Sitaram Yechury talks nonsense

Justice Markandey Katju-

Speaking in the India Today TV program anchored by Rajdeep Sardesai and Rahul Kanwal on PM Modi’s Self-Reliant India speech and the Finance Minister’s MSME package, Sitaram Yechury, the CPIM General Secretary, said that the package only gave some credit facilities to small and medium businessmen, but would prove useless in absence of demand. He said that the problem for India’s economy is lack of demand, and to create demand he proposed that every person not paying income tax in India should be given Rs 7,500 p.m. for 3 months and free food.

In India, as stated by the Prime Minister himself, and as endorsed by the Income Tax Department, out of the country’s total population of about 135 crores, only 1.46 crore people pay income tax, i.e. a little over 1% of the population. In other words, almost 99% people do not. So, if Mr. Yechury’s proposal is accepted about 133.5 crore Indians will have to be given this dole, which works out to be Rs 100125000000 p.m. for 3 months. Has Mr.Yechury ever asked where will this money come from, or will it fall like Manna from the sky?

Moreover, there is massive corruption in India, and so many govt schemes, though appearing to be fine, in practice become another source for corrupt politicians and officials to make money. Former PM Rajiv Gandhi had said that of every rupee spent in a govt scheme only 10 paise reaches the really needy. In other words, 90 paise of every rupee is gobbled up by corrupt politicians and bureaucrats. It is true that PM Modi is personally honest, but he is only one man in a system that is largely corrupt, and in that respect has not changed since Rajiv Gandhi’s time.

Mr.Yechury is right when he says that the main problem for our economy is how to increase demand, for without people having the purchasing power how will the goods produced be sold?

I submit that it is not possible to solve this problem within the present system, and it will require a revolution and creation of a new political and economic system for this. I have explained this in my article ‘ The economy’s problem is one of purchasing power, not production ‘ published in theweek.in

I have explained there that in the erstwhile Soviet Union when the First Five Year Plan was announced in 1928 the methodology adopted by the Soviet Govt was broadly this: the govt fixed the prices of all commodities, and every 2 years or so reduced these prices by 5-10% ( sometimes wages were also raised by 5-10% ). Thus, even with the same wage now the worker could buy more goods since goods had become steadily cheaper (the real wage is relative to the price index). In this way the domestic market was steadily expanded (as prices were regularly going down). Simultaneously production was stepped up, and this increased production could be absorbed in the domestic market since the people’s purchasing power was steadily going up. This solved the unemployment problem in the Soviet Union since thousands of new factories were set up requiring many workers. The people’s standard of living also rose with an increase in their incomes

This was at a time when the Great Depression had hit the Western world after the Wall Street Slump in 1929, following which one-third of workers in America and Europe became unemployed following the closure of thousands of factories.

I am not saying that India must necessarily follow the Soviet model. We can devise our own model, but whatever it is it must raise the purchasing power of the Indian masses. Whether this is possible within the present system is in my opinion doubtful.

 

 

[Justice Markandey Katju is former Judge, Supreme Court of India, and former Chairman, Press Council of India. The views expressed are their own].