Keep silent! Do not disturb! Big Biz at work! The biggest loot of Indian economy is going on for the last 25 years. Dare not complain – otherwise “business sentiment” will be hurt!
In the year 2016-17, the total subsidies and concessions in the form of taxes and revenue foregone to the rich amounts to a paltry sum of Rs. 6.11 lakh crores, out of the annual budget of Rs. 19 lakhs of rupees (about 1/3rd and no less). Not only that, the total subsidies under various schemes for agriculture in this year’s budget amount to about Rs. 4 lakh crores. Before we heave a sigh of relief and say that at last, something sensible is being done for the poor farmers, who are committing suicides, remember that about 90% of this goes in to the pockets of Agro MNCs – those that have a vice grip on our seed, fertilizer and pesticide business – all those big bad Cargills and Monsantos. Out of the remaining amount, the local agro-companies and rich farmers’ share the cake. The poor farmer is left with empty hands. Hardly 1% of that grand amount reaches the marginal farmer. Whatever subsidy you name, be it gas, fertilizer, electricity, the ultimate beneficiaries are the rich as the subsidy amount ultimately lands up in their pockets. Tax on gold is a mere 1.6%, where as if you buy a liter of milk, you have to pay tax anywhere up to 15-20%. The banks are ever eager to lend you lakhs of rupees and pester you with advertisements and messages, luring you to take an instant loan of Rs. 3.0 lakhs or buy a new flat or a car. They will promise to clear your loan application in just a few minutes. But if a poor farmer approaches a bank for credit, he will have to run from pillar to post and ultimately, faced with un-surmountable firewalls, will have no option other than take money from a loan shark at indecent interest rates. Unable to payback, he has only one ultimate option left, to end his life. But we have grown insensitive to suicides of farmers across the country – after all, if you open the morning news paper, there will some 2-inch news column about some obscure farmer from some godforsaken village committing suicide - more than 2.45 lakhs of them had ended their lives in the last 15 years. For the upward looking urban middle class, such news is not worth a second look. But the accidental up-skirt snap shot of a super rich lady is sensational news and goes viral on twitter and other social media. We ogle at the super rich playboy, posing with glamorous models and unconsciously envy his good luck.
The Great Bank Fraud
Overall, about 15% to 20% of all outstanding bank credit of about Rs.65 lakh crore is considered to be suffering from various levels of stress. As of December 2015, the banking industry is burdened with Rs. 4.4 Lakh crores of bad loans – mostly from large corporate defaulters. The RBI Governor Raghuram Rajan has complained that India’s crony capitalists (all those big daddy’s who fund elections for major political parties) run their businesses in a virtually “risk free capitalism”. Recently, the famous finance research firm Credit Suisse released alarming data for 10 severely indebted groups in the infrastructure and commodities sectors. The aggregate gross debt in the books of these corporate groups – Essar, Reliance ADAG, GMR, GVK, Adani, Lanco, Videocon, Vedanta, Jaypee – who have thrived in both the UPA and NDA regimes - is of the order of Rs.7.3 lakh crore. Of this, Credit Suisse estimates that about Rs.3 lakh crore of loans are severely stressed! Private credit rating agencies have assigned these severely stressed loans near default status. Of the total bad loan stock of Rs 4,43,691 crores in the banking industry, about 65-70 percent is from the corporate sector. Before anybody could complain that after all, business needs funds and there will be naturally ups and downs, let me remind you that “bad loans extended on the basis of fake documents and outright cheating, soared to almost Rs.13,000 crore in 2015-16, more than double the amount two years ago.” (The Hindu, 8th may, 2016)
Consider this – if any Medium or small scale enterprise falters on repayment, due to negative business atmosphere, the banks do not hesitate to seize the properties and even personal assets of these small defaulters. They advertise the defaulters under a “Name and Shame” program and then go for penal action. But in the case of large business houses, the yardstick is different. These big and powerful promoters who default, use system loopholes to their advantage. Mallya’s default is only the tip of the iceberg. There are bigger corporate groups, with immense political clout, who are in default but they have technically avoided being declared defaulter through what is called “ever-greening” of loans. Ever-greening is a technical geek for fresh borrowings from the same banks to simply pay interest, involving a mere book entry. By doing so, the corporates avoid being officially declared defaulters and the banks too are hand-in-glove in showing that the loan hadn’t gone bad in their balance sheets. The loss in revenue incurred by the banks due to bad loans are transferred as additional burden to the small loan seekers. Higher losses ensure that interest rates on retail loans (which has lowest Non Paying Assets (NPAs)) and other loans is kept high to make up for the loss. Which literally means that if you take a loan to build a house or to pay your child’s college fee, you end up paying the banks for the loss they had incurred in the deals with big loan defaulters.
The Gate keepers of the system
RBI Governor Raghuram Rajan says the big loan defaulters should desist from throwing lavish parties and thus advertise their wealth. And the most Hon’ble Finance Minister opines that making too much noise about big loan defaulters will adversely affect the “business sentiment.” The record of previous FM, Chidambaram is no different. After all, both the bank Big Boss and the FM are simply gate keepers of the neo-liberal capitalist system and it is their responsibility to see that the Big-Biz party goes on smoothly. You can loot the banks – after all, everything is there up for your grabs, but please don’t advertise it and invite jealousy from the underdogs. The Sensex is the pulse of the nation. If the Sensex goes up, the economy is supposed to be healthy and the nation is considered to be alive and kicking. But if it is otherwise, heavens can fall. Human Development Index, or data such as the number of primary schools and medical centers per lakh of population or infant mortality rate are insignificant. What matters is the ‘business sentiment’, a sense of confidence to the big-Biz that they can loot this country unhindered. The state, legal and political systems, the mass media are all at the service of the Big-Biz in their “heroic” endeavor to loot the country.
Only 3% of the country’s population, that is wage earners and pensioners are paying personal Income Tax. In fact, TDS is mercilessly cut from salaries of employees and on interest and pension payments of retired people. Their hard earned Provident Fund is being targeted to be handed over to MNCs, so that they can rake in indecent profits, at the cost of ordinary wage earners and retired pensioners. Most of them have incomes below the IT threshold limit, but their meager income is first taxed and they have to wait for the excess amount collected to be returned. But it is reported that 50% of large business enterprises do not pay tax at all or pay ridiculously low amounts. In fact, though corporate tax is 30% on paper, they have to pay only 23% or lower. Even this reduced tax also is being avoided by the corporates. So, it is common man who bears the tax burden of Income Tax and other direct and indirect taxes. And the rich make hue and cry that the students of public educational institutes such as HCU, FTII and JNU are ‘looting’ the nation and ‘enjoying’ at the expenses of the tax payer (the mere 4-5 thousand rupees scholarships for PhD students). So students like Kanhaiya Kumar are looting the nation and are anti-national as they dare to question social and economic injustice.
The FDI Saga
Every politician worth his salt, right from a lowly MLA to the Prime Minister blathers on uninterrupted that they are moving heaven and earth to get Foreign Direct Investment into the country. Just like the famous instant noodles, add a little water and heat for 2 minutes and presto – your tasty meal is ready! FDI is advertised as the cure for all ills – be it poverty, underdevelopment of a region or chronic unemployment. Once ethereal FDI enters the country, we will have roads, factories, super malls, gigantic mechanized farms, corporate hospitals and presto – there will be instant development! For the last 25 years, FDI has been made the icon of development and we are getting FDI into the country alright, but the so called instant development is nowhere to be seen, except in the metros, where necessary facilities are created for the rich to conduct their business. Poor peasants are committing suicides as usual, the armies of unemployed are swelling and the infrastructure is languishing. If at all we see developed roads, they are all under private participation and we get fleeced for the sin of travelling a few dozen kilometer on the wondrous infrastructure development. And this present government hinges all of its hopes on “Make-in-India”, by getting trillions worth of FDI investments. But in the last 20 months of their rule, very little of the promises had materialized in to FDI, let alone as productive capital. Neither was there any thundering increase in FDI inflows nor even marginal increase in employment.
The Big Loot
Consider this. The total estimated black money generation in our country is of the order of Rs. 35 lakh crores, out of which it is believed that at least 10% of that leaves our shores to land in Panama, Swiss Banks or in many more such havens. Our annual intake of FDI is Rs. 1.8 lakh crores last year, out of which 60-70% comes from Mauritius and Singapore via round-tripping. Which in common man’s parlance means that the money stolen from our country is parked in tax havens abroad and returns back to the country via the conduit of Mauritius and Singapore as FDI. That means that out of Rs. 1.8 lakhs crores of FDI, at least Rs. 1.0 lakh crores is money stolen from the pockets of Indians returning back as honourable FDI. And note that the government showers every Dollar of FDI investment with at least $2.5 in concessions – tax incentives and exemptions, land at nominal price, subsidized power, water and other utilities etc., besides providing necessary infrastructure facilities at government cost. Which again in common man’s speak means that if the rich steal 3.5 rupees from our country, make 2.5 rupees investments abroad and bring back 1 rupee back via round tripping, they will stand to gain again 3.5 rupees from the poor man’s pocket. Lakhs of acres of land from poor peasants is acquired by force using the state machinery and handed out to the rich at nominal rates – the government acts as the land grabbing goon at the service of the rich. Nice deal! Whichever way you look at it, it is win-win for the rich and lose-lose for the poor. Do not dare to complain! The rich man will be peeved and his “business sentiment” will be hurt! He will be unwilling to bring back even that small amount!
The basic question arises. If the contribution of FDI to the national economy is a mere 6%, why the hell should our rulers talk as if FDI is the savior of our economy? There is more to it. The OECD in their report in 2011 on the analysis of FDI investments have revealed that out of $1 of FDI that enters a Third World country such as India, 33 cents go into FII – Foreign Institutional Investment – again in common man’s parlance – money for satta business in the stock market. This 33 cents of FII neither generates any wealth for the country nor does it create any jobs, but gives fabulous and instant profits to the rich investors – real instant noodles. In the remaining 67 cents, 45-50 cents are inter- unit transaction of MNCs, which enters the country by the royal route of FDI and enjoys tax free benefits. Of the remaining, 15 cents only go into productive capital for setting up industries and infrastructure projects. In the present context, no foreign entrepreneur employs outdated technologies to create high density employment, even if labour is relatively cheap here. Goods produced with outdated technology, even with cheap labour will be of secondary quality and will not be saleable. So a foreign investor goes invariably for state-of-the-art technology, employing robotic machine tools and automatic processes. If industrial plants 30 years ago were employing say, 2000 workers, a similar plant with modern technology today requires hardly a dozen workers. In such state-of-the art plants, upwards of Rs. 15 crores of investment can create one manufacturing job. Assuming on a very optimistic note that one manufacturing job can nurture another 9 service jobs, that include secondary services such as transport, communications, health care, education etc., as well as other sundry low quality contract service jobs such as sweepers, cleaners, drivers etc., the total number of jobs that Rs. 1.8 lakh crores of FDI (remember that out of that only 27,000 crores goes in to productive capital) a maximum of 20,000 new jobs will be created per year by FDI. The government knows pretty well that what they are promoting amounts to “zero employment growth’, economist geek which translates in to – super profits for the rich without creation of new jobs.’ The dangerously plummeting rate of new employment generation in the last decade is a mute testimony to this process going on in the neo-liberal economies. When there is an urgent need to create 2 crore jobs every year so as to address the ballooning army of unemployed, only 1.35 lakh new jobs were created – a success rate of less than 1%. Even today, medium and small scale industries generate the bulk of new employment in the country and no FDI goes in to that sector.
The ultimate purpose of FDI is to:
- Provide a red carpet for round-tripping of money stolen from the country
- Shower innumerable incentives and concessions at common man’s expense
- Allow the rich to rake in super profits at the expense of the economy
- With minimum or negligible contribution to employment generation
On the other hand, the government is showering the rich with benefits such as:
- Rs. 6.11 Lakh crores as Revenue Foregone
- Rs. 1.16 lakh crores as reduced taxes on gold, which is exclusively used by the rich
- A lion’s share of the agricultural subsidies (fertilizer, power, seeds etc) ultimately end up in the pockets of the super rich and rich farmers
- Most of the subsidies doled out in the name of benefitting the poor ultimately end up in the pockets of the rich (PDS, Kerosine etc.)
By one estimate, the rich corner about Rs. 50 Lakh crores from the wealth generated in the country and still complain that subsidies of a few thousand crores for the vast majority of the poor such as MGNREGA, PDS, primary education and child health are a burden on the economy.
This is the justice of neo-liberalism. I will not go further than saying that with just 5% of what the rich gobble up, we can provide livelihoods for at least 4 crores of young people every year, which literally means that you need not provide any sops for 20 crores of people once a member in their family earns a livelihood and he/she in turn will become a tax payer and a consumer and buoy up the economy. And we are not counting the additional crores of livelihoods that will be created as a secondary effect of such a development. This has been suggested by a number of economists time and again, but because it runs counter to the very grain of neo-liberal thinking process, it is a no-go for the ruling elite. “Let those who suffer, suffer – we are only concerned about our profits” is the mantra of the ruling elites.
[M. Vijaya Kumar is a retired engineer and a student of philosophy of science Email: firstname.lastname@example.org]