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Mainstream, VOL 61 No 34, August 19, 2023

Freedom: Corroded And Stained | Kobad Ghandy

Friday 18 August 2023, by Kobad Ghandy


We have just celebrated the 77th year of our independence. While much euphoria was generated by the media and politicians it is the right time to take stock as to where we have reached in this journey forward and what is the likely future for the new generations growing up.

Oxfam India’s briefing ‘Inequality Kills’, published Jan 16 2023, has revealed “that the collective wealth of India’s 100 richest people hit a record high of Rs. 57.3 lakh crore (USD 775 billion) in 2021. According to the same report the richest 21 Indian billionaires now have more wealth than 70 crore Indians.

When 84 percent of households in the country suffered a decline in their income in a year marked by tremendous loss of life and livelihoods, the number of Indian billionaires grew from 102 to 142. In India, during the pandemic (since March 2020, through to November 30th, 2021) the wealth of billionaires increased from Rs. 23.14 lakh crore (USD 313 billion) to Rs. 53.16 lakh crore (USD 719 billion). While more than 4.6 crore Indians were estimated to have fallen into extreme poverty in 2020 (nearly half of the global new poor according to the United Nations.)

 The top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%, while 67 crore Indians who comprise the poorest half of the population saw only a 1% increase in their wealth.

There were 119 billionaires in India in 2022. Their number has increased from only 9 in 2000 to 101 in 2017. Between 2018 and 2022, India is estimated to produce 70 new millionaires every day.

Billionaires’ fortunes increased by almost 10 times over a decade and their total wealth is higher than the entire Union budget of India for the fiscal year 2018-19, which was at Rs.24.4 lakh crores

“Oxfam’s global briefing points to the stark reality of inequality contributing to the death of at least 21,000 people each day, or one person every four seconds. This is mindboggling when a handful of families corners most of the wealth of society. According to the World Economic Forum (2020) report 22 crore people are living on less than Rs32 per day.

After 77 years of independence why is our country facing such a horrible state of affairs, with absolutely no trajectory of improvement, no matter which party has been in power from the BJP to the Congress to the regional parties to even the CPM. Of course, the BJP has aggravated the situation even more than others.

What is worse practically every sector of the economy is dominated by foreign capital which takes a huge toll on the potential for further growth due to the massive drain abroad, estimated to be as much as 20% of the GDP each year. (See my article in earlier issue of Mainstream entitled Diamond Jubilee or Rusted Freedom).

And then there are the massive amounts lost in corruption which would have been a potential source of funds for further investment. Arun Kumar has estimated the extent of the black economy. In his book Understanding the Black Economy and Black Money in India (Feb 2017) he says: India’s black economy is estimated to be 62% of GDP — generating about Rs 93 lakh crore of revenue (or USD 14 trillion). It is larger than the income generated by agriculture and industry put together, which is about 39% of GDP. It is larger than the size of the government (Centre plus states) spending, which is about 27% of GDP. Because of its existence, the country’s economy has been losing on an average 5% growth (when compared to official figures) since the mid-1970s when the black economy became significant. If we add 5% to the rate of growth over the past four decades or so, the size of our economy would be Rs 1,050 lakh crore (or about USD 15 trillion at the current rate of exchange) instead of Rs 150 lakh crore (or USD 2.2 trillion) as it is now (when the book was written). We would have become the world’s second largest, behind the US and a middle-income nation. The per capita income of the country would have been Rs 7.4 lakh (or USD 11,000) instead of about Rs 1 lakh (or USD 1,500) as it is at present. In other words, every one of us would have been seven times richer on average.

In today’s terms (in 2022-23), where the GDP is Rs. 274 lakh crores ($3.3 trillion) the black economy works out to a massive Rs 170 lakh crore generated in that year. A lot of this is siphoned abroad to tax havens. Besides this India’s total counterfeit market is estimated at Rs.1 trillion by the Authentication Solution Providers’ Association. ASSOCHAM IN a 2015 report (OUTLOOK Oct 21 2019) estimates 25% of medicines sold in India are either fake or poor quality. Due to this the losses to the textile sector are about Rs.30,000 crore per year; tobacco Rs.16,000 crore; electricals Rs.22,000 crores; and capital goods Rs. 52,000 crores.

So with a drain abroad each year of about Rs 55 lakh crores and black money drain of Rs.170 lakh crores — what remains for investment and development? Rs.225 lakh crore if put to fruitful use each year, India’s growth story would be something else. But, even the little that remains (as we have seen above) is cornered by the top billionaire club leaving the masses in a state of increasing despair.

No wonder India is one of the last on all human indexes in the world (Indian Express Dec 6 2022 Article by D. Raja):

  • Global Hunger Index (2022) 107out of 121 countries
  • Global Food Security Index (2022) 71 out of 113 countries
  • Global Happiness Index (2022) 136 out of 140 countries
  • Human Development Index 132 (2023) out of 191 countries
  • Transparency Index/Corruption Index 139th
  • Democracy Index 108th (23) out of 202 countries in 2022 it was 100th
  • Press Freedom Index (2022) 150th out of 180 counties
  • 8 crore people do not have access to safe drinking water
  • 23 crore people live in very unhygienic conditions and do not have access to proper sanitation
  • 11 crore youth outside the workforce (that is not employed or looking for employment).
  • Internal migrants looking for a source of income 45 crore
  • 4-5 crore people living in temporary slums

The tale of woe and tragedy gets multiplied when we see the structure of govt taxation which burdens the poor and gives concessions to the rich, inspite of the lopsided state of affairs — making things worse for the poor and middle classes and giving a bonanza to the ultra-rich.

According to the Oxfam ‘Survival of the Richest: The India story’ (Jan 2023) report the bottom 50% of the country’s population pays six times more on indirect taxation as a percentage of income as compared to the top 10%. Of the total taxes collected from food and non-food items, 64.3% was incurred by the bottom 50% of the population. According to the Oxfam Report: Historically, India has always been dependent more on indirect taxes (i.e. tax on goods and services rather than incomes and profits). In the year 2000 the percentage of indirect tax in the total tax revenue was at 63.69 percent. Sadly, even during the pandemic this trend continued as the government revenue remained highly dependent on indirect taxes —especially the tax levied on the sale and manufacture of goods and services that ordinary Indians depend upon.

The Oxfam India briefing shows the trend that indirect tax as a share of the Union government revenue have been increasing at a time when there is a decline in the proportion of corporate tax for the same in last four years. The additional tax imposed on fuel has risen 33 percent in the first six months of 2020-21 as compared to last year and is 79 percent more than pre-Covid levels Till today it has kept rising with new taxes continuously being introduced.

At the same time, the wealth tax for the super-rich has been abolished in 2016. Corporate taxes were lowered from 30 percent to 22 percent in 2019/20. As a result, the Government suffered a revenue loss of Rs 1.84 lakh crore in 2019-20 and 2020-21 due to reduction in corporate tax rates effective from 2019-20, according to a report by the Parliamentary Committee on Estimates. This further impacts the government’s ability to spend on welfare schemes for the poor. These trends show that the poor, marginalised and the middle class paid high taxes despite going through the raging pandemic while the rich made more money without paying their fair share.

And with a reduction in spending on health care and education and massive privatisation of these sectors the family budget leaves little for basic food, which too has witnessed a huge price hike. The agony of the bulk of our people cannot be imagined.

Even within the prevailing system if measures are taken to curb corruption and the foreign drain enormous resources could be made available for investment growth/development generating employment which is today stagnant/declining. As per the 2011 census there are 49.5 crore landless individuals in villages, who are directly or indirectly dependent on cultivation for their livelihood. Then there are 11 crore who have no work at all. Then there are 1 crore venders. In terms of employment share the unorganised sector is 83% of the work force and 17% is in the organised sector. And even out of this organised sector a large proportion are government employee. Ther are about 2,15,47,845 (2.15 Crore) government employees currently working in India. This includes both state government employees and central government employees, ...Their entire wages come from peoples tax money and not from productive employment. Though necessary it is a burden on the backs of the rest of the population.

 Conditions were even better in the 1980s where contractualization of labour was not on such a large scale. No wonder 81 crore people (60% of the population) are on the free ration scheme of the government giving 5 kg per month per head of grain, much of which is unfit for human consumption, especially rice.

 So funds would be available for development and welfare if the economy was not so skewed in favour of the ultra-rich. So, for example, a temporary ONE percent surcharge on the richest 10 percent population could help raise an additional Rs. 8.7 lakh crore; a mere one-off tax on unrealised gains from 2017—2021 on India’s richest person — Gautam Adani — could have raised Rs 1.79 lakh crore; the other handful of billionaires taxed even at the earlier 30% could generate of Rs.4 lakh crores; and if corruption is reigned in and the foreign drain ended imagine the further resources available for development/welfare. At least Rs.150 lakh crores could be generated each year for the much talked of Vikas — all of it robbed by big corporates (Indian and foreign), top politicians and bureaucrats, and their hangers-on.

But if the present model continues the country will perish and the bulk of the people — already living a hand-to-mouth existence — will be totally destroyed. The opposition must give a concrete formula to implement an alternative set of economic policies and not just talk secularism, love etc.
Something tangible is essential if we are to save the situation.

                                          August 16 2023

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