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Globally and in India, Covid-19 pandemic has paralyzed the then fallen economies and drastically increased socio-economic inequalities. Some pointed out that the Indian economy is heading towards a ‘K’ shaped economic recovery. But this does not indicate the recovery of real economic activities. The K-shape only refers to the revenue-based growth change. On the one hand, most of the workers lost their jobs, and their incomes have fallen. On the other hand, the wealth of the super-rich is soaring. In the K 'shape, one arrow goes up, and the other goes down. It only denotes the rich are becoming richer, and the poor and middle class are becoming poorer. Economic crises are also being turned into opportunities for the wealthy to amass their assets.

nirmala sitharaman before budgetIn 2019-20, India had a high number of job losses in the service sector, manufacturing, trade, tourism and education. There were 1.14 crore job losses in the manufacturing sector alone. As of December 2020, 80% of those under the age of 40 affected by the fall in employment were in their 20s. The UN estimated that the Covid-19 pandemic had quadrupled the job losses seen in the 2009 recession.

Stock markets have hit new highs in 2020. For the first time since 2010, the combined market capitalization of all listed companies in India has exceeded the country's GDP. The ratio between India's stock market capitalization and domestic value is over 100 per cent. The stock market situation does not reveal the real economic situation. The rise in the stock market does not indicate the growth of real economic activity, but rather the rise in stock prices. Stock markets have risen far away from the real economy. This is because the central banks around the world are pursuing a loose/cheap monetary policy in order to boost economic recovery. Banks in developed countries lend at 0% interest. Large amounts of foreign investment are invested in the stock markets of developing countries to make a profit from interest rate arbitrage as the lending rate is higher in developing countries. The ratio between stock price and return (P / E ratio) is currently significantly higher. The amount of return earned through stocks in the stock market has also decreased. Industrial profits have also fallen. But stock prices are just soaring. Financial investors from all walks of life, including the rich, the middle class tend to invest heavily in the stock market, considering the period of economic crisis as an opportunity to buy stocks at a lower price. In the Indian stock market alone, 1 crore people have opened new accounts to invest in stocks. This is how the stock market bubble is triggered. As long as the interest rate is low, the prices of the stock market shares inflate like a bubble and go afar from intrinsic value. If banks of developed countries raise interest rates and tighten their monetary policy, stock prices in the stock market will plummet, and the stock market bubble will burst, causing huge losses to those who buy stocks at a later stage.

Pharma companies are the biggest gainers in the Covid crisis. In 2020, 7 new super riches have cropped up from India's pharmaceutical / healthcare sector. The number has risen from 10 last year to 17 now. They have amassed assets worth Rs 4.35 lakh crore.

There are two types of capital accumulation in the capitalist economy. The accumulation of capital through the stock market can be called financial capital accumulation, which is a secondary way of capital accumulation. Not all of the capital raised through financial capital accumulation is invested in productive sectors. That too, in a period of economic recession like this, the amount of productive capital invested tend to be very low, so where does the real/primary capital accumulation in capitalist society take place? Certainly not in the financial sector. Real/primary capital accumulation is the accumulation of surplus-value by exploiting the unpaid labor of the workers in the process of production in Industries. It is only the surplus-value which becomes the Profit.

The total amount of the market capitalization of the stock market is not invested as an industrial capital in productive sectors. Economist Hilferding defines founders profit as the difference between the value of market capitalization and the value of capital invested in productive sectors. From this difference, only the major shareholders of the companies, financial institutions and intermediaries are reaping huge profits. Only in the long run does stock market coincide with the business cycle of capital accumulation. This difference is due to short-term speculative investments. Taxes and regulations should be put in place to control these speculative investments and regulate financial activities. For example, the economist Tobin proposed a tax to prevent speculative investments in currency transactions, known as the Tobin tax. But by arguing this tax will obstruct the growth of the financial sector, it is prevented from implementation.

Overall, Banks' loose/cheap monetary policy boosted only the speculative investments. It does not reach those who need cash assistance or those who need loan finance. Small businesses are suffering from a lack of credit. Despite the increase in deposits in banks, banks are very cautious in lending and not providing loans to those in need. This is nothing new in the capitalist economy and cannot be considered as unintended consequences. If such effects had occurred for the first time, it could be assumed that something had been done unknowingly. But Banks know of consequences of their banking policies nevertheless, without learning a lesson, they abide by the status quo, and again and again, they follow the same path as ox goes around the oil press. But It delays economic recovery. The monetary policies of the damning capitalism are pushing people into the abyss. Knowing it and pretending not to know it, the ruling class is protecting and amassing their assets.

At the World Economic Forum, Oxfam released a report entitled The Virus That Created an Unbalanced Society. It says the economic crisis created by the corona virus is comparable to the global recession of the 1930s, and India ranks 4th in the world in terms of poor funding for health and medical sector. According to the Oxfam study, the wealth of Indian billionaires rose by 35 per cent to Rs 12.97 lakh crore during the nationwide corona lockdown. It showed it would take 10,000 years for an unskilled worker to earn what Mukesh Ambani earned in an hour during the general lockdown. It will take 3 years for an ordinary person to earn what Mukesh Ambani earns in a second. Since April 2020, 1.70 lakh people have lost their jobs per hour. The amount earned by Ambani during the Corona lockdown has put 40 crore workers of the informal sector at the risk of being pushed into poverty.

The informal sector has been devastated. A total of 12.20 crore people have lost their jobs. Of these, 75 per cent, or 9.20 crore, belong to the informal sector. In April 2020 alone, 17 crore women lost their jobs. With at least a one per cent tax on the increased assets of India's top 11 billionaires during the Corona period, Oxfam says the Central government could allocate 140 times as much money to the Jan Aushati scheme to provide affordable drug pills to marginalized people. This can be used to allocate MNREGA funds for the next 10 years for the rural employment program or for funding the health sector for 10 years.

The Oxfam report highlights the necessity to raise direct taxes in India. But even after the government made concessions on direct taxes, direct tax revenue has declined in 2020. The share of indirect taxes in total tax revenue has increased by about 56 per cent, while direct tax revenue has declined by 26-27 per cent.

While stock markets have peaked up the shares of public sector companies, have fallen. The central government is urging public sector companies to pay higher dividends. The market capitalization of PSUs has fallen by 16.6 per cent since the beginning of 2020, while the market capitalization of other stocks has risen by 18 per cent.

The Department of Investment and Public Property Management (DIPAM) has held its first consultative meeting with the World Bank to discuss plans for asset monetization and to expedite the sale of non-core assets of public sector entities. These assets include surplus land and public utility (PSU) assets worth Rs 100 billion. Vedanta Group Chairman Anil Agarwal plans to invest $ 10 billion in public sector companies in association with London based Centricus asset management company.

 In the eight months from April to November 2020, foreign direct investment in India increased by 22 per cent to US $ 58.37 billion. But actually, foreign direct investments and financial investments are being used as tools to exploit the financial resources of other countries.

The central government is increasing its share of surcharge, CESS taxes because this need not to be shared with states. The share of tax revenue to the states has not been raised to 42 per cent as recommended by the 14th Finance Commission. From April-November 2020, the central government has reduced its tax revenue shares to states by 21%. During April-November 2020, the total capital expenditure of 12 states, including Tamil Nadu, fell by 26 per cent to Rs 1.1 lakh crore.

On October 12, 2020, Finance Minister announced a special financial plan for the states for capital expenditure as part of the Athmanirbar scheme to promote the capital expenditure of the State Governments affected by Covid pandemic. The first installment of Rs. 5,378 crore has already been disbursed. However, Tamil Nadu was not given funds for the scheme. In a consultation meeting prior to the release of the finance minister's annual financial statement, the states urged the central government to increase their financial margin and assist with goods and services tax relief, and also to assist in obtaining Covid-19 vaccines.

The Central Government has provided only 29 per cent of the funds allocated in 2020 for the Integrated Central Funding Program (CSS), Samakra Siksha, which provides funding for pre-school to higher secondary education. The states have provided only 26 percent of the allocated amount. Shockingly Rs 6,000 per year PM-Kisan fund which is to be provided to small and marginal farmers have not reached them. According to an RTI reply, from 2019 to July 31, 2020, the central government has disbursed Rs 1,364 crore to 20.48 lakh ineligible beneficiaries, who belonged to the category of income taxpayers and ineligible farmers. Of these 20.48 lakh ineligible beneficiaries, 55.58 per cent are income taxpayers. The remaining 44.41 per cent are farmers belonging to the ineligible category.

India's trade deficit widened to 26% in December as exports fell and imports increased. India's 7th Trade Policy has been reviewed by the World Trade Organization. India's new Foreign Trade Policy will take effect from April 1, 2021 for a period of five years. It is said to have been planned with the aim of transforming India into a $ 5 trillion economy!. The World Trade Organization has warned India that protectionist policies such as Atmanirbar Bharat could impose trade restrictions.

From January 1, the central government will implement a production-linked incentives (PLI) scheme to boost exports. But the beneficiaries of this scheme are going to be only the multinational companies which are increasingly exploiting the cheap labor of Indian workers. But this is in no way going to improve or incentivize the domestic manufacturing sector. India's export-oriented economic policies are badly affecting small domestic enterprises. The domestic production of small and medium enterprises is affected by the shortage of raw materials and rising prices as they are mostly exported as raw materials instead of being exported as manufactured goods. Raw material imported by small and medium enterprises are taxed at 20 per cent countervailing duty. India's largest steel and cement companies are operating as a cartel and arbitrarily raising prices. Nitin Gadkari urged to explore alternatives to cement and steel, and has said the authority to regulate is not with him and promised to talk to the finance ministry, prime minister in that regard!.

Inflation:

Consumer price inflation increased to 4.59 per cent in December, while food inflation rose to 3.41 per cent. Prices of vegetables fell by 10.41 per cent. Grain prices rose 0.98 percent. Pulses became dearer by 15.98 per cent. Egg prices rose to 16.08 percent. Fish and meat prices rose by 15.21 per cent. Inflation in Tamil Nadu has increased to 4.74 per cent.

Industrial growth in November:

The Index of industrial production (IIP) index declined by 1.9 percent in November, according to the estimates released by the Ministry of Statistics and Programme Implementation. Growth in primary sectors increased by 0.3 percent. Of which production in the mining sector fell by 0.1 percent. In the manufacturing sector, output grew by 0.4 per cent and electricity generation increased by 0.8 per cent.

In the user-based category, the output of primary goods declined by 0.2 per cent and the production of capital goods reduced by 8.9 per cent. Production of construction materials has declined by 0.7 per cent, and durable goods production has declined by 1.4 per cent. Production of non-durable consumer goods (1.1%) and intermediate goods (17.2%) has increased.

Industrial growth in December:

The combined manufacturing index of eight key industries released by the Department of Industry and internal trade promotion is increased by 1.3 percent in December. Coal production has increased by 2.2 percent, and electricity production has increased by 4.2 percent. Production in the fertilizer sector has fallen by 2.9 per cent, crude oil production has declined by 2.8 per cent, natural gas production has reduced by 7.2 per cent and petroleum refining has seen a decline of 2.8 per cent. Steel production has fallen by 2.7 per cent, and cement production has fallen by 9.7 per cent.

First advance estimates of National Income (2020-21)

According to the first advance estimates of national income for 2020-21 released by the Ministry of Statistics, India's real GDP is projected to reach 134.40 trillion by 2020-21, and comparing to GDP growth of 4.2 per cent in 2019, it is projected to contract by 7.7 per cent in 2020-21. Gross value added at constant prices is estimated to be at Rs 123.39 lakh crore in 2020-21, which is 7.2 per cent decline comparing to 2019-20.

In 2020-21, the agriculture-based sectors grew by 3.4 per cent, and the electricity sector has shown a growth of 2.7 per cent. Growth in other sectors like mining (12.4%), manufacturing (9.4%), construction (12.6%), trade, hotel-based sectors (21.4%), finance (0.8%), public administration and defense (3.7%) were in decline.

Net taxes on products have declined by 13.0 percent. Net national income shows a decline of 8 percent. The gross domestic product (GDP) per capita has fallen by 8.7 percent. Net per capita national income has declined by 8.9 percent. Expenditure on private consumption per capita has fallen by 10.4 percent.

From all of this, no sign of a V-shaped economic recovery is seen as claimed by BJP Govt. Geeta Gopinath, the chief economist at the International Monetary Fund, has warned that the government's policy tightening will affect the economic recovery. Raghuram Rajan has suggested that the government should prioritize essential expenditure and should provide cash relief to poor families and financial assistance to small and medium enterprises. But even when the voice of the liberal for fiscal expansion, BJP govt pays no heed.

In Delhi, millions of farmers who have been fighting for more than 70 consecutive days for the repeal of Farm laws. More than 155 lost their lives. BJP Govt is failing the farmers and refused to accept their demands even after eleven round of meetings. The shameless BJP govt incited violence in their peaceful tractor rally on Republic Day to undermine the protest and arbitrarily registered false cases against 37 leaders. The Prime Minister and the Finance Minister have neglected to meet the farmers even once atleast for namesake.

The Finance Minister is hyping about presenting an epochal once in a century annual financial statement, not been seen in a century! What can be expected from BJP Govt which not shown an iota of concern to people, who goes on killing and torturing farmers. There is no doubt the BJP govt will use the annual financial statement as a tool to further exploit the labor of the people and the resources of the states.

Samantha K.S.


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