We need to plan big, very big
The government’s $4 billion public investment is too little to block the winds of recession. What is required is a massive dose of public investment to generate employment and domestic demand, thus stimulating growth, writes Sitaram Yechury.india Updated: Dec 18, 2008 08:01 IST
One response to this column, (Box that slide, October 23) suggesting measures we in India need to adopt to tackle the impact of the global capitalist crisis posed an interesting question — why should communists offer solutions to capitalism on how it should tackle its crisis. After all, communists seek to replace capitalism with socialism.
The manner in which the crisis is tackled defines the priorities. Communists seek human liberation and emancipation. Hence, they put people before profits. The current bailout packages announced across the globe, however, do the opposite. Even the New York Times was constrained to point out that the $700 billion bailout package “helped strengthen bank balance sheets” but did not “mandate new lending or support specific investment projects in the United States”. Such bailouts help finance capital which, in the first place, created this crisis and do not prevent a recessionary slide. Around 240,000 jobs were lost in October in the US and the unemployment rate soared to 6.5 per cent.
In sharp contrast, China has announced a two-year $586 billion public investment. This is designed to improve people’s welfare through projects like low-cost housing, strengthen infrastructure and re-build areas devastated by natural disasters like earthquakes. The consequent employment generation would boost aggregate domestic demand, fuelling growth. Consider this example: the planned expansion of 10,000 km of railways, as a part of this package, by the end of 2010 will employ six million people and would require 20 million tonnes of steel and 120 million tonnes of cement. Such public investment, China expects, will offset the negative impact of the sharp fall in exports caused by the global recession.
What is happening in India? Compared to 13.8 per cent growth in the manufacturing sector in October 2007, it is minus 1.2 per cent in October 2008. For the first time in 15 years, India's overall industrial production recorded a negative growth of minus 0.4 per cent. Similarly, exports that contribute around 22 per cent of our GDP fell by 12.1 per cent. India’s much-famed IT sector, with annual revenues of over $50 billion accounting for around 16 per cent of exports, estimates a fall of over 50 per cent of its revenues. The FIIs who put in $17.4 billion last year have virtually vanished, leading to a crash in the stock market. The rupee has weakened by about 20 per cent against the dollar despite the RBI selling up to $2 billion a day.
All this is leading to large-scale closures of export units and layoffs of workers. The consequent decline in purchasing power amongst the people will further depress growth. This may well push India also into a recession. Under these circumstances, however cheap credit may be made with lower interest rates etc, there will be very few takers. What is required is a massive dose of public investment to generate employment and domestic demand, thus stimulating growth. The Prime Minister has announced a Rs 20,000 crore investment programme. This translates into a pitiable $4 billion.
This gross inadequacy must be urgently corrected. A massive public works programme will only help us in improving our woefully inadequate infrastructural facilities. India has the world’s second-biggest road network of 3.3 million km. However, the much tom-tomed national highways are only 2 per cent of the total and only 12 per cent of them (8,000 km) are dual carriage ways. By the end of 2007, China had nearly 54,000 km of four or more lanes roads. Similar inadequacies are there in other crucial sectors. Last year, peak demand for electricity outstripped supply by nearly 15 per cent. According to the World Bank, 9 per cent of India's potential industrial output is lost due to power cuts. Nearly 60 per cent of Indians do not have direct electricity connections. Last year, we added only about 7,000 mw compared to 100,000 mw added by China.
There is so much to be done in the field of social infrastructure. Nearly 1000 children die every day due to preventable illnesses. Only 13 per cent of the sewage is treated; 70 per cent of our people do not have access to a toilet; and, over 50 per cent do not have access to potable water. Half of enrolled children drop out from schools by the age of 14. Enrolment in higher education rose from 7 to 13 per cent only. Yet, this is sufficient to create waves of fear in the Western capitals of an Indian cerebral takeover. Fifty-four per cent of Indians are below the age of 25. If we can give them proper health, education and employment, then they shall build a new, better India.
The current global crisis can well provide an opportunity for India. With the domestic savings rate rising to 35.5 per cent of the GDP, resources must be marshaled to put in place a massive programme of public investment. It is in this process of mobilising popular pressure to force the government to adopt such a course that the communists will strengthen the movement for socialism.
Sitaram Yechury is Rajya Sabha MP and member, CPI(M) Politburo