June 08, 2020
The Indian economy was on the rise from 2001-02 onwards, overcoming the effect of global sanctions after the Pokhran Atomic explosion and this surprised and shocked the world. The national saving and investment were on the rise and therefore, national growth and GDP, reached 8% in 2003-04. For the first time after 1977-78 India posted surplus in current account between 2001-02 and 2003-04. The surplus in the three years totalled $22 billion. This was achieved largely with domestic saving, investment and consumption and India was the only emerging economy in the world to achieve such high growth without significant foreign investment.
But things changed from 2004-05. The focus shifted from emphasis on domestic impulses to external props for the economy. The new government began to tap short term stock market funds, which were available in plenty because of high global liquidity and funding imports. The glut of global liquidity blinded the government into more and more import liberalization. The result became visible after 2008-09 when global liquidity began dry up. An analysis of the current account form 2004-05 to 2012-13, shows that the current account deficit totalled $339 billion against a current account surplus of $22 billion between 2001-02 and 2003-04. The current account deficit ate up the forex reserve and the rupee value nose dived from Rs. 45 to a dollar in August 2012 to Rs. 68 a US dollar in August 2013. The government began blaming oil prices and high oil and gold imports for the current account deficit. But an analysis of the imports during 2004-05 shows that the government was telling lies. The net oil import was $ 815 billion and net gold import was $161 billion but the capital goods import was $587 billion in 9 years against an average of just $10 billion a year before. This destroyed India’s capital goods industry – which declined by 10 percent in 2001-12 and 2012-13. This also brought down the growth of manufacturing from 11 percent upto 2007-08 to less than 4.5 percent after wards. The capital goods import was facilitated by zero rate import duty. The tax concession given during the 9 years period was 30 lac, cost of which Rs. 10 lac crore was upto 2007-08 and Rs. 20 lac crore from 2008-09 to 2012-13. This tax concession resulted in fiscal deficit of Rs. 23 lac crore in 9 years. So this was clearly a period of economic destruction. The fall in rupee value, led to rise in petrol prices. So the fall in value of rupee from Rs. 45 to 62 Rs. a dollar, meant Rs. 187000 crore increase in oil bill. This led to high inflation. But for the remittances of $337 billon by Indian abroad for their family needs in the last 9 years, the nation world have been bankrupt. The last nine years are an example of gross mismanagement of the national economy for which the UPA government must he held accountable by the people.
The SJM therefore –
1. Condemns and holds the UPA government criminally responsible for mis-management of the economy and demands an inquiry to be made into the reckless tax concession led imports which crashed the Indian Rupee and led to inflation and disturbed the over all growth of the economy.
2. Demands that the tax concession given for imports be forth with withdrawn and imports tariff be restricted to the 2003-04 level.
3. The policies of the present government is a warning to any government that may come to power, not to follow such reckless tax concession led import liberalization and to follow policies of adequate production of domestic capital good and encouraging domestic manufacturing.
4. The policy of the present government to finance reckless imports through short term forex funds obtained through stock markets and short term debts have damaged the economy and SJM warns the future government against such irresponble economic adventure.
5. All tax concession which the budget documents describe as “Revenue foregone” be reviewed and withdrawn to cut and bring down the revenue deficit and fiscal deficit and augment resources for infrastructure and other development.
6. Any government that comes to power should focus on domestic savings, capital formation, manufacture and demand for growth and as the core economic impulse and not as foreign capital and foreign trade as means for growth.
7. Future government shall also ensure that genuine needs of the deserving people are met from government funds and not populist schemes to create vote-banks and for getting votes which distorts and destroy national economy.