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Mainstream, VOL LVII No 37 New Delhi August 31, 2019

Restore Nehruvian Economic Policies

Saturday 31 August 2019



The BJP Government had been casting covetous glances on the RBI reserve fund for quite some time and the RBI was resisting it. It was mainly on this issue that the former RBI Governor Urjit Patel resigned in December, 2018. During his time as Finance Minister the late Arun Jaitley tried to curb the autonomy of the RBI by amending certain sections of the RBI Act. That effort thankfully did not succeed.

The virtual looting of the RBI reserves by the Modi Government is to make up for the huge budget deficit it is going to face at the end of the current fiscal, that is, after March 31, 2020. This, along with a slew of tax concessions to corporate bosses announced by Finance Minister Nirmala Sitharaman, will not, however, overcome the recession-hit economy where demand is not only stagnant but falling. Here are some telltale figures: At the moment there are 15 lakh unsold motor cars, 30 lakh unsold two-wheelers and 13 lakh unsold housing units. The concessions given to the corporate sector will not per se stimulate demand. The industries facing demand crisis are laying off or dismissing thousands of employees. So, instead of creating new employment, those employed are also joining the army of the unemployed.

As we go to press, information has come that the Modi Government is determined to go ahead and privatise Air India. Now this is another way to reverse the Nehruvian policies in the economic sphere. Nehru opted for a mixed economic framework but underscored that the public sector would gradually acquire the commanding heights of the economy. The Modi Government, in its blind hatred of Nehru, is ensuring that the private sector instead reaches the commanding heights of the economy. This needs to be roundly decried.

The money that the Modi Government has virtually looted from the RBI coffers will go to meet its current expenses which means market liquidity will increase and if this huge volume of money comes into circulation, it will have an inflationary impact on the economy, leading to price spiral.

The government has infused Rs 70,000 crores to banks for recapitalisation. This has become necessary because many big bosses of the corporate sector borrowed huge money from the banks and did not repay either the principal or the interest thereon. They stole public money and several of them fled the country. The capital base of most banks has been eroded.. Now the common taxpayer is being fleeced to compensate the banks.

This year the government may tide over the economic crisis with money looted from the RBI coffers. But what about the future? Unless the basic causes of rising revenue deficits are tackled and removed, budget deficit, year after year, cannot be controlled. This is a chronic malady that needs structural changes in the economy on Nehruvian lines. But the government will not make these changes in order to protect the corporate bosses from being hurt.

This is the logical consequence of reversing the policies in the realm of our economy initiated long years ago by our first PM with the objective of guaranteeing our self-reliant advance. Those policies must be restored at the earliest in national interest.

There is no other alternative.

August 29 Analyst

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