BJP seeks to cement growing rich-poor divide

To be fair, one has to wait for the Union Budget scheduled to be introduced in the parliament on July 10, before passing a judgement on the economic polices of the government.

But going by the indicators of the last 30 days of governance – hike in rail fares, increase of diesel price, soaring prices of onions and other essential commodities, proposal to introduce FDI in defence – it can be deduced that the economic policies of the BJP government are going to be no different from the neo-liberal policies pursued by the earlier UPA II government.

Policy pronouncements favouring foreign capital, including in areas of defence production, can adversely affect domestic industry and national security.

Given their active role in strongly financing this BJP election campaign, unprecedented in the history of Indian democracy, the assessments of India Inc. would be closer to what the government’s policies might be rather than people’s hopes and expectations.

The 15 tough steps that the PM is likely to announce, according to India Inc., include the phasing out of subsidy on diesel; monthly increase of LPG and kerosene prices; scaling down of the food security and fertilizer subsidy; significant amendments to make land acquisition easier; shrinking the NREGA; labour reforms to enact ‘hire and fire’; increase railway fares and lower food subsidy by reducing the rate of raising minimum support prices. This last measure will further compound the present agrarian distress. The classic recipe for profit maximisation by imposing burdens on the people! Hence, there is an alarming new surge for the complete privatisation of the public sector.

Cries are getting louder asking the PM/FM not to do this piecemeal but “Tackle them all in one go by enacting a new omnibus law giving the government the right to disinvest by executive action, overriding existing laws”. To overcome the lack of a majority in the Rajya Sabha, the PM is being advised, “You can convene a joint session to pass it”. Need anything be more explicit! The real meaning of the BJP’s election slogans of ‘development’ and ‘ache din aanewale hain’ are, thus unfolding. The singular message is that people’s miseries are going to mount exponentially.

The news on the economic front, however, dampens such hopes. Inflation has suddenly shown an upward swing.

The wholesale price index rose from 5.2 per cent in April to 6.01 per cent in May 2014. The consumer price index growth would naturally be a multiple of this price rise. Worse, this surge in inflation is based on the rise in food prices and essential commodities.

Food inflation rose to 9.5 per cent in May against 8.64 per cent in April. Potato inflation was highest at 31.4 per cent followed by fruits at 19.4 per cent and eggs, meat and fish at 12.47 per cent.

Manufactured product inflation went up by 3.55 per cent. This, naturally, negatively impacts the poor, marginal and the vast majority of the working people more.

Under these conditions, financial reforms aimed at making capital available on easier and cheaper terms, may make available funds for higher investments. Both this and higher FDI cannot lead to economic growth because the domestic demand to absorb the consequent production is shrinking constantly amongst the Indian people.

This new surge of inflation led by the rising prices of food and essential articles is likely to come under greater pressure, due to a possible poor monsoon.

The government’s real agenda of ‘development’, a la its much tom-tommed ‘Gujarat model’, has, however, now come from outside the parliament, when the prime minister spoke of “tough economic decisions”. He justified the imposition of further burdens on the people through “stringent measures” for restoring financial discipline. Saying that “for ten years, the people of this country have not witnessed a working government in Delhi”, he tweeted, in his by now established channel of one way communication, that the “time has come to take tough decisions in the interests of the nation”.

Is this anyway different from the previous government’s slogans, one that was not “working for the last ten years”? Former PM Manmohan Singh had asked the people to “tighten their belts”. The result was unbearable inflation, growing unemployment and heaping miseries on the vast majority of our working people. Having reaped the benefit of this people’s discontent during elections, the

BJP is now asking the people to be prepared for a more lethal dose of the same medicine.

Again, the PM did not outline what these “stringent measures” mean. But India Inc., through the media, have been articulating this agenda. Industry associations were quick to demand tax concessions in the name of overcoming the economic slowdown.

The ‘tax foregone’, as informed by the last UPA budget, was a whopping Rs 5.73 lakh crores. In addition, default in direct tax collections amounted to '5.1 lakh crores. Thus, over '10 lakh crores of legitimate revenue to the government have already been denied.

India Inc. cries out for further tax concessions! The tax concessions given so far would wipe out the entire fiscal deficit and leave handsome surpluses in the hands of the government for much-needed infrastructure development. This, in turn, would have generated new employment boosting domestic demand serving as the sustainable impetus for manufacturing and industrial growth.This, however, is not to be.

Thus, the BJP’s economic policies, is aping the Congress’ trajectory of economic reforms. The UPA’s efforts have only led to the consolidation of the creation of two Indias started by the Vajpayee-led NDA government earlier. The BJP, is seeking to further cement the growing divide between the two Indias – the rich and the poor.

Tough steps PM is likely to announce

• Phasing out of subsidy on diesel.
• Monthly increase of LPG and kerosene prices.
• Scaling down of the food security and fertilizer subsidy.
• Significant amendments to make land acquisition easier.
• Shrinking the NREGA.
• Labour reforms to enact ‘hire and fire’.
• Increasing railway fares.
• Lower food subsidy by reducing the rate of raising minimum support prices.

(Sitaram Yechury is a member of the CPM politburo and party’s Parliamentary group leader)