[Trans India]

Published date: Apr 1978

The Government Is Helping Create A Privileged Class!’

Professor C.N. Vakil, eminent economist, formerly Director, School of Economics and Sociology, University of Bombay, and Director, Central Board, Reserve Bank of India:

“The Janata government was suddenly thrust into power, and there was hardly any coberence between the various constituents of the Party. So decisions were taken very slowly. The Assembly elections in June 1977 again diverted the government’s attention; this happened again in February this year. Also, the Janata party’s constituents were busy patching up differences amongst themselves, and so economic policies were pushed to the background.

“When there were many complaints about the lack of direction in the economy, the government came out with two conciliatory moves-in November 1977, it announced the Janata Economic Policy, which was more a Party document, and still has not been adopted by the government itself. Later, the Industries Policy Statement was tabled in Parliament, rendering it a government document. But these are only statements, you see.

“The Prime Minister and other government leaders want to control prices and lower prices. They have said that deficit financing will be avoided. Minister for Civil Supplies Mohan Dharia talks of a large, comprehensive public distribution system (when everyone knows how third- class our rationing system is!). Dharia wants his system to deal with many articles of essential consumption. But where is the money to set up such a vast network? Where is the organizational skill? Where will the government find the staff to man such a system? We all know that rationing is necessary only if there is a famine. Talking about this sort of governmental control of distribution under normal conditions is ridiculous. Whenever the government has undertaken trade, there has been total chaos. And isn’t this sort of talk contradictory to the Janata Party’s professed ideals? They talk of individual liberty, but large-scale public distribution is nothing but regimentation!

“The Janata government has not been able to bring down prices. Credit is stringently controlled by the Reserve Bank of India, and there are many vexing monetary controls. The prices haven’t gone down, because the inflationary pressure on the economy is heavy. I am quite disappointed. The government talked a lot but did very little. Now, as soon as the crop season is over, inflationary pressure will assert itself again, and this will be aggravated by the heavy taxation and excise duties imposed by Patel in his latest budget. The only bright spot may be that rice and wheat are more easily available today, because of the abolition of the zone system. But in edible oil and sugar, the prices keep going up. This creates a plus minus negating effect on the average man’s budget.

“The government, quite simply, ought to have taken some imaginative steps during its first year in power to demonstrate that it meant what it said in its manifesto. I agree that it is difficult to remedy everything in one year. But I am sure the government could have done something striking as a gesture of its determination. For instance, the Janata government last year appointed the Bhoothalingam Committee to rationalize disparities between incomes, to draw up what is called an ‘Incomes Policy’. The government wants to bring down the disparity in incomes between the highest- paid and the lowest-paid employees to a ration of 1:20 and ultimately to the ideal level of 1:10. Right now, it is somewhere close to 1:100! But the government could easily have issued an Ordinance freezing all prices, wages, dividends, and other forms of income. Price levels would then have automatically come down. Instead of that, they issued the Bonus Ordinance, making bonus compulsorily payable whether profit is made or not. Labor immediately took up the cry and this created a chain reaction among all organized workers. Even government employees took advantage of this soft attitude.

“I blame the Janata government squarely for all this mess in industrial relations. It is no use trying to ascribe labor unrest to the Emergency, not one year after coming to power. And remember, only organized labor gets settlements, not unorganized labor which is in a majority in India. This means that the government is helping create a privileged class! Once again, a contradiction, a going against promises of reducing class’ disparities.

“Neither has the government circulated its Economic Policy Statement. There is a massive gap in public understanding of the government’s policies. The Budget that Patel presented in Parliament last month is very inflationary. If you add to the budgetary deficit of Rs. 10,500 million the budgetary deficits of most States, the situation looks alarming. As for the Draft Plan discussed by the National Development Council, I couldn’t get a copy like in the past. “The question now is, will all the States cooperate with the Center in the ‘removal of poverty’? The states ruled by different parties are bound to be very critical. Therefore, the Janata economic policy is not evident except in very small gestures. “

Then there is the matter of a bias in favor of small-sector industries. The existing capacities of large companies could have been frozen, and smaller units could have taken care of fresh demand. Yet, Industries Minister George Fernandes orders Hindustan Lever and Wimco to cease production of soaps and safety matches altogether in three years! Small units may not be able or ready to deal with the demand that will arise should these units phase out production by 1981. Isn’t this madness? If demand keeps increasing, if rural purchasing power increases, there will be scarcity in three years’ time. This means that prices will shoot upward. If one resorts to reductio ad absurdum, tomorrow the government might ask all textile mills to stop production of mill cloth so that Indians can wear only khadi and handloom cloth! Is that possible?

“What does this mean? Here is a ‘non-violent’ government going in for ‘economic violence’! It is forcing the people to do things against their will! There is tension among the public. Investors are scared of starting anything. The government wants investment but behaves like this.

“Everything therefore is contradictory, regimentative, contrary to the Janata Party’s ideals of democracy and liberty of the individual. George Fernandes may be a labor organizer, but that doesn’t mean he knows how to run industry!

“The saddest thing is that the government has appointed no economic committee to advise on policy statements. Only Nehru used to consult the country’s economic experts before he went in for policy statements. Even if there are so-called economic advisers, they are encouraged to tell untruths-they have to keep their jobs, and the Ministers happy.”