The Indian government’s “shock and awe” scheme to demonetise
more than 85 percent of the country’s currency has severely disrupted
economic life across India and continues to inflict great hardship on
the working class and rural toilers more than two months after its
sudden imposition.
Conceding that demonetisation has forced farmers to accept ultra-low
prices from wholesalers, depressed consumer demand, and led cash-short
employers to lay off workers, both the World Bank and IMF have sharply
scaled back their 2017 economic growth projections for India.
In a report issued this week, the IMF said that it now expects the
Indian economy will grow by 6.6 percent in the fiscal year ending March
31, 2017—a full one percent less than its previous forecast—and by 7.2
percent in 2017-18 or 0.4 percent less. Indian political leaders have
repeatedly said the country needs 8 percent annual growth if the economy
is to be able to absorb the ten million youth who join the labour force
each year.
However, a sample survey that the All India Manufacturer’s
Organization (AIMO) conducted of 73,000 of its more than 300,000 members
indicates the adverse impact of demonetisation may be larger, indeed
much larger, than is being anticipated by the IMF or, for that matter,
the Indian government.
According to the AIMO survey, during the first 34 days following
Prime Minster Narendra Modi’s November 8 demonetisation announcement,
micro and small industries (that is family-owned firms employing no more
than a handful of workers) slashed employment by 35 percent and
suffered a 50 percent fall in revenue.
While the micro and small industry sector was hardest hit, the AIMO
survey found that medium and large enterprises also experienced sharp
revenue drops, ranging from 20 to 50 percent, and slashed jobs
wholesale. The medium and large manufacturers surveyed had reduced
employment by 5 percent. Those that specialize in infrastructure
projects, such as road-building, had laid off a third of their employees
on average.
The AIMO is projecting that the slump will continue in the coming
weeks and forecasts that by March the job losses in the micro and small
industry sector will rise to 60 percent, while tripling in the medium
and large manufacturing sector to reach 15 percent.
The authors of the AIMO study were themselves stunned by their
findings. “While [the] AIMO understands,” they wrote, “certain immediate
repercussions of such a bold step (demonetisation) by the government,
it did not anticipate or was prepared for such a jolt to industries even
after one month.”
In December, AIMO leaders made repeated attempts to meet with
Commerce Minister Nirmal Sitharam and Finance Minister Arun Jaitley, but
they were given the cold shoulder. This prompted AIMO President K.E.
Raghuram to exclaim, “It is high-time the Indian government …. wakes up.
By March 2017, large numbers of small and medium units might close
down. Small and micro industries cannot bear the losses, not even for
more than a month.”
According to the Ministry of Micro, Small, and Medium Enterprises,
such enterprises provide employment to 81 million Indians including
large numbers of financially vulnerable self-employed artisans.
The social dislocation caused by the Bharatiya Janata Party (BJP)
government’s demonetisation scheme is further indicated by the sharp
spike in destitute rural workers seeking to exercise their right to
temporary employment under the central government’s Mahatma Gandhi
National Rural Employment Guarantee (NREGA) program.
Adopted in 2005 by the Congress Party-led, Stalinist-supported,
United Progressive Alliance (UPA) government in order to provide
political cover for its pursuit of pro-investor reforms and a “global
strategic partnership” with Washington, the NREGA guarantees 100 days of
poorly paid, manual labor per annum to every rural household.
According to an analysis published by the Indian Express,
from last July through November three million workers sought NREGA
employment daily. Then in December, the first full month after
demonetisation, the daily average spiked to 5 million. And by the end of
the first week of this year, the daily average had swelled to 8.4
million, well over two-and-a-half-times the pre-demonetisation average.
The average daily wage paid under the NREGA, according to the
government’s own figures for the current 2016-17 fiscal year, is just
161 Rupees (about US $2.40).
Modi and his Hindu supremacist BJP have claimed that the sudden
demonetisation of India’s 500 and 1000 Rupee notes was a “surgical
strike” against “black money”—that is assets that were illegally
obtained and/or held outside the scrutiny of the tax authorities.
This is a fraud. The vast majority of India’s “black money” is in the
form of real estate, gold, foreign currency, and overseas bank
accounts, not Indian currency, and it is in the hands of India’s
corporate bosses, real estate developers, other rich and super-rich, and
corrupt politicians, not the workers and toilers who are bearing the
burden of demonetisation.
Preliminary figures show that a very large portion of the demonetised
notes have been deposited in the country’s banks, which strongly
suggests that the government’s own estimates of the amount being held as
“black money” were highly inflated.
Be that as it may, the real purpose of the government’s
demonetisation scheme is to shore up India’s ailing banks and government
finances at the expense of working people.
By compelling the population to exchange their cancelled old bills
for valid new ones through the banking system, the government is hoping
to give the banks, which are hobbled by unpaid business loans, a
desperately needed cash-injection. The longer-term aim is to
dramatically raise the proportion of everyday financial transactions
made through the banking system, so as to make them a potential source
of revenue for the banks and bring them within the purview of the tax
system.
Not surprisingly, Modi’s pro-investor government has proven callously
indifferent to the massive social dislocation caused by its
demonetisation scheme. In a speech at the end of last month Modi claimed
that he had “saved the country” by taking a stand against “black money”
and “terrorism,” and said any hardship would soon pass. In his New
Year’s address, he took a somewhat different tack. He claimed that the
“pain” Indians have borne in fighting corruption “will be an example for
generations,” urged the banks which have “had a huge influx of wealth”
to prioritize the middle class and poor, and announced that a handful of
“relief measures” would be included in next month’s budget, especially
for farmers who desperately need cash so that they can proceed with
planting.
A few days later, President Pranab Mukherjee, who was himself a
finance minister under the UPA and supports demonetisation, said he
feared the poor cannot “wait.” In an address to India’s governors and
lieutenant governors, Mukherjee praised Modi’s New Year’s address for
providing “some relief,” but signaled his concern that it will prove
woefully inadequate in preventing social unrest. Declared Mukherjee, “We
all will have to be extra careful to alleviate the suffering of the
poor … They need to get succour here and now.”
For its part, the rightwing Indian Express published an
editorial titled, “Heed the President: Government should listen to his
warnings about a looming crisis in rural India.”
Thus far the opposition parties have proven incapable of capitalizing
on popular anger over demonetisation and more generally the Modi
government’s ultra-rightwing, pro-big business agenda, which includes
aligning India ever more completely with Washington’s war drive against
China. This is because the entire opposition, from the Congress Party
through the Stalinist Communist Party of Indian (Marxist) or CPM, have
themselves assisted in the implementation of this agenda. For two
decades, from 1989 to 2008, the CPM sustained in office a succession of
rightwing governments, most of them Congress-led, which did much of the
heavy-lifting in the drive to make India a cheap labor haven for global
capital and a satrap for Washington.
Source: WSWS
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