Pandemic: time for haircut and write-offs

Source: TaxGuru.in

An additional 230 million people have quietly slid below the poverty line during the first year of the pandemic, reports the Centre for Sustainable Employment at the Azim Premji University (APU). In another study, the Pew Research Centre had computed the middle class to have shrunk by an estimated 32 million. This estimate is again for the first year of the pandemic. However, both the studies are a grim reminder of the severe blow of the pandemic that struck the middle class and the poor.  

We still do not know how severely (or relatively softly) the devastating second wave has impacted. While all sections of the society have been hit in varying proportions, with household savings coming down drastically, and unemployment soaring, forcing the government to extend till November the 5-kg free ration scheme for the 800 million needy, the good news is that the corporate net profits of listed companies have soared by 57.6 per cent in the last fiscal. At a time when economy is struggling to cope with the impact, the stock markets, fuelled by surplus money, too have been rallying high. While the wealth of India’s billionaires has gone up by 35 per cent, Bloomberg says the wealth of top two – Ambani and Adani – has jumped to $ 84 billion and $ 78 billion, respectively. 

The rich continue to amass wealth, while the pandemic has driven the poor against the wall.

Let’s dig still deeper. The increase in corporate profits does not however translate into higher tax collection from the rich. In reality, while the rich get hefty tax concessions and easy money, the rest of the country ends up paying more taxes. Corporate tax collections have declined significantly, reaching its lowest in ten years. The systematic reduction in corporate tax is in sync with the global trend. The Finance Minister had in Sept 2019 lowered the corporate tax base from 30 to 22 per cent, and reduced the corporate tax for the new manufacturing companies from 25 to 15 per cent. This costs the exchequer Rs 1.45-lakh crore by way of revenue foregone every year.  

Now let us take a look at how the tax base has shifted from the corporate to the average households. Against the direct tax collections – corporate and personal income tax -- for 2020-21, which amounts to Rs 9.45-lakh crore, the indirect tax collections have exceeded it, and reached a high of Rs 11.37-lakh crore. In addition, the common person in the street ended up paying over Rs 5.70 lakh crore as taxes (excise and VAT) on petrol and diesel, with roughly 60 per cent of fuel tax coming from two-wheelers. Add to it the electricity duty that consumer pays along with taxes on real estate registry and excise duty on liquor, the share of indirect tax that a common person finally ends up paying is enormous. At least now the individual tax payers cannot claim they alone provide resources for development. The non-tax payers too have made a significantly higher contribution in generating revenue. Let’s not forget, even a labourer wearing a plastic chappal (bathroom slipper) pays GST. In fact, it should now be abundantly clear: everyone pays tax.   

What may appear baffling is that at a time when the share of corporate profit in the country’s GDP has reached a 10-year high of 2.63 per cent, Indian banks had written-off a whopping Rs 1.53-lakh crore of corporate bad loans in 2020-21. As per RBI estimates, non-performing assets (NPAs) of banks are expected to increase further. Meanwhile, the total write-off in the past four years, since 2017-18, stands at a staggering Rs 6.96-lakh crore. A lot of hue and cry erupts whenever farm loans are waived but the periodic NPA write-off by the banks goes rather unnoticed.

As if this is not enough, a newspaper report, based on an RTI reply, showed how Rs 5-lakh crore of bank money is struck in frauds. Accordingly, the top 50 credit accounts contributed 76 per cent to these dubious transactions. 

Interestingly, the Insolvency and Bankruptcy Code (IBC) was enacted with the aim to punish the chronic defaulters but has left much to be desired. The two recent insolvency proceedings, where the banks/lenders have been forced to take a ‘haircut’ of 93 to 96 per cent, have evoked a lot of public anger. In a resolution plan, approved by the National Company Law Tribunal (NCLT), the bidder -- Twin Star Technologies of Vedanta group -- gets control of 13 companies of the debt-ridden Videocon group by ‘paying almost nothing’. Against the admitted claims of Rs 64,838.63-crore, Vedanta group walks away by paying only Rs 2,962.02-crore as one time settlement which is merely 4.15 per cent of the total amount. In other words, the creditors, including banks, have agreed to waive the remaining 95.85 per cent of the outstanding amount. 

In another insolvency resolution, lenders of the Shiva Industries and Holdings, including several banks, have agreed to take a ‘haircut’ of 93.5 per cent. Of the total outstanding of Rs 4,863-crore, the creditors will get only Rs 313-crore. Of this, the company has agreed to pay upfront only Rs 5-crore. Quipped the well-known financial journalist and author, Sucheta Dalal: “Now take a bicycle loan and see how banks treat you.” 

There are numerous such cases, where the bidders have walked away with cheap deals, leaving the banks (and other lenders) to take a heavy cut, often in the range of 80 to 95 per cent. The general impression is that it is public money that is being siphoned-off through a legitimate route. After all, the banks hold public money, and any write-off means public money lost. 

Probably this is what irked industrialist Harsh Goenka who tweeted: “Promoters stash away money on the side, take the company to the cleaners, get a 80-90% haircut from bankers/NCLT - that’s the new game in town.” he wrote, adding: “A lot of institutions cleansed by the government – NCLT next please @PMOIndia. We can’t have our hard earned money being stolen.”

Public money write-off calls for accountability. The Tribune. June 28, 2021. https://www.tribuneindia.com/news/comment/public-money-write-off-calls-for-accountability-274934 

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How the rich become richer, and the poor are driven to the wall

Ever since the first wave of coronavirus pushed countries into a lockdown, the central banks, mainly in the rich countries, printed US $ 9 trillion of surplus money. Well, the underlying objective was to infuse this surplus money into the pandemic hit economies, which had been left gasping for breath.

According to economist Ruchir Sharma, Chief Global Strategist at the Morgan Stanley Investment Management, this pandemic stimulus in turn made the rich add on to their wealth. “Much of that stimulus had gone into financial markets and from there into the net worth of ultra-rich,” he wrote (Financial Times, May 16). The total wealth of the super rich has increased in the same period to somewhere between $ 5 trillion to $ 13 trillion. No wonder, markets are awash with money, while countries are struggling to pull economy out of slump.

The sad irony is that what appears to be an ingenious way to indirectly transfer wealth from public coffers into the pockets of the ultra-rich happened at a time when Brookings estimated that an additional 144 million people globally, in 2020, slipped below the stringently kept poverty line. Using the World Bank and IMF poverty estimates, the calculations show that India has surpassed Nigeria when it comes to having the largest population of people living in extreme poverty. India added another 85 million poor to its existing huge numbers that have somehow been surviving below the poverty line. The devastating second wave of Covid-19 may leave a still bigger dent in poverty estimates.    

But perhaps what we do not realise is that all it requires to eradicate extreme poverty from the globe is US $100 billion, a tiny fraction of the pandemic stimulus that was pumped in to revive the global economy and instead ended up rewarding the billionaires by helping them to amass more wealth. This is not the first time that such astonishing amounts of surplus money have been pumped indirectly into the hands of the super rich. For quite a number of years, central banks in rich countries have been printing surplus money. However, what remains unexplained is how come there is all the money for the rich, but the world is still unable to find enough money to fight poverty.

If only a fraction of the pandemic stimulus had gone to where it was needed -- to remove poverty, the world would have been a much better place to live.

Meanwhile, the pandemic has further widened income inequality taking it to obnoxious levels. In America, the Institute for Policy Study says the combined wealth of its billionaires increased by 44.6 per cent during the pandemic. During the same period an estimated 80 million people lost their jobs. In any case, top 50 super rich in America hold as much wealth as the bottom 165 million. In India, the income inequality is no less glaring. Just to give you an idea, the average farm income as worked out by 2013 National Sample Survey Office (NSSO) report, for roughly 50 per cent of the population dependent largely on farming, stands at a paltry Rs 6,426 per month (roughly half of it coming from non-farm activities). That is why protesting farmers have been demanding an assured income by way of an assured price for their produce.

Compare this with what an Oxfam’s ‘Inequality Virus Report’ brings out. The combined wealth of India’s billionaires has risen by 35 per cent during the pandemic, and to explain how the increase would translate in simple terms, the report states that the rise in wealth of just top 11 billionaires alone is enough to pay for MNREGA work for ten years. In any case, the top 1 per cent holds four times the wealth that the bottom 953 million has.  

To understand how an increase in income works wonders for the poor, look at the outcome of this experiment on the feasibility of universal basic income. Two years before the pandemic struck, in early 2018, Foundation for Social Change, a charitable organisation, along with the University of British Columbia in Canada gave $ 7,500 Canadian dollars (or US $ 6,206) to 50 homeless families in the Vancouver region. A year later, during which time the charity kept a tab on how the money was being utilised, the results that emerged were not only astounding, but equally encouraging. More or less same results have been achieved in almost similar kind of studies conducted elsewhere.

Contrary to the public perception wherein it is generally believed that the poor don’t know how to handle money, the results clearly brought out how wisely they made use of the limited financial support, spending it on necessities like food, clothes, housing and other utilities. According to news reports, while the consumption of basic food needs went up by 37 per cent; the poor had actually cut down on drug and alcohol by 39 per cent. By moving fast into housing, these homeless actually worked to ensure a roof over their head. What the study therefore conclusively established is the significance of roti, kapda and makaan for the poor households everywhere in the world, and their strenuous efforts to work towards attaining it. In other words, such petty cash transfers have the potential to uplift the poor from the clutches of poverty.

Instead, we see more money being routed to the rich by way of tax concessions, economic stimulus packages, bank write-offs, bailouts and massive subsidies in the name of incentives for growth to bolster corporation profits with the faulty assumption that some of it will trickle down to the poor and needy. When it comes to giving poor their share, the argument is that by giving surplus money directly into the hands of the poor everyone will have more to spend, and that will lead to higher inflation.  

The economic growth model therefore has been very cleverly designed to help widen income inequality, and make the fat cows still fatter. The poor are expected to fend for themselves. #

Growth should take the poor into account. The Tribune. May 22, 2021 https://www.tribuneindia.com/news/comment/growth-should-take-the-poor-into-account-256674?fbclid=IwAR3OX6dgsHwmg3kBgPxtksZkQKxPaSjOxe9v10eK0wxIlMXZskwip2RXvAE

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Isn't dominant economic thinking behind the crumbling public health infrastructure?

Public health infrastructure in shambles. 

Pic courtesy - Outlook India

In a government hospital in Meerut in Uttar Pradesh, an Indian Express report says many patients bring their own folding cots; many other lie on the floor on bed sheets. And such are the deplorable conditions in the two government hospitals in Patna; a report in ThePrint says patients are reluctant to get admitted to these hospitals. They prefer to be treated at home, and gods forbid, are even willing to die at home. 

In a way, both these reports sum up the crumbling health of the rural healthcare infrastructure. The two reports also provide a glimpse of the enormity of the crisis at hand given the deep and worrisome inroads the virus is making into the rural areas. The more you travel in the interior, the more you realise how a decrepit rural healthcare infra is itself gasping for breath. If only India had a robust health infrastructure in the rural areas, tackling the pandemic would have been relatively much easy. To give you an idea of the deplorable conditions, in an Assembly constituency in Abohar district in Punjab, only one hospital caters to 68 villages. This hospital has no oxygen beds. Imagine the situation elsewhere in the country. 

In fact, before the second wave hit the urban areas with a deadly ferocity, much of the public rural health infrastructure was already in ruins. We ignored it because it didn’t affect us. Several studies have meanwhile shown how a rural family, when one of its members falls ill, easily slips below the poverty line. They often have to take loans to repay the medical bills and that pushes them still deeper into indebtedness.With nearly 74 per cent of the population in rural areas banking on the private sector for medical treatment, health care has gone dreadfully beyond the means of the poor, adding on to the huge economic distress the rural population is already reeling under.  

As city hospitals run out of oxygen, medicines and beds amidst a deadly surge of the disease, with harried friends and relatives appealing desperately for help on the social media, there is a belated realisation that the public health infrastructure in the cities is at the brink of a collapse. Most hospitals had run out of beds, and disturbing visuals of many patients being taken by their relatives from one hospital to another to get admission, has certainly shaken up the urban middle class. The tragedy is lit large, with many families in the cities having lost a near and dear. Open your Facebook timeline, and you are sure to be confronted with pictures as well as tributes being offered to a number of family friends and other acquaintances who have succumbed to the virulent disease. Unlike the pandemic last year, when death figures were only a number, the second wave has provided a face to these casualties. 

People now realise that many lives could have been saved if timely medical help, including hospital admission, was possible. Lack of adequate health infrastructure therefore is being rightly blamed for the rise in death numbers. But let’s be very clear. Before we blame the system, isn’t it a fact that we remained a mute spectator when the public health infra was being privatised? Didn’t we fail to question the mainline economists and media when the policy thrust was on drastically cutting the public sector investments in health, education and agriculture to reduce the budgetary fiscal deficit? We kept quiet because somewhere at the back of our mind we thought Mujhe Kya (how does it affect me). As long as you could afford the private hospitals you thought you had nothing to worry. 

I am not sure whether the death dance we witness all around will wake us up from deep slumber. But as someone wrote on Twitter: “Can’t even say Covid-19 caught us with pants down, it came by invitation ... after the pants were sold in a Fire Sale. “ He was referring to a Down to Earth (Aug 15, 2017) report titled: ‘Government hospitals on sale’ which clearly stated how the government was handing over public health infra in cities, town and villages to the private sector. Niti Aayog had then suggested privatisation of the district hospitals on public private partnership (PPP) mode. And don’t forget, how many corporate big wigs, media personalities and even policy makers had applauded when medical tourism by top private hospitals was being encouraged. Even prior to that, some well-known economists had been calling for a cut in social sector investments to keep the fiscal deficit within limits. In fact, every budget discussion in Parliament had kept its eyes on the fiscal deficit. 

Last year, in 2020, Niti Aayog had again come out with a 250-page policy document: ‘Schemes to link new and/or existing private medical colleges with functional district hospitals through PPP’. It spelled out a roadmap on how to privatise the public sector health infrastructure drawing from the ‘best practices’ abroad. Again, except for a few health activists questioning the move, everyone had kept quiet. 

That’s the problem. Our mainline economists are always quick to cut paste the ‘best practices’ from western countries. Without trying to find out firsthand what the real needs of the country are, they find it easy to look abroad. I wonder how could they escape seeing the public sector National Health Service (NHS) of UK, which is rated among the most efficient in the world. Anyway, the privatisation thrust gels very well with the dominant economic thinking that calls for cutting down on social sector spending – including health, education, food and agriculture. If there is less money available for public health, how can we expect a robust health infrastructure to be built? Just because the World Bank/IMF have advocated for stiff austerity measures, and the FRBM Act had set an upper limit of a stringent 3 per cent fiscal deficit to be achieved by 2021, does it mean that we have to blindly follow what international bodies tell us? Why do we have to go by the dictates of the credit rating agencies, which as well know rank countries on the direction they follow towards privatisation, in other words encourage privatisation of profits and socialisation of costs.  

Sadly, successive governments continued to follow the prescriptions to cut down fiscal deficit. They neglected the health sector.  

In a country where the public sector investments in health is too low at present, only 1.20 per cent of the GDP (15^thFinance Commission has promises, and that too in the midst of pandemic last year, to raise it to 2.5 per cent by 2024,) I thought mainline economist would demand a substantial increase in public health spending. They in fact called for reduction in public expenditure on health and education (and also food). After all, if after the reports submitted by 14 of the successive Finance Commissions, public sector investments in health is around 1 per cent of GDP, isn’t it time to point to the flawed economic rationale behind it?  The question that also needs to be asked is how has China been able to invest 5 per cent of its GDP on public health? How have the other emerging economies, Brazil and South Africa, invested 9.2 per cent and 8.1 per cent of their GDP on public health, respectively?  

The second wave has exposed the chinks. This call for a larger public debate on what kind of economic policies are best suited for a country like India. Hope the catastrophic second wave will make us rethink, force policy makers to take a re-look at the economic policies that are required to meet the challenges of an Atmanirbhar Bharat. #

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Post Covid-19, future belongs to reviving agriculture

In the midst of an economic slump, reflected through the tumbling of GDP figures for the first quarter of the financial year, agriculture has emerged as the only bright spot. Riding on the back of a bountiful rabi crop harvest, agriculture has in reality turned out to be the real saviour. With kharif sowings exceeding by over 8 per cent, and the monsoon rain behaviour being normal so far, India is expected to be heading towards another record harvest. 

In these depressing times, agriculture alone provides a ray of hope. At a time when the gross value added (GVA) – value of goods and services produced minus the cost of inputs and raw materials that has gone into its production -- declined across the spectrum, agriculture and allied activities grew by 3.4 per cent.   

With most industrial houses pulling down shutter at least for the first two months of the lockdown, economic activity got severely curtailed. The GDP growth therefore tanked by a steep minus (-) 23.9 per cent – the lowest among the 20 big world economies – the sharpest decline since India began computing quarterly GDP numbers in 1996. Add to it the staggering job losses; the economic hit for the average citizen has been too traumatic. Private consumption being limited to essential buying only, salary cuts and leave without pay added to their woes. As if this is not enough, 18.9 million salaried people and another 6.8 million daily wage workers lost their jobs since April, as per the estimates of the Centre for Monitoring of Indian Economy (CMIE). 

This is in addition to the estimated 30 million migrant workers (if intra-state migration is considered, the numbers swells to 80 million) who trudged back home, some walking hundreds of kilometres, carrying their children on their shoulder or in tow, in what is seen as the biggest reverse migration since the days of the Independence. Besides the large numbers, the painful long march in a way brought out the failure of economic policies that had rendered farming uneconomical over the decades. With the cost of production rising, and the output prices remaining stagnant or declining, the terms of trade in agriculture had remained negative. Therefore, instead of making all provisions to bring the migrant workers back to the cities, the effort should now be directed to reverse the economic model that continues to push people out of rural areas. Considering that 70 per cent of the rural households are engaged in agriculture, the time has come to bring the focus back on revitalising agriculture. Turn it into a powerhouse of economic growth.

While the pandemic has certainly exposed the fault lines, it will require a set of new ideas and a strong political will to reshape the new economic agenda that will spur economic growth, create employment and at the same time protect nature and environment. Following the same old prescription of economic growth – sacrificing agriculture for the sake of industry – has outlived its utility, as evident from the extent of reverse migration. Agriculture being the biggest employer, the post-Covid-19 challenge instead should be to strengthen rural livelihoods, bring more income in the hands of the farming community, which alone has the potential to realise the dream of Sabka Saath Sabka Vikas. As Qu Dongyu, the Director General of Food and Agricultural Organistion of the United Nations (FAO) said: “Past progress was sustained by the benign trickle-down effects of strong economies. This is not the case anymore. The facts have changed, and so must our minds.” 

It certainly was not an Act of God that pushed agriculture into the throes of a continuing agrarian distress. Agriculture has in reality been a victim of a biased economic thinking perpetuated by the World Bank/IMF aimed at drastically reducing the dependence on farming. Over the decades, farm incomes have therefore been deliberately kept low so as to bring in macroeconomic stability required to boost growth. With inflation target kept at 4 per cent, plus and minus 2 per cent, and since food items carry a relatively higher weight in the computation of consumer price index (CPI), farmers ultimately end up paying the price of keeping food inflation low.

Take the case of paddy procurement price for the ensuing kharif harvest season. While the MSP has been increased by 2.9 per cent, the Commission for Agricultural Costs and Prices (CACP) has acknowledged that the composite input prices for paddy cultivation have increased by 5.1 per cent. 

In any case, fixing the procurement prices keeping in consideration the fallout it will have on inflation is one of the objectives of the CACP’s farm price policy. Even during the lockdown, when agriculture performed well, retail inflation for farm workers being higher than the gain in farm incomes, farmers in reality suffered income losses. This is borne by a joint survey conducted by Gaon Connectionand Centre for the Study of Developing Societies (CSDS) which showed that a majority of the farmers did not receive the right price (equivalent to MSP) for their produce. Several other studies over the years have shown how the farm prices have remained static or frozen.   

That is why I have always maintained that when farmers undertake cultivation they do not realise they are actually cultivating losses. 

It is agriculture that is actually crying for bold reforms. Agreed, in its present form, agriculture cannot emerge as the engine of growth. But let’s not forget, a healthy agriculture requires a prosperous farming community, which is only possible if the emphasis shifts to ensuring a significantly higher and an assured monthly income to farmers. This has to be accompanied by a sharp increase in public sector investments in agriculture, health and education. Is this possible? Of course, it is possible provided the mainline economic thinking changes with the changing times.  

 Agriculture served as the lifeline during the pandemic. The challenge now is to ensure that agriculture no longer remains the laggard but becomes an equal partner in growth. That’s the new normal that India should shift its policy direction to. 

Agriculture comes up trumps. The Tribune. Sept 4, 2020 https://www.tribuneindia.com/news/comment/agriculture-comes-up-trumps-136054?fbclid=IwAR1xb7L964sY8zfYWJovpP0YEofPCnUgSSAv1xv8jdfoBbIZtPzrga-kQe0 

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Agriculture needs an economic stimulus

After listing a host of measures that have been taken in the past, Finance Minister Nirmala Sitharaman in her series of press conferences has come up with 11 specific measures on Friday, besides two measures she had spelt out a day earlier, to provide help to farmers as part of the Rs 20-lakh crore economic package for Covid-19. But it did not contain any special measure to provide direct cash transfer into the hands of farmers reeling under distress.   

While most of these measures have already been listed in the budget proposals in the past, Sitharam also announced three measures to ease up agricultural marketing and remove the stock limits under the Essential Commodity Act, a move that will help processing industry and wholesale trade. Except for exceptional times when a disaster strikes or when the prices for perishables go up beyond 100 per cent or 50 per cent in case of cereal crops, traders have now been allowed to hoard. A central law to provide farmers with various options to market their produce and laws to facilitate contract farming will soon be formulated.  

A fund of Rs 1-lakh crore to be created for strengthening post harvesting infrastructure like cold chains, storage was provided. Similarly there were proposals for developing marine and inland fisheries for which an allocation of Rs 20,000-cr was announced; another Rs 15,000-crore for dairy infrastructure, a continuing scheme; Rs 13,343-crore for control of animal diseases like foot and mouth disease, 100 per vaccination for all animals, which was approved by the Cabinet in may 2019; schemes for medicinal plants, honey bees, micro-food enterprises engaged in nutritional food, health and wellness etc. While I agree that these are important measures and are required to boost the rural economy, and help farmers, fishermen and dairy farmers but are steps that are part of a continuing process to improve agriculture activities in the long term.  

But in these extraordinary times when the lockdown has severely restricted economic activity, it is only agriculture which served as a lifeline. Agriculture, in true sense, reinforced its image as the mainstay of the Indian economy. With urban demand collapsing, with hotels, restaurants and dhabas closed for almost 50 days now, agriculture took the brunt of the lockdown, and still continued to keep the supplies moving. Reports of farmers spilling milk on the streets, poultry birds being buried alive, flowers being re-ploughed, fish rotting in the markets, and agitated farmers throwing away vegetables before cattle and with prices of almost all crops crashing in the market because of supply chain constraints have regularly poured in. Several estimates have put the losses suffered by vegetable growers alone at Rs 25,000-crore; dairy farmers at Rs 10,000-crores; poultry loss at Rs 15,000-crores besides there were huge losses suffered by flower growers, plantation crop, fruit growers and a massive hit suffered by fishermen. In other words, across the country, farmers have suffered a huge loss.

Despite all odds, farmers have also harvested nearly 106 million tonnes of wheat, and have already sown more area under kharif crops and are also getting ready for paddy transplantings in the weeks to come. Adhering to the safety norms, which meant staggering of dates to bring produce into the mandis, procurement of wheat is heading towards a record. Agriculture being already in distress, the expectation was for an immediate relief package to partly offset the losses they have suffered, and provide an incentive for the sowing operations to be undertaken. Here was an opportunity for the government to stand with farmers in distress, and provide a stimulating economic stimulus package. Farmers are in need of an immediate relief package, and providing more cash in their hands would have also helped create more demand.

Even earlier, when the Finance Minister had announced a package of Rs 1.70- lakh crore for farmers and other marginalised sections of the society, the only commitment for farmers was to frontload an instalment of Rs 2,000 under the PM-Kisan scheme, benefitting 8.19-crore farmers, which in any case was due to them. Under the PM-Kisan farmers get a direct transfer of Rs 6,000 per year, in three instalments. The first instalment was in any case due for April-June quarter. In other words, farmers have so far been deprived of any direct support. My proposal therefore is to provide a direct income transfer of Rs 10,000 per farmer, including the tenant farmers, without disturbing the PM-Kisan scheme allocations. In addition, considering the enormous difficulties farmers faced at the time of wheat harvest and procurement, they need to be given a bonus of Rs 100 per quintal over and above the minimum support price (MSP) for wheat procurement. Considering that several lakh migrant workers have returned to their villages, agriculture needs to be strengthened so as to absorb the additional workforce.

The pandemic provides immense opportunities to realise the Prime Minister’s vision of Atmanirbhar Bharat Abhiyan. Revitalising agriculture and turning farming into an economically viable proposition forms the basis of the campaign. The additional allocation of Rs 40,000-crore for MNREGA is a welcome step.

It’s also time to learn from other countries. The US has provided a support of $ 3 billion to purchase vegetables, fruits and milk directly from the farmers and supply it to consumers. A similar strategy can be worked out for perishable crops in India, wherein the government provides at least a support of Rs 10,000-crores (like it is providing for the purchase for pulses/oilseeds) to the state governments directing them to make purchases directly from farmers by using the official machinery, cooperative agency outlets, Mother Dairy outlets, FPOs, organised retailers and also activating the supply chain. Extra-ordinary crisis needs out of box solutions, and it is time the government ushers in steps that are beneficial to farmers. After all, farmers have demonstrated that at this difficult time, they are the real backbone of the economy. #

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From Growth Economics to Economics of Well-Being

These are cars lined up before a food bank in America 

Pic courtesy -- MotherJones

At the beginning of the coronavirus outbreak, the World Economic Forum shared on Twitter a study 

conducted by Statista, a German online portal for statistics. It listed the top ten countries where people are 

losing faith in capitalism, where people agree “capitalism as it exists today does more harm than good in the world.” Interestingly, India tops the chart with 74 per cent respondents agreeing, followed by France (69 per cent), China (63 per cent), and Brazil (57 per cent). Germany trails with 55 per cent, UK (53 per cent) and with Canada and United States at 47 per cent each.

The declining faith in capitalism comes at a time when Oxfam International in its annual presentation, timed a few days before the World Economic Forum meeting in January at Davos in Switzerland, presents the shocking report on income inequality. Accordingly, India’s richest 1 per cent carries four times more wealth than the combined wealth of bottom 70 per cent. Internationally, the report says 2,153 billionaires have more wealth than 60 per cent of the global population. Ironically, the same wealthy corporations are once again on the forefront seeking massive Covid-19 bailouts. Such economic bailouts over the period have helped shape the popular thinking that global economic system in reality supports ‘socialism for corporate, and capitalism for the poor’. The worsening income inequality, which is increasingly coming under the scanner, is enough to fuel growing dissatisfaction with capitalism. As if this was not enough, the pandemic has further widened the social and economic gulf with the poor certainly faced with a much greater risk. With massive job losses, the challenge to stay safe and at the same time the struggle to provide food for the family has further deepened the gap between haves and have-nots.

Despite market reforms being pursued aggressively over the past four decades, one better way to understand how the social and economic disparities have only widened, comes from an insightful analysis of growing food insecurity and that too at a time of plenty. Writing in the New York Times, Patricia Cohen compares the long queues for food in America at the time of the Great Depression in the 1930s with the still longer queues of cars, stretching to several miles, before food banks during the 2020 pandemic. Separated by a time gap of almost 80 to 90 years, a memorable picture taken by photographer Margaret Bourke-White (of Time Life Pictures) shows a long line of poor citizens waiting for relief below a signboard showing a happy family in a car, with the banner claiming: ‘World’s highest standard of living’.

Nothing much seems to have changed. The economic model of growth has only made the rich richer, and the poor have been driven against the wall. In a country, which is known to be the world’s richest economy, pictures of cars lined up for an average of 2 miles or so before a food bank, is only a stark reflection of ‘profound, longstanding vulnerabilities in the economic system’. Not only in America, the distressing visuals of a traumatised migrant workers in India, with children in laps and carrying family belongings on head, trudging on foot to reach their homes several hundred kilometres away, will continue to haunt the nation for quite some time. Whether it is the long queues of cars in America or the long march in India, the pandemic has laid bare the inequalities perpetuated over the decades. A serious rethink is now required to radically overhaul the economic system bringing in equity and justice at the centre of human development.

It doesn’t end here. Four decades of neoliberal economics has also unleashed an environmental havoc. With temperatures soaring, ice caps melting and greenhouse gas emissions (GHGs) rising, climate change in no longer a distant reality. Many believe that the destruction of prime natural resources, forests and biodiversity hotspots has lead to the emergence of deadly diseases. A complex web of relationship exists between industrial farming, factory farms and bushmeat markets calling for an immediate fixing of the broken food systems so as to avoid the next pandemic. Whether it is the resulting environment destruction or the rampaging economic inequalities, the Covid crisis should act as an urgent wake-up call for governments to seriously move towards an economic system where the majority population is not deprived of basic necessities, where the emphasis shifts from economic growth to economics of well-being, where Gandhi’s talisman becomes the new development mantra. 

Prime Minister Narendra Modi recently said the biggest take away from the global crisis “is to become self-reliant.” Although several newspapers editorials as well as lead articles have warned against returning to self-reliance and that too at a time when the world needs to quickly move into a trajectory of high growth, I think what the Prime Minister said is exactly what the country needs. Not only making villages self-reliant, where agriculture becomes the pivot for rebooting the Indian economy, the policy imperative has to swing to creating adequate farm, public health and education infrastructure thereby revitalising the rural economy. This has to be accompanied by a renewed emphasis on ‘Make in India’ programme – especially by revitalising the MSME sector -- given that too much dependence on global value chains is now coming under the radar.

The principle of self-reliance is based on according dignity to labour and living in harmony with nature. These two underlying principles for economic well-being come in direct conflict with traditional economics which continues to harp on productivity and growth, in short pushing for more aggressive market reforms. The bumpy road ahead however will need a clear cut change in policy direction where first providing a generous social security net for the unskilled as well as skilled industrial workers becomes an immediate necessity. Secondly, and more importantly, the focus has to shift from destroying nature in the quest for economic growth.

Staying indoors for several weeks has made people realise the importance of conserving and protecting environment. They now need appropriate policies that make it possible. Economic well-being is an idea whose time has come.#

Losing faith in capitalism. The Tribune. May 16, 2020

https://www.tribuneindia.com/news/comment/losing-faith-in-capitalism-83920?fbclid=IwAR1Zbq6RJImJNDIMvp6CK8g8M_PC5QVrqEJpi_7-ouZSY8pp2wejbVD3-P0

READ MORE - From Growth Economics to Economics of Well-Being