Pamphlet on Economic Crisis

Date: 
Saturday, March 28, 2009

HIGHLIGHTS OF THE PAMPHLET ON
THE GLOBAL ECONOMIC CRISIS AND INDIA:
NEED FOR ALTERNATIVE PRO-PEOPLE POLICIES

 

1.The adverse impact of the crisis is being felt in India through a downturn in industry and agriculture, massive job losses and plummeting crop prices. This global crisis is the end result of the imperialist globalisation process. The Congress, which had embraced imperialist globalisation and the neoliberal free market policies since 1991 and the BJP, which is also firmly wedded to the policies of privatisation and liberalization, cannot offer any credible solution to this crisis.

The current global economic crisis is the biggest in the capitalist world since the Great Depression of the 1930s. The deepening of the crisis has eventually caused a significant policy shift at the international level. Public pressure forced the governments of capitalist countries to partly nationalise the banks, abandoning neoliberal policies.

2.The Congress-led UPA government has been on a denial mode vis-à-vis the impact of the economic crisis on India, claiming that the “fundamentals” are strong. This despite the hard facts that GDP growth has fallen to 5.3% in the third quarter (October-December 2008), with the agriculture and manufacturing sectors witnessing negative growth rates of 2.2% and 0.2% respectively. The response of the Congress-led government has been grossly inadequate. The increase in Plan expenditure by a meager Rs. 20,000 crore, (0.5% of GDP) is the fourth lowest fiscal stimulus package in proportion to GDP among the G 20 countries. Even as it cited the constraints of an Interim Budget, it doled out Rs. 30,000 crore in tax concessions to the big corporates, without linking them to protecting the workers from lay-offs and retrenchment.

3.With international oil prices falling to $45/barrel, the government cut the prices of aviation turbine fuel eleven times to bailout the private airlines; but petrol and diesel prices were reduced only twice and cooking gas only once.

4.The Congress-led government underplayed the massive job losses and pay cuts that are affecting workers and employees. At least 5 lakh workers lost their jobs during October-December, 2008. Another one lakh jobs were lost in January 2009.The most affected sectors were Gems & Jewellery, Transport and Automobiles andTextiles. Even these shocking figures are gross underestimates, since 4.13 lakh workers lost their jobs in the diamond industry in Gujarat alone. If the organised and the unorganised sectors are taken together, the magnitude of job losses would run into crores.

5.It is yet to even acknowledge the serious situation arising out of the plummeting prices of crops like cotton, rubber, coffee, tea, coconut, copra and groundnut, wheat and maize. Huge inflows of speculative finance into the commodity futures markets have led to sharp increases in commodity prices. Following the financial meltdown, prices are coming down even more sharply.

6.India’s financial sector remained relatively immune from the devastating financial meltdown, mainly due to the existing regulations and public sector domination of the financial sector in banking, insurance, pension funds, etc, which the CPI (M) and the Left parties have struggled hard to defend by preventing financial liberalization measures like the takeover of Indian private banks by foreign banks, increase in FDI in the insurance sector, privatization of Pension Funds, etc.

7.The stock market crash in India has occurred because of the Foreign Institutional Investors (FIIs) pulling out a whopping Rs. 78800 crore since the beginning of the financial crisis, causing the rupee to depreciate below Rs. 51 per dollar. This demonstrates the volatility of speculative capital flows by FIIs. Yet the Congress-led Government wanted to push capital account convertibility, opposed by the CPI (M).

8.Learning little from the experience of the global meltdown, the Congress-led government continued to push financial liberalization measures. Restrictions on the Participatory Notes (PNs) were removed in October 2008 despite Government’s own National Security Advisor saying that terrorists are using PNs to invest in the Indian stock markets; In December 2008 it introduced legislation to raise FDI cap in insurance; FDI guidelines were clandestinely revised in February 2009 bypassing Parliament to nullify foreign investment caps across all sectors.

9.The Congress-led government violated its own NCMP which had committed to reduce “the vulnerability of the financial system to the flow of speculative capital” and tried to lure the FIIs and other speculators through tax concessions and it failed to plug the Mauritius route, through which FIIs and MNCs evade Indian taxes.

10.The BJP’s economic policies are no different from that of the Congress. The CPI(M) had detailed a set of measures to tackle the global economic crisis in November 2008. These included: (1) Enhancing annual Plan expenditure to 10% of India’s GDP (currently it is below 5%). (2)Adopting specific relief packages for crisis-affected sectors aimed mainly at the small and medium enterprises; preventing job and pay cuts (3) Increasing public investment in agriculture and irrigation; providing protection against price crashes of crops through price support and increased import tariffs. (4) Expanding the employment guarantee to cover all adults and for as many days as demanded; extending it to the urban areas. (5) Universalising the PDS and supplying 14 essential commodities at subsidised rates. (6) Providing income tax relief for salaried employees, pensioners and senior citizens; increasing taxes on speculators and the wealthy and crackdown on black money. (7) Strongly regulating the financial sector and strictly controlling the outflow and inflow of speculative finance; maintaining predominant state control over finance and revive development finance.

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