India's Current Recession - The Failure Of The Liberalization Privatization Globalization Model Of Growth
The country is passing through an unprecedented economic slowdown. Bourgeois experts refuse to call it a recession (yet!) as we have not yet seen overall negative growth for three periods (which is the establishment's characterization of a recession).
Let us examine the growth picture as of today. Consider the following pieces of information:
1. The Year On Year GDP growth rate for April-June 2019 quarter slipped to a 7 year low to 5%. (For comparison, the same figure for 2018 was 8%)
2. The manufacturing sector is showing an unprecedented slowdown .Of the eight subsectors identified as part of the "Core Sector", four have shown negative growth in June (which means instead of GROWTH there was CONTRACTION OR DECREASE IN OUTPUT.). These 4 sectors are: Crude Oil, Natural gas, Refinery products and Cement). The remaining four subsectors showed greatly reduced growth rate, so that overall growth rate was a dismal 0.2% in June - a staggering 50 month low. Some key refining units have shut down.
3. India's passenger vehicle industry suffered its worst sales performance in nearly 19 years in July as a slowing economy, higher ownership costs and floods in some states deterred buyers. Sales fell 31% to 200,790 vehicles last month from 290,931 units a year earlier, showed data released by the Society of Indian Automobile Manufacturers (Siam). It was the worst sales performance since a 35% decline in December 2000.This was also the ninth straight drop in monthly passenger vehicle sales. Sales have fallen in 12 of the 13 months since July 2018, underscoring the sharp slowdown in demand in the world's fourth-largest automobile market. (So again negative growth, instead of slowing growth)
4. As the slowdown intensified, automakers announced shutdowns of their factories to adjust inventory. Tata Motors Ltd, India's largest commercial vehicle maker, closed its Jamshedpur and Pune plants for up to 12 days. Ashok Leyland Ltd, the third-largest commercial vehicle maker by volume, closed its Pantnagar facility for nine days last month due to weak demand.
5. India's textile sector is the second biggest employer in India after the agriculture industry. However, the industry is staring at a steep slump without any effective action plan in place, which is propelling it further into collapse. A leading daily had carried an advertisement by Northern India Textile Mills Association (NITMA). It was titled 'Indian Spinning Industry Facing Biggest Crisis, Resulting in Huge Job Losses'. This is one of the rare occurrences when an industry body had resorted to newspaper appeals to draw the attention of the government towards their current state. It states that almost one third of the country's textile mills have already shutdown. The remainder is incurring huge losses. Upcoming cotton crop of about Rs 80000 cr would not find any buyers resulting in devastation of cotton farmers. (Again negative growth)
6. The agrarian field is worse off. The April-June 2019 growth rate was 2% as against 5.3% the previous year. In Maharashtra crop output declined by 8% in 2018-19.
So it is a stubborn fact that india is slowly moving from a regime of growth rate reduction to one of negative growth in sector after sector and state after state.
The establishment's counter argument is that growth is not slowing down in ALL sectors, with some sectors witnessing robust growth. However their arguments lack credence, because first the aggregate indicators are ALL proving the opposite, and there are sufficient numbers of negative growth sectors to raise an alarm.
Let us see what the bourgeois experts are saying about reasons of this impending collapse.
What The Experts Are Saying
A slowly growing section of the economists are saying this may not be a mere "cyclical downturn" which will go away with some monetary and fiscal re engineering by the Govt.
The term "structural problem" is slowly gaining ground.
See what Rathin Roy, a member of the EAC (Economic Advisory Council to the PM) has to say:
"The warning by Rathin Roy, a member of an economic panel advising Prime Minister Narendra Modi, that India could be headed for a "structural crisis" has sparked a debate on whether the economy's days of high single-digit growth rates are a thing of the past. According to Roy, India's growth has mostly been driven by demand generated by 100 million-odd people at the top of the country's socio-economic pyramid. But that demand has begun to exhaust itself, and so India could slip into a "middle-income trap". This is a risk that emerging economies are said to be vulnerable to. As a country runs out of new sources of growth after an initial burst of rapid expansion, it finds itself unable to break into a higher-income league."
"Wealth inequality and the hierarchical distribution of income in developing countries has long been identified as a growth barrier. The greater the gaps between strata, by this analysis, the slower the upward mobility of families that are at lower levels. Such economies typically experience lopsided expansion, with the positive fallout of an economic boom on top often failing to reach those below. Sustaining growth requires the mass mobilization of financial as well as human resources, and if inequality is acute, the latter tend to come up short. This phenomenon is exemplified by Brazil and South Africa, among a few others. These countries increased their economic output at a fast clip for several years at a stretch, but large sections of their population did not see their lives get better. They got left behind. India appears to have undergone something similar. Opening up to global capital in the early 1990s gave the economy a big boost, transforming upper-crust and middle-class lifestyles beyond recognition. Their prosperity also generated enough demand for goods and services for India's have-nots to get slightly better off, and it's clear that poverty levels did fall. Yet, growth impulses seem to have flagged and the economy's incline has flattened out."
This article was written in 12th may 2019 when the signs of slowdown had not yet worsened so much. (https://www.livemint.com/opinion/online-views/opinion-the-middle-income-trap-that-india-must-avert-1557670151023.html)
In brief, the very effectivity of the liberalization, privatisation, globalization model of growth adopted by india since 1980s is now being questioned by economic advisory council member rathin roy , an advisor to modi.
What Does He Actually Mean?
The growth of any underdeveloped economy depends on the unfettering of industrial demand by raising the purchasing power of the vast multitude , the peasant masses. This was historically done in the developed countries (USA, Europe and China, Russia) by revolutionary land reform.
However after the nineteenth century the bourgeoisie of the backward countries abandoned the path of radical land reform. They started following the "Junker path" or the path of slow reforms from above.
In the last part of the 20th century, world imperialism ushered in the era of LPG (Liberalization, Privatization and Globalization) and most of the 3rd world countries including India , followed that path in a bid to enter a high growth path. The underlying logic was that this would usher in an era of a thick middle class layer with high purchasing power at the top end of the social pyramid , which would fuel the demand for industrial growth. This approach did succeed temporarily at the beginning and India entered 7-8% annual GDP growth era.
The first break was the 2008 world crisis. The growth rate fell to ~ 3%. Even after giving almost 7 years for revival after that, GDP growth rates are falling in each successive year since 2016.
This is where our policymakers are staring at the hard truth - that without radical land reform and unfettering of the country's potential demand, no reforms from above can provide a lasting path to continued accelerated industrial growth. The "rich middle class demand push" has played out its role and demand in the past 3 years is showing first, deceleration and now, slowly but surely, contraction.
So however much the bourgeois pundits might talk about monetary and fiscal policies to alleviate the current crisis, the fact remains that our undone agrarian and anti-imperialist
Revolution has slowly started taking its toll.
Rathin Roy's commentary is talking of structural reforms - possibly some reform to redistribute the wealth towards the lower part of the social pyramid. Needless to add, this is a daydream.
On the other hand, it is in the interests of the proletariat that we talk of a thoroughgoing agrarian revolution, to be accompanied by an anti imperialist revolution. It is in the interests of the proletariat and the vast multitude of toiling masses that we talk of embarking on a revolution of a new type, which from the very beginning outstrips its anti-feudal and anti imperialist content and starts taking progressively bolder anti capitalist steps which ultimately lead to the transition to socialism.
This, in our opinion is the actual answer to the "structural problem" being talked about by Rathin Roy and others of his genre.
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