The economic slowdown in the Indian economy, which began in mid-1997, reached acute proportions in the just concluded financial year ending March 31, 2002. The CMIE (Centre for Monitoring the Indian Economy) said that the last year (2001-02) was India’s worst since the Balance of Payments crisis of 1990/91. The increased growth rate last year in GDP of 5.4% (compared to a mere 4% in the previous year) is misleading. This higher figure was primarily due to a 6% growth rate in agriculture (which will only result in further accumulation of food grain stocks), after 2 years of successive decline. Manufacturing continues to be in a state of deep stagnation. The CMIE has predicted a meager growth for the current year (2002/03) of 4.5%. (1) In other words, even officially the stagnation is to continue. In fact, with a drought looming over the country, the real situation is likely to be much worse.

When even growth does not generate much employment (due to government policy), such stagnation is having a disastrous impact on the lives of the people. Unemployment stalks an entire generation. In the first 3 years of BJP rule 20 lakh (2 million) more have been added to the list of the educated unemployed. (2) The plight of the illiterate is even worse. The average growth of employment in the organized sector (official) over the last four years has dropped to less than 0.1% annually — but, even this would be a grossly exaggerated figure, as those retrenched would not be properly recorded. In the last two years even the official figures have turned negative. Growth of jobs in the organized sector was 0.5% in 1998, 0.04% in 1999 and –0.15% in 2000.

In agriculture not only is there continued stagnation in growth, an incessant drop in agricultural commodity prices, but now, even agricultural labour is being displaced by sophisticated imported machinery. For example, lakhs of seasonal workers in Maharashtra’s sugarcane fields are to be displaced by Rs.1 crore harvesters imported from Australia, which systematically cuts all the cane. Also, the harvesting of food grains is slowly being taken over by machines, making agricultural laborers redundant. Even middle peasants are turning to hiring in these machines, as the cost is roughly equivalent to that of the labour charge, but the time taken is a fraction of the earlier method. These machines give huge profits to its owner — either the bosses of the sugar cooperatives or the landlord/rich peasant/trader combine — but displaces millions of agricultural labourers. Unlike a developing capitalist economy, where displaced labour gets absorbed in industry (that manufactures of machines), in semi-feudal India, with most of the machinery imported (or merely assembled) the displaced labour faces the threat of starvation. What is even worse is that the various rural employment schemes have been drastically cut by the BJP government at the center. In 1995/96 1,242 million man days were provided; by 2000/01 this went down to 486 man days; in the first 10 months of 2001/02 it is down to 190 million man days. (3)

In fact, all major growth in the economy has, of late, been recorded in the service sector, which provides few jobs. While in the period 1991/92 to 1996/97 the service sector ( finance, banking, tourism, communications, info-tech, entertainment, public administration, etc.) contributed 48% to overall growth annually, in the last five years (from 1996/97) it contributed over 70%. (4) On the other hand, both agriculture and manufacturing have been stagnating. But the hi-tech service sector (jobs in public administration are being systematically cut) provides few jobs, and even the few that do fall available; go mostly to the English-speaking urban upper middle class.

So, with government employees being retrenched, with the public sector being privatized, with industry and manufacturing in the doldrums and with thousands (nay lakhs) of small scale units being squeezed out by cheap imports, there is little hope for future generations gaining decent employment. Even the bulk of the vast middle class will be pushed into deep poverty; while the already poor will be pushed to starvation and death. For the business community and their pen pushers in the media stagnation means a few statistics, but for the vast masses of the country, it means unemployment and going to bed on an empty stomach.

People’s March has been continuously warning of the systemic flaws in the Indian economy (see issues Dec. 2000, Sept. 2001), which is the cause for the present stagnation, disproving the media hype, which says this is a mere temporary blurb that can be overcome by speeding up ‘economic reforms’. The ‘fundamentals’ are extremely fragile and certainly not ‘sound’ as made out by the captains of industry. The 8% growth repeatedly predicted by the Prime Minister to ‘remove’ unemployment is an outright farce. Not only is the growth rate dropping, it is in no way linked to employment potential in the existing scenario of privatization, retrenchment and rural stagnation. And even if there is a temporary recovery within the continuous decline, it will barely touch the masses and will chiefly contribute to the coffers of big business. In fact, even during this period of stagnation, it is big business that has been least affected. On the contrary many have increased their profit margins (in spite of weak sales) due to ‘rationalisation’ of labour and excessive government incentives. For example, the profits of 1,679 companies in the manufacturing sector, increased profits by 20% in the first quarter of the last financial year ending June 01, growing from Rs.9, 833 crores to Rs.11, 824 crores. (5) Reliance alone made a net profit of a gigantic Rs.5, 000 crores in the nine months to Dec.31 2001.

Manufacturing and industrial growth is the motor of any real development of a country. But, for this, there must be a continuing market for the goods produced. The rapidly growing poverty in the country is retarding this growth. Added to this, the world recession led to a crash in the exports last year. With the rulers having tied the Indian economy more firmly to the imperialist chariot since the last decade, a drop in exports can have disastrous results.

An astounding fact was that even consumption in the most key FMCG categories (i.e. Fast Moving Consumer Goods — e.g. soaps, toothpaste, etc) declined last year. Now, these are mostly necessities, linked to wages and must necessarily increase with a growth in the population. Yet, in the last year, with population growing at 2% sales of soaps and detergents witnessed an absolute decline. As the Economic Times caption asked, "are the people having less baths"?(6) On the other hand, luxury items (consumer durables) grew by 11%. But, as a large part of the latter are imported, they do not help real growth within the country, neither do they help generate employment.

In addition, exports, for the first time in the past decade, recorded a negative growth of -0.1% in fiscal 2001/02.

With such weak demand it was not surprising that manufacturing recorded the poorest growth rate since the last decade, of a mere 2.7%. This figure is to be compared with a 12.3% growth rate in 1995/96. In fact, the decline since then has been continuous — to 6.1% in 1996/97 and 4.1% in 1998/99. (7) The situation last year was so bad, that the capital goods sector (i.e. production of machinery, tools, etc) recorded a negative growth of as much as -4%. In addition, the six core infrastructure industries (which account for one-third of industrial production) growth was just 3% (compared to 5.1% in the previous year), with crude oil recording a decline of -1.2%.

This stagnation has had a severe impact not only on the financial sector, but also on government revenues and the state of debt of the country.

Capital accumulation is a law of capitalism. It must grow and grow in order to survive and compete with its rivals. But, what was witnessed last year was a desert of investments. There were virtually no new projects, and even depreciation costs were barely met by the new investments. Whatever investment was there was mostly in the form of take-overs or increasing equity in ones own company to either ward off corporate raiders or to take control by ousting the collaborator.

New investments are mostly in the form of loans taken from banks, or in the form of new public issues (IPOs) on the stock exchange (i.e. by floating shares and raising equity capital form the public). In the last year there was a virtual desert in both spheres.

In the first six months of the last financial year (i.e.Apr.2001 to Sept. 2001) companies borrowed just under half of what it borrowed in the same period of the previous year. Bank borrowings by companies in the first six months of 2000/01 was Rs.35, 018 crores, while in the same period last year it was Rs.20, 894 crores.(8) This was reflected in the fact that banks were sitting on deposits of over Rs.10 lakh crores in Sept 2001, as there was little credit disbursement.(9) This is in spite of the fact that the government has drastically reduced interest rates, in order to boost investment.

In addition, in the last financial year the primary market on the stock exchange (i.e. floating of new issues) was virtually dead. Last year there were just 6 IPOs, which was the worst in the past three decades. In fact, since the latest phase of stagnation of the economy, in the past five years just Rs.8, 771 crores has been mobilized through public equity issues, or 40% lower than in 1994-95 alone. (10)

In addition, the stock exchange has been depressed throughout most of the last fiscal year. In the 5 months to Aug.01, 73 industrial sectors registered a decline in market capitalization; the financial institutions, IDBI, ICICI & IFCI lost 38% of their value in the same period; and the bloated info-tech stocks crashed. All these 3 banks had to be bailed out by the government as also the largest mutual fund, the UTI. All are still in a state of crisis. Of course, much of this is due to outright fraud by big business; but wh-at it does show is a deepening of the crisis in the economy.

Most industry and finance have been languishing, while the government insipte of giving gigantic concessions to big business has been unable to revive the economy.

The stagnation in the economy and the huge concessions given to big business has been leading to an ever-increasing shortfall in tax revenues by the government. In the last financial year this shortfall doubled compared to the previous year, reaching the unbelievably high figure of Rs.21, 000 crores. In other words, the government could gather Rs.21, 000 crore less than it had itself planned. And with profligate and wasteful expenditure continuing unabated the government is neck-deep in debt to cover its growing fiscal deficit. For example, defence expenditure is expected to increase by over 20% in the last two years from Rs.48,500 in 1999/00 to a budgeted amount of Rs.65,000 crores in the current year. Though police is a State subject, the Central government spent a huge Rs.10, 000 crores on the police. (11) All such expenditure is unproductive and is geared only to sustain the rule of an increasingly despotic and alienated ruling class. Besides, wasteful expenditures by ministers and MPs (like the crores spent by the central government in funding a 15 to 20 day holiday to East Asian countries of nearly 200 TDP MLAs) continue unabated. It is therefore not surprising that the gross fiscal deficit (the excess of expenditure over receipts) has increased three fold in the last decade from Rs.36, 325 crores in 1991/92 to a massive Rs.1,31,721 crore in 2001/02.(12) This entire amount is made up of borrowings, which has resulted in a mountain of debt submerging the government. The interest charges on this debt are galloping ahead each year. Interest payments, as a proportion of central revenues increased from 44.7% in 1996/97 to 56% in 2001/02. In other words, in the last financial year, mere interest payments accounted for over half the central government’s total receipts.

It is then no wonder that there is little money left for development expenditure, which has been falling rapidly each year — by nearly 20% over the decade of the 1990s. This further retards industrial growth. With interest payments accounting for 56% of total receipts and salaries, pensions and defence taking up another 46%, the government has to resort to borrowings to cover this routine expenditure, let alone taking up development projects. Not surprisingly, the government’s capital expenditures have fallen by as much as 41% over the decade of the 1990s, from 4.4% of GDP in 1990/91 to 2.6% of GDP in 2000/01. (13) Such is the pathetic state of central government finances.

The State governments are in an even worse state with their meagre revenue barely able to meet the huge expenses of their ever-increasing number of ministers, their long retinue of staff and payments to government employees. Besides, both center and States are more pre-occupied with increasing the instruments of repression through massive increases in expenditure on the police. So, here too little is left for development purposes.

With the policies of globalisation continuing, greater unemployment and further devastation of the economy are inevitable. No doubt, the TNCs and their agents, the comprador big bourgeoisie (Ambanis, Tatas, Birlas, Premjis, Narayan Murtys, etc), will continue to make windfall profits, but the masses, and even the bulk of the middle classes, will be pushed to destitution.

Their rising discontent will be sought to be diverted through communal carnage and war hysteria. Though the diversions are many (TV, cricket, cinema, consumerism, etc) to lull the masses into passivity, it requires something more militant to divert people’s growing anger. Communal holocausts are a good outlet for such frustrations built up over years of unemployment and dropping living standards, particularly of the middle classes. War hysteria also gives a false sense of ‘nationhood’ diverting people’s genuine sense of anti-imperialist patriotism, at a time when the TNCs and the WTO-IMF-WB combine are aggressively penetrating all spheres of the country, with the assistance of the comprador ruling classes of the country.

And on these economic policies all the parliamentary parties are united. On the aspects of communalism and war hysteria their emphasis varies, some are soft on it; others are more aggressive about it. Some appease it. None systematically fight it. Yet, economic policy, communalism and war hysteria are part of a single package; with the latter two seeking to divert attention from he former. They are interlinked like the body and fangs of a scorpion. It is on the body politics of economic reforms that the fangs of communalism and war hysteria extract their blood.

The country calls out for hundreds and thousands of Bhagat Singhs, Chandrashekhar Azads and Ashfaqulla Khans, to destroy this monster and free the masses from the bloodsuckers.