men in power we can get the idea of these reforms more or less clearly.
Firstly, they were demanding for a long time for repeal of some, if not all, "archaic" labour laws of "British period". ( Is it not an irony of sorts that the same bourgeoisie, who are clamouring for repeal of 'archaic' labour laws of 'British period' is crying hoarse to go back to far older 1894 colonial law of land acquisition? ) One may think why the bourgeoisie at all need the change of labour laws? The hard earned rights of workers have been practically snatched. The permanent workers have been practically replaced by contract workers, who have no rights whatsoever. The capitalists are recruiting and retrenching these workers at their will. The workers practically do not have any statutory benefits. Their wages are low. And above all they hardly can get organized and protest unitedly as the possibility of retrenchment is always hanging over their head like the mythological sword of Damocles. The aims of these reforms are two-fold. One, to maximize their profits, they want to extend their 'hire-and-fire' strategy further. The hard-earned right of 8-hour working day has almost been forgotten and 12 hour shift is almost the order of the day, which they now want to legalise. They now want to extend their right to start and pack up any company any time, without any state intervention and without any compensation to the workers. Along with this right they also want to remove restrictions on their exploitation of workers as much as possible. Two, they also understand that with such intense exploitation there is bound to be increase in struggle of the workers. So, they want to curtail workers' right of organization and struggle further. So, they now want to reform the labour laws to restrict trade union formation, organizing strikes and other forms of struggles inside the factory premises.
Already, the BJP government of Rajasthan has taken the role of pioneering in this regard. Some significant reforms have already been carried out there. There have been proposals to amend the Industrial Disputes Act so that from now onwards establishments employing up to 300 workmen ( the limit was till now 100) will not be required to take permission for retrenchment, lay-off or closure. It may be noted here that FICCI had proposed this amendment as a precursor to the extension of that limit up to 1000. The Rajasthan Government have also amended trade union act to make raise minimum membership from 15% to at least 30% of the total workforce in order for a labor union to be registered.[4] It has been reported that MP Government has already followed Rajasthan and already forwarded similar amendments for ratification.[5] It has also been reported that Maharastra Government has also decided to change labour laws in similar lines. It is clear that these moves are well-planned and BJP governments are working in unison. A host of amendments of existing labour laws are being planned by the Central Government.
Secondly, the big bourgeoisie want to capture newer fields of investment. A large part of erstwhile public sector is being privatised either directly or through the route of disinvestment. The budget of 2014-15 had set the target of disinvestment to around whooping `58,425 crores. The target included ` 43,425 crores from selling stakes in PSUs and ` 15,000 crores from selling residual stakes in erstwhile government companies.[6] 5% stake of SAIL has already been sold in December last year. And recently 10% stake of Coal India Limited has been sold for ` 22,558 crores. We may see selling of further shares within coming two months as the Government is falling short of its disinvestment target. However, already it is doing the rounds that in the next budget similar target will be fixed for disinvestment.[7] Public Sector banks have also been allowed to sell their shares keeping share of Government up to 52%. And also raise money from the markets. The sale of shares of these PSUs is actually accelerating the final takeover of these PSUs by the big bourgeoisie.
Along with the disinvestment, the Government is planning to shut down some PSUs completely. Such 21 sick companies including once famous HMT will be closed down by the Modi government and thousands of workmen will be rendered jobless. It may not be irrelevant to note here that, contrary to popular belief, these PSUs were once set up with the public money not for the public cause but for the benefit of private capitalists. After the capitalists have exploited these companies to the last, some of these companies have become useless to them, which they now want to close down.
Another important measure in connection with privatisation is the removal of restrictions on private investments in various sectors. A number of fields of Indian Railways have been made open for private investments. The fields include new railway projects like High speed train projects, building infrastructures like passenger terminals, freight terminals, locomotive coaches manufacturing and maintenance etc. Defence sector is also being opened up for private investments.
Thirdly, restrictions on limit of FDI investments in different sectors are being further withdrawn. Among these decisions, most important was the decision to enhance foreign equity cap in insurance sector. The UPA government tried to bring in this step but failed due to opposition from BJP, left parties and other parties. The NDA government naturally did a volte-face and tried to amend the insurance acts, but they also failed to pass the amendment in parliament. Ultimately the government promulgated an ordinance to enhance the foreign equity investment cap in insurance sector from 26% to 49%. A press release from finance ministry announcing the promulgation of the ordinance also stated that "the content of the Ordinance is aimed also at allowing insurance companies to raise capital through new and innovative instruments, which would help capital intensive insurance industry to garner resources for business growth"[8] Before enhancing cap in insurance sector, the government had already enhanced the cap in several sectors. In the abovementioned sections related with railways where private capital has been allowed, the government has also allowed 100% FDI. In the Defence sector, FDI up to 49% has been allowed. FDI above 49% may also be allowed, but that has to be decided by the Cabinet committee on Security on case to case basis. 100% FDI has already been allowed in construction sector. 100% FDI in medical devices is under consideration of the government. So, the Indian economy is further opening up for the imperialist capital and the extent of imperialist exploitation will increase.
Fourthly, the government is planning to curtail further its already shrinking expenditure for 'social security' drastically. According to an article of Wikipedia, total expenditure in the social security programmes of Government in the year was ` 3 lakh 60 thousands crores or 60 billion US Dollars. Apparently, the figure is huge. But, if it is compared with GDP it comes down to only 3%. According to the data of 2008-09, the total expenditures of central and all state governments on social security on that year were only 6.72%. This figure certainly has not increased in the meantime. Within this ` 3 lakh 60 thousand crores are included the expenditures on NREGA, Food security, subsidies on petroleum and fertilisers. How much meagre it is in comparison with the tax reliefs given to the rich is clear from the fact that in the year 2013-14, the government has given tax reliefs in corporate income tax, personal income tax, customs duty and excise duty ` 5 lakh 72 thousands 923.3 crores.[9] This meagre social security expenditure is being further curtailed.
One, MNREGA will be restricted to only 2500 backward blocks. The budgetary allocation for NREGA was gradually decreasing from around 2011-12. This process has been started by UPA II government, which has been further curtailed by the present government. Huge amount of payment for wages for work already done under this scheme is due because the central government is not providing the states with sufficient funds.
Two, the government is curtailing petroleum subsidy drastically. Even though the price of crude oil is falling in international market, the prices of kerosene distributed through PDS and of subsidized LPG have been marginally increased. May be the price of subsidized LPG cylinder has been increased by only ` 3, but the real catch is that in last 9 months , the price of unsubsidized LPG has gone down by almost `375 per cylinder. (The price of unsubsidized 14.2 kg domestic cylinder in Delhi was `1017 on April 1, 2014 and it came down to ` 640 at the end of month of January 2015.)[10] Recently a notice has been issued to scrap the supply of subsidized kerosene through PDS The ultimate aim of the Government is to withdraw all subsidies, viz., on LPG, Kerosene and diesel. In lieu of supply of kerosene through PDS, some cash subsidies may be given to extremely poor families.
Three, regarding subsidies another important mission of the ruling classes was introduction of Direct Benefit Transfer or DBT. To cushion the effect of withdrawal of subsidies on the poorest sections of society, some sort of subsidies will be maintained. However, the subsidies will be not given by maintaining the prices of these commodities at a low level. Subsidies will be given directly to a small section of poor people. To enable this process, the Government has started to open bank accounts for all under Jan Dhan Yojana. Once completed, all subsidy transfers will be cash transfer which can be targeted to a specific section, instead of pricing which can be availed by all. This process has already been started with implementation of DBTL in domestic LPG supply.
Fifth important aspect of reform measures is the amendment of the Land Acquisition Act. After the massive upsurge against forcible acquisition of land for the industrialists in Jagatsinghpur of Odisha, Singur and Nandigram of West Bengal and many other places, the UPA government replaced the infamous Land Acquisition Act of colonial era by a new act named The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. There were two major changes in the new act. (1) Compensation will be four times the market value in rural areas and double the market value in urban areas, (2) The process of acquisition involves a Social Impact Assessment survey. In case of acquisition of land for use by private companies, consent of 80 per cent of all land losers required; in case of public-private partnerships, consent of 70 per cent of land owners required (not all land losers).[11] This new act made land acquisition comparatively difficult and also pushed up the prices of the land. So, the big bourgeoisie was demanding the repeal of those amendments. It was becoming difficult for UPA government to accede to their demand because the UPA government itself had amended the act. Modi Government has no qualms about amending it to big bourgeoisie's demand. Along with ordinance on insurance, the Modi government has brought in an ordinance to amend the LARR Act. According the newspaper reports, Mr Arun Jaitley has stated in a press conference that the "mandatory "consent" clause and Social Impact Assessment (SIA) will not be applicable if the land is acquired for five purposes including national security, defence, rural infrastructure including electrification, industrial corridors and building social infrastructure including PPP where ownership of land continues to be vested with the government." In this way the consent clause has been removed practically. However, the Government has till now not changed the compensation amount.[12]
Sixth aspect of the measures is introduction of GST, Goods and Service Tax. It is also a long-standing demand of the big bourgeoisie. The GST will replace present indirect taxes like excise duty, sales tax and VAT. GST will be applicable on all products except petroleum products, alcohol and tobacco products, which are the major sources of revenue for states. There will be two types of rate to begin with which will be later merged into one. The successive governments are claiming that it will broaden the tax base and will increase the revenues of the Government. Though its effect on common people is not very much clear, there is reason to believe that the tax burden on the common people will increase as the government is claiming that the revenues of the government will increase and we all know that the lion's share of indirect taxes is borne by the common people.
Last, and not the least aspect, is the reforms in agricultural sector. The ruling classes are already implementing a host of measures under the planning of second green revolution. Genetically Modified or GM seeds produced and marketed by imperialist monopolies are being gradually introduced even after protests from agricultural scientists. The use of these seeds will increase the stranglehold of the big multinational companies involved in the agro-business on the peasants and agricultural sector as a whole. In a word, through these measures the multinational companies and the Indian monopolies will gradually capture the agrarian economy and the poor peasants and agricultural labourers will be ruined farther.
Big bourgeoisie's problems
It is needless to explain that the Government is taking these steps for the benefit of the big bourgeoisie and imperialist capital. The whole policies of Globalisation-liberalisation have been taken for their benefits. In that respect, the measures of present Government has nothing new in it. However, after its initiation in the beginning of nineties of last century, the measures of economic reforms have never before been taken in such a big way. The UPA government started the process during 2012 but could not complete it, which is being done by the Modi Government for which they have been put in power in the first place.
India's GDP grew on a very high pace during 2003 to 2008. In this period, GDP growth rate was around 9%. However, after 2008 this growth rate began to fall. The growth rate of GDP fell below 5% later, market began to shrink, production growth in some sector, notably in manufacturing sector, became negative. The reasons are probably two-fold. Firstly, the boom in the period before 2008 was brought about by giving housing loans and other consumer loans from the excess capital inflows of foreign institutional investments (FII). So from the very beginning it was based on very narrow market and the growth was fragile. As the purchasing power of the masses of people did not increase, this boom was bound to be halted. From beginning of 2009 the GDP growth rate began to fall as the domestic market was not growing further. It happened before the effects of global economic crisis started to affect the Indian economy. Secondly, from around 2010-11, the effects of economic crisis in developed countries started to influence the India's economy belatedly. The exports of merchandise and later software related services fell due to crisis in developed countries, and they were the main sources of earning from India's exports. The capital inflow not only decreased, but at a certain period financial institutions took away large chunks of capital from India's market. The Indian currency devalued with respect to dollar. Due to these events, GDP growth rate fell to below 5%. Fiscal deficit of the government widened further, especially due to increased petroleum prices. The big bourgeoisie alarmed at the turn of the events started to cry hoarse so that the Government takes necessary measures to bail them out. In their opinion, to revive the economy more investments must be encouraged. So, they want to open up Indian economy farther for the imperialist capital. The Indian big bourgeoisie also hope that with the imperialist capital they will also be able to profit by investing in these new fields. However, to attract foreign capital atmosphere for investment must be made attractive to the capitalists. So, the restrictions on investments must be removed, tax sops must be given to the capitalists, above all labour laws must be changed so that the capitalists are able to exploit the workers with increasing intensity without any problem.
The Government has its own set of problems. Trade deficit is increasing affecting the current account deficit. Due to this reason balance of payments has reached a precarious position. Without continuous flow of dollar, Indian currency will not be able to maintain its value with respect to dollar. There is no way other than a bigger flow of foreign investments and external loans by which this continuous flow of dollar can be maintained. So, the government also has no other way but to ensure a bigger flow of FDI, which is considered a safer option amongst foreign investments. Fiscal deficit is another problem faced by the Government. How the government will be able to manage the fiscal deficit? As it must serve the class interest of the big bourgeoisie it cannot burden the rich with taxes. Rather it will have to give tax sops, the magnitude of which is mind boggling. It must also massively invest in infrastructural projects to provide necessary markets of their products for the big bourgeoisie. It also should give huge salaries to the government staff so that they can form a significant part of the middle class market. So, the burden must be shifted to the shoulders of workers, agricultural labourers and poor peasants. This is the rationale behind the lifting of all subsidies
Definitely, Achchhe din but only for the rich
The overall effects of these reforms on the livelihoods of people and also on the economy as a whole are not difficult to predict. Prices of essential commodities will rise. Though at the present moment, the withdrawal of fuel subsidies is not pinching much as the price of crude oil came down below $60 per barrel from a high of $140 at some point in 2008. Naturally, the effect of withdrawal of fuel subsidy will be felt bitterly when the crude price will rise again. The agricultural workers are getting less and less work due to increasing mechanization of agriculture. The withdrawal of NREGA will deprive the rural poor of some amount work, however small it may be, which was provided to them under this scheme. The onslaught of foreign multinationals and also of Indian monopolies on agricultural sector is ruining and will further ruin peasants and will pauperise them rather than converting them into proletariat as the 'spectacular' growth of Indian economy is, even in terms of the bourgeois economists, a jobless growth. The large number of workers and employees of the public sector have already lost their jobs. Those, who retained their jobs, had to work with increased workload, sometimes which is becoming humanly impossible. The present phase of privatisation (and also of disinvestment, which is privatisation in another form) will further this process. The rights of workers will be further curtailed. It will be easier for the capitalists to retrench, lay off the workers. Under the threat of retrenchment, their wages may be curtailed. The imperialists, along with their Indian counterparts, will plunder the natural wealth of our country; will displace the poor people from their land; will devastate the environment beyond repair. Rich will get richer, disparity will increase.
But the moot question remains whether they will succeed in reviving the economy by taking these measures. It is too early to answer that. But, definitely it will not be easy. By opening up the economy of India only, they may not be able to attract enough foreign investments, as the multinationals have other considerations for investment in a certain country. Another problem is that the developed countries have not come out of the crisis till now and it will continue to affect the economy of India as the process of globalisation has integrated the economy of India with the global economy further. Internally, the ruling classes are trying to develop capitalism on a narrow base, keeping all old relations of productions more or less intact. Remnants of old, feudal relations are continuously obstructing the growth of capitalism. The imperialist monopolies and imperialist states are eating out a large amount of surplus generated by the Indian people, through debt service and dividends. Naturally, the development of capitalism is constantly coming into contradiction with the narrow base on which it is developing. So, whether the big bourgeoisie will succeed in their present plan is a question whose answer will be given by future events. But, what is certain that even if they be able to tide over their present problems, these measures will tighten the grip of imperialism on India's economy, these will make India's economy more fragile and as the these measures will restrict the consumption of mass of people further it will lead to further crisis in the near future.
Preparation for resistance and present task of the communists
It has been proved beyond doubt that the bourgeois parliamentary parties neither have the ability nor the will power to resist this attack of the ruling classes. They will clamour inside the parliament, may pose to fight against these attacks by organising some protest rallies or even some innocuous strikes or bandhs. These mock fights may help them to garner some votes, but will not be able to resist the attack of the big bourgeoisie. Only the toiling people led by the proletariat can resist the attack by their struggle. Though the workers and toiling masses are trying to resist this attack, but in absence of a real proletarian party, they are forced to resist at the factory level or local level. Though very difficult, through these fights they may be able to resist the attacks in some factories, but it is impossible to resist the policy of the big bourgeoisie. Only a nationwide struggle can resist the attack of the ruling classes. Through the struggles of present will grow the struggle and organisation of the future. But, naturally, it is moving in a very slow pace. The workers in the past have struggled under the leadership of a party. On the one hand, the betrayal of old parties under whose leadership they once fought against the ruling classes, has taught them to struggle and organise on their own. On the other hand, as they did not fight on their own they are now feeling helpless in the absence of a true party, which can serve their cause. The working class is going through such a difficult phase.
It cannot be foretold when the workers will ultimately rise up against the attack of the big bourgeoisie. But, this will happen and will be done by the workers themselves. Does that mean the communists have nothing to do? Not at all. The communists must campaign amongst the workers, agitate the workers and try to organise the workers for struggle. However, they must campaign from a revolutionary plank, not from the reformist plank as the parliamentary opposition parties. It must be understood that within the bourgeois realm there is no other path that can be taken other than the path taken by the ruling classes. The other way of resolving the present crisis of Indian economy, of the problems of Indian people is the revolutionary path. The communists must explain why only the revolutionary path can extricate the India's economy and naturally its people from the present crisis.
Thursday, February 5, 2015.
[1] According to dictionary reforms means make changes in (something, especially an institution or practice) in order to improve it. But, especially with respect to livelihood of millions of people of this country, these reforms are doing just the opposite. So, it will be not correct to term these measures as reforms. However, we have used this term in some places as it is being used commonly to refer these neoliberal measures.
[2] Budget to unveil second generation reforms: Jaitley, The Hindu, NEW DELHI, November 23, 2014
[3] http://www.ficci.com/SEdocument/20193/FICCIs12-Point-Agenda-for-Economy.pdf
[4] http://blog.ficci.com/_press_release/rajasthan-labour-reforms/
[5] Labour law changes: MP follows Rajasthan, Business Standard, November 15, 2014
[6] http://zeenews.india.com/business/indian-budget-2014/union-budget-2014-disinvestment-target-revised-upwards-to-rs-58-425-cr_103620.html
[7] http://economictimes.indiatimes.com/news/economy/finance/budget-2015-fy16-disinvestment-target-to-be-around-rs-43000-crore/articleshow/46131516.cms
[8] http://www.finmin.nic.in/press_room/2014/InsuranceLaw27122014.pdf
[9] Revenue foregone under the Central Tax System: Financial Years 2012-13 and 2013-14.( Page 39),source: http://indiabudget.nic.in/ub2014-15/statrevfor/annex12.pdf
[10] https://www.iocl.com/Products/Indanegas.aspx accessed on 5th february, 2015
[11] http://www.frontline.in/the-nation/larr-bill-salient-features/article5127984.ece
[12] http://www.deccanherald.com/content/450460/cabinet-approves-amendments-land-acquisition.html
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