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GDP Growth – No index to prosperity for all

By: K Parthasarathi
Jan-14-2008
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It was with some dismay that I read about the contemplated move by the Finance Minister to reduce the rates of direct taxes in respect of individuals and corporate sector. Perhaps such a generous thought came from the increased collection of taxes which only reflects better compliance and less leakage. There is however no case for rewarding the tax payers as FM is envisaging. It is not that there is a surfeit of revenues with the government that it can indulge in such munificence. The country needs mammoth resources for the daunting task in basic and much neglected areas for uplifting the poor in rural and urban areas. The money allocated towards primary and vocational education, health in the form of primary health centres and free hospitals for the poor, small industries in rural areas to provide employment to the unemployed men and women, availability of potable water without the poor having to walk miles and infrastructure like roads and electricity is totally disproportionate to the needs. Much has been written on this that there is no need for dilation. Oil bill has increased way beyond the capabilities of oil companies. The government is fighting shy of raising the prices on political considerations. User charges are not recovered fully in many areas and government cannot continue to subsidize the rich and affluent. This is nothing but robbing the poor of the resources they need. The government should introspect whether adequate funds are allocated to pressing sectors in the rural areas and spent for the benefit of the poor before thinking of a tax holiday for tax payers or subsidizing the rich.

It was not long ago the PM while unveiling his ten point charter in his talk at CII made the suggestion to rein in voluntarily the skyrocketing CEOs pay packages especially in the context of wide disparity between the haves and have nots. Is reduction of taxes in keeping with this plea? In a land where millions are still wallowing in utter poverty it will be only sick minds that would revel in such outlandish and astronomic pay packages. The growing inequality between the rich and the lack of resources to fund the pressing poverty amelioration measures is a stark reality that PM could hardly afford to ignore. It is in this context that Dr Man Mohan Singh raised this issue of inclusive growth without fear of injuring the felicity of tycoons of Industry. Though there was no hint of government regulating the salaries, he was pleading for self imposed restraint consistent with the ground realities of large number in the throes of poverty and the social atmosphere in which the industry and business operated. It is not a question of the rights of wealth creators to a larger share of the pie. Rather it will not be in their interests to continue as tiny islands of opulence in the midst of vast sea of want, neglect and abject misery. If FM is really thinking of a reduction in rates of taxes, it goes counter to the philosophy of PM.

In an article by Andrew Hunt, he has mentioned how the wealth of the world is distributed with 90% in the hands of North America, Europe and high income Asia-Pacific countries with the rest of the world having to contend with the balance 10% only. The author has added the misdistribution of wealth can create conditions that give rise to violence and upheaval, and when this happens we will feel the ripples…. What better time than the present to begin discussing this matter and giving it the weight it deserves. Just as is happening with countries of the world a similar situation is prevailing among individuals within the countries too.

As was reported in a daily the combined worth of 36 Indian billionaires is around $ 191 billion forming 25 per cent of the countrys GDP. The author has warned in a different context that like global warming “the widening gap between the rich and poor has potentially destructive consequences for the future, and the threat will continue to loom until the world community confronts it directly. According to Mahatma Gandhi Poverty is but the worst form of violence. Let us not rub salt on the injuries of the poor by flaunting the riches and widening the inequality. This is exactly what our PM tried to convey at the business forum. FM should be aware of this.

The distinctive feature of the liberalization ushered in the country is the creation of wealth concurrently along with growing inequality. This is an inevitable outcome where the stress is solely on growth of industry, service and IT sectors to the gross neglect of agricultural sector. Even a cursory look at the investments made by the corporate world both domestic and foreign would reveal that they are only in selective sectors where the beneficiaries are not the poorer sections. The motive of the corporate class is to maximize profit and create wealth for the shareholders. Any social content is at best an incidental byproduct. Man Mohan Singh may bewail about crony capitalism even when his own government is responsible for altering the direction in favour of right wing politics, corporate power, weakening of the labour unions and consumerism.

Investments are only in areas of high returns and the quick payback period. Rural upliftment, long gestation projects of infrastructure and agriculture are in back burner. Concern for the poor is not in the scheme of things be it in the displacement of the vast number of poor farmers from their ancestral lands to make way for the industry or in the selection of areas for investment by government.

There is no gainsaying the fact that the policies are influenced by the business class. They believe that IT and industrial revolution is the route to make the country join the club developed countries. There is an undue obsession about GDP growth. The development today is skewed and not broad based. The vital sectors of economy like oil, gas, communication are cornered in the hands of a few corporate houses. These houses are spreading their tentacles to grab other important areas like retail, airports, power and such like. The danger of a monopolistic or oligopolistic situation should be avoided at any cost. The dangers of this trend have not been realized fully. The emphasis should be to make the investment broad based with a large number of players both indigenous and foreign taking part in the development process in all sectors. We should not allow a situation where the country is at the mercy of a few business houses in the near future as this is more pernicious than foreign oppression. The concentration of wealth in a very few hands would sound the death knell of democracy. While we are for laissez faire, we should consciously endeavour to broad base the wealth in the country.

Even at the global level equality as a concept is at a discount with developed countries thriving to retain the barriers while wanting the poor countries to throw open their markets. It is an unequal world where ethical values do not come into play. We should not permit such behaviour within our country if we are determined to lift the poor out of poverty. The GDP growth, however much the economists talk about it, is no index of prosperity for all. With the poor continuing to suffer in poverty, we cannot buy the argument that large creation of wealth would uplift the masses as a spin off. A guided liberalization is the only recourse to prevent the exploitative and anti poor nature that we witness today. As of now only the rich and the educated classes benefit leaving out the vast poor totally in the cold. Such a twisted development provides a fertile ground for the violent elements to recruit its army in different parts of the country. The aim should be to tailor the reforms to suit our ethos towards a wider dispersal of wealth in larger number of hands than in concentration in the hands of a few business houses as is obtaining presently.


K Parthasarathi

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