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Mainstream, Vol XLVII, No 16, April 4, 2009

A People‘s Manifesto

Thursday 9 April 2009, by Kripa Shankar

Two hundred years of colonial rule in India had turned the richest country on earth into one of the poorest. The task was to make up the leeway by optimal use of the existing physical, human and financial resources and its continued renewal and upgradation. The colonial structure needed dismantling as it was the greatest stumbling block in unleashing the vast productive potential that the country possessed. The political class to whom power was bestowed could not countenance such dismantling as it was the very product of colonial rule and owed its power and privileges to the colonial structure. It had no vision of an alternative model of growth which could impact its privileges except to increase its share of the national pie. It was more or less a continuation of the old order with some adjustments and cooption which gave it a greater elbow room but could not put the country on a path of sustained growth with justice. The possibilities of growth in such a context were limited and soon appear to have been exhausted leaving no other option to the ruling classes but to ally with international capital as a last subterfuge. The latter is in desperate need of such openings to extract surplus not by investing in productive ventures but in financial leverages and speculative activities. The native bourgeoisie would partake some of the gains and increase its share in the national cake through windfall gains that will accrue to the owners of capital but this by itself cannot put the country on the path of sustained equitable growth. The recent recession in developed capitalist economies has further adversely affected the prospects of growth in less developed countries like India.

The basic task of putting all the available resources to optimum use could be realised only when the whole economy is broadly directed to achieve these ends in a planned manner. There will be enough room for private players and to those who own capital and skills but the guiding motto will not be maximisation of profit but fulfilment of the material needs of the people; where surplus generated will not go to meet the luxury and wasteful consumption of a few but will be directed to investment in improving the productive base of the economy along with raising the quality of life of the people. It will be a battle against all that is ugly, ignoble and divisive in society and for the creation of a new man who lives in perfect harmony with other human beings.

The first priority will be to provide gainful employ-ment to the vast unemployed and underemployed workforce primarily in the conservation and regeneration of natural resources in the first instance where employment opportunities are vast. The unutilised land in the country is roughly 40 million hectares mainly because no programme of conservation of rainwater through watershed development has been undertaken. By increasing the moisture content in such lands through construction of water harvesting structure like check dams, dug wells, ponds and tanks etc., such land can be put to some productive use. Plantation of trees and shrubs can be undertaken on a large scale. The more inferior part of such land can just be converted into ponds and tanks where fisheries can be undertaken. But planners have been averse to such activities as will be evident from the fact that in the current year’s Budget less than Rs 2000 crores has been provided for watershed development out of a total Budget of over Rs 9 lakh crores. The National Rural Employment Guarantee Scheme can also be oriented towards water conservation schemes but the allocation at Rs 30,000 crores is far short of the requirement. It is lower than what has been allocated for the police in the Central Budget.

Reconstruction of the country needs massive public investment but the difficulty is that the political class in India is not willing to tax the richer sections even to the same extent as is being done by the developed capitalist countries where tax as a ratio of gross domestic products is in the range of 20 to 35 per cent as against 11 per cent in India. The effective tax rate of income tax and corporation tax is only 20 per cent because of various exemp-tions. And the annual revenue foregone through these exemptions is nearly Rs 3 lakh crores, that is, one-half of the revenue receipts of the government. It is estimated that half of the income tax and other taxes is evaded giving rise to a parallel black economy. Instead of taxing the rich the government has opted for borrowings to finance its ever-rising expenditure on military and bureaucracy which again is in the interest of the rich as interest income accrues to them. In the current year’s Budget the revenue receipt of the Central Government is Rs 6 lakh crores but repayment of debt and interest charges taken together will take away Rs 5.6 lakh crores leaving only Rs 40,000 crores. Consequently, almost the whole of developmental activities is financed by borrowed funds which explains the low expenditure on such items in relation to the requirements.

All this has to be changed if the desired level of public investment is to be achieved. At one time the income tax rate was 97 per cent on the highest slab of income. Not only should it be restored, but the wealth of the rich should also be mopped up through various taxation measures so that luxury consumption could be curbed and resources may be conserved for productive investment. Adequate resource mobilisation will obviate the necessity for borrowings which will save the government from the ever-rising servicing of debts. This, in turn, will leave more funds with the banking system to step up private investment. Deficit financing is primarily responsible for inflation which adversely impacts the life of the poor.

People resist resource mobilisation for it is found that resources are not being productively deployed. Military and administrative expenses are rising fast with no improvement in governance or in the defence capability. Even the little that is spent on developmental heads is largely earmarked as salary to the burgeoning staff; for in the name of development a highly dysfunctional so-called developmental bureaucracy has come on the scene taking away a large part of the investible pool. This requires a thorough decentralisation of various developmental schemes to bring about efficiency in expenditure, accountability and transparency. The Seventythird and Seventyfourth Amendments of the Constitution in 1992 envisaged that the States shall by law endow Panchayats and local bodies like municipalities “with such powers and authority as may be necessary to enable them to function as institutions of self-government...”. But the nexus between political class and bureaucracy is strong that no State Government is prepared to genuinely empower the Panchayats and munici-palities as envisaged in the Constitution because it will seriously erode the power of the former. Without any popular participation, accountability and transparency most of the micro-level developmental schemes have become a cesspool of corruption and leakages. While much larger allocation for various developmental activities is called for, it is no less important to devolve power and funds to Panchayats and local bodies with full transparency and popular participation for effective implementation of the schemes.

It is also time that the British system of jurisprudence, wholly alien to our tradition and ethos, should be changed and local panchayats which used to dispense justice in the pre-British period should be empowered to adjudicate and punish the wrongdoer. These panchayats were like people’s courts from whose clutches no criminal or offender could escape. He would be publicly humiliated and public humiliation is worse than death. For fear of such humiliation no one would resort to any crime (there is no equivalent word for “crime” in vernacular languages testifying to the absence of crimes in the society in those days). Prison sentence has not deterred criminals from criminal activities but if such persons are publicly humiliated, say, by blackening their face and making them ride a donkey in the locality where they usually reside it will leave them so much humiliated that not only will such persons say good-bye to such activities but even may leave the locality. They can even repent publicly which should be the aim of any punishment. But such a system of punishment will be frowned upon by the political class and the judiciary simply because it will predictably make the latter redundant except in some cases.1

One big issue facing the poor is provision of cheap and hassle-free credit for meeting consump-tion as well as production needs. The banks may be flush with funds but the poor are out of their orbit for they can neither produce guarantors nor collateral. The poor are not bankable but such is not the case with private moneylenders who naturally charge exorbitant rates of interest; but the poor have nowhere else to go. If the government guarantees loans to the poor the banks will have no difficulty in lending to them who have a better repayment record.2 The government stands guarantee to loans amounting to over Rs 1 lakh crores of various entities and in a similar manner it can stand guarantee to the loans extended to the poor.

To meet the vast credit needs of the poor it may be desirable to offer them loans, say, two-to-four per cent because being in deficit an interest rate of 14-15 per cent may deter them to go in for productive loans. Loans for survival needs or for social ceremony like marriage stand on a different footing. In such cases one will have to borrow howsoever onerous the terms may be. But so far as making even small investment in any productive venture is concerned, a poor person may not like to take any risk and remain content with his lot. It is, therefore, essential to offer very cheap loans for productive purposes to induce them to come out of their inertia. The loss in interest income to the banks should be compensated through interest subvention by the government. With an interest subvention of, say, Rs 10,000 crores, credit to the poor to the extent of Rs 1 lakh crores can be extended assuming a 10 per cent interest subvention being the difference between the normal lending rate of banks and the subsidised interest rate. Bank loans should be hassle-free and corrupt practices should be strictly checked.3 At present bank credit mostly goes to large borrowers and geographically Mumbai alone accounts for 28 per cent of all bank credit. If the banks begin to serve the poor the age-old grip of moneylenders and their fierce exploitation can be put an end to heralding a new era for the poor.

It should be clearly understood that howsoever high a growth rate may be achieved, the people at the bottom will be left out because they have neither assets nor skills nor access to credit to start any small business. Coupled with this is the disturbing fact of declining job opportunities for the unskilled because technological upgradation has seriously impacted the job opportunities where machines are now being increasingly introduced for unskilled jobs given the entry of corporations in various fields. In such a scenario it makes sense if educational and medical services are made free for the poorest along with free life insurance, old-age pension and other benefits. Poorer societies in the past cared for the very indigent and a developing technological society has far more greater resources to look after those whom fate has willed otherwise.

The farming community requires special attention because not only has the average size of a holding come down to one hectare, but the per hectare yield of agricultural crops is now stagnating. The income of a farmer household is less than Rs 1000 per month and half of such households are indebted. The number of those depending on agriculture is rising annually by about 60 lakhs and job opportunities are declining. Over and above these, the farmers do not get fair price as marketing is not under their control. What is required is a strong cooperative marketing structure so that farmers may get back loans by hypothecating their produce and need not sell the produce immediately after the harvest to meet cash expenses which results in a fall in prices. Construction of rural godowns is the first step in this direction but there is hardly any allocation for rural godowns in the Budgets of the Centre and State governments.

There should also be almost free crop insurance as the farmers are hardly in a position to pay the premium. Had there been a comprehensive crop insurance scheme there would have been no farmers’ suicides.

Consumers need to be protected from excessive profiteering on the part of producers and traders. One way is to get the consumer informed about the actual cost of production per unit of the commodity of various consumer goods in the non-agricultural sector. If this figure is displayed the producer and the middleman cannot succeed in indulging in excessive profiteering.

Notes

1. There are nearly three crore pending cases in different courts in the country and according to one study it will take 300 years to dispose them off if no fresh cases are accepted by the courts.

2. Farmers have preferred suicide if they find themselves unable to pay back the loan from banks. But rich borrowers in the urban areas never do so and every year the banks write off their debts running into crores.

3. Corruption has now engulfed every aspect of human life and now banks make a cut of 15-20 per cent on the loan amount, particularly loans extended to the poor. This should be stopped; otherwise there is no meaning in extending loans to the poor as the bank functionaries will become the main beneficiary.

The author is a Fellow, G.B. Pant Social Science Institute, Allahabad.

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