India’s new government moves to implement big business agenda
8 July 2014
In its first six weeks in office, India’s new Bharatiya Janata Party (BJP)-led government has moved aggressively to implement the agenda of Indian and international big business.
Led by the arch-communalist and self-styled Hindu strongman Narendra Modi, the new government has signaled that it intends to gut any and all labor, environmental and social legislation that impedes corporate profit making, while lavishing subsidies, tax cuts and other largesse on big business.
The Modi government’s opposition to any restraints on capital is epitomized by such crude slogans as “No red tape, only red carpet towards investors” and “Minimum government and maximum governance.”
Of course, all this is being politically packaged as an attempt to eliminate corruption and to lift the economic growth rate, which has been below 5 percent for well over two years, so as to create jobs.
The previous Congress Party-led government pursued pro-market “reform” and forged a global strategic partnership with Washington. Nevertheless, under conditions where India’s economy became mired in stagflation, Indian and international big business turned against it, accusing Congress of balking, in the face of mass opposition, at implementing a further “big bang” package of pro-investor policies.
Modi, who won the backing of corporate India by slavishly attending to their interests while serving as Gujarat’s Chief Minister, has demonstratively declared his readiness to stare down popular opposition.
“Hard decisions” and “bitter pills” will be necessary “to improve financial discipline” and “take the country out of its economic ill-health,” Modi told a meeting in Goa last month. “I know my popularity might go down due to these hard decisions, people might be annoyed with me, but they will appreciate it later.”
Meanwhile, Arun Jaitley, Modi’s finance minister, has been deriding the previous government for pursuing “populist policies”—a big business slur word for antipoverty and other social welfare measures. In the eyes of the Indian elite, such expenditures are a “waste” of resources that should either be directed to swelling their incomes or toward infrastructure projects that will enable them to squeeze more profits from the exploitation of India’s workers and natural resources.
“If you indulge in mindless populism you burden the exchequer,” Jaitley told a meeting of accountants in New Delhi last week. “You convert yourself into a high taxation society so that you can indulge in populism. It doesn’t work.”
The government has already begun administering its “bitter pills” on multiple fronts.
Four days after Modi’s Goa speech, the government announced a 15 percent increase in railway passenger fares and a 6.5 percent increase in freight rates. The latter increase will further fuel inflation, which is already rising at double-digit rates, as rail is a principal means of transport for both industrial and agricultural goods.
The rail-price hikes included no plan to improve the Indian railway system’s dilapidated infrastructure. Yet a recent government safety panel felt compelled to term India’s 15,000 annual deaths in railway accidents a “massacre.” “No civilized society,” said the report, “can accept such a massacre.”
The Modi government has already hinted that it aims to utilize the longstanding crisis of India’s railways to argue for privatization. Under such a scenario not only would fares rise still further, but improvements in infrastructure, if any, would be directed entirely at the most profitable lines.
In a move undoubtedly coordinated with the new BJP central government, the BJP state government of Rajasthan has announced its intention to pass legislation to allow large businesses in the so-called “regulated sector” to hire low-paid contract workers in lieu of permanent employees and to close plants and lay off workers at will.
For years domestic and foreign businesses have been collectively howling against India’s “rigid and archaic” labor laws, which restrict employers’ power to lay off more than 100 workers at a time or hire contract workers.
Under conditions where the BJP and its National Democratic Alliance lack a majority in the upper house of India’s bicameral legislature, having the Rajasthan and potentially other BJP state governments push through labor law “reform” is a way of kick-starting the drive to rewrite India’s labor laws to better serve big business. Under India’s constitution, in areas of joint Union (federal)-state jurisdiction such as labour law, the central government can sanction state laws that contradict or supersede existing Union legislation by instructing the president to sign them into law.
The Modi government has also signaled that it intends to push through big business development projects over local opposition and, in the name of “streamlining,” to gut environmental oversight.
Within days of Modi becoming prime minister, the government gave the Gujarat state government clearance to raise the height of the controversial Sardar Sarovar dam over the Narmada river a further 16 meters.
More significantly, the government leaked an Intelligence Bureau (IB) report with the aim of delegitimizing opposition to infrastructure projects on environmental grounds.
The report, which was commissioned by the previous Congress-led government, accused 22 middle class-led NGOs involved in protests against destructive mining projects in Orissa and the building of nuclear power plants in a potential tsunami zone at Kundankulam, Tamil Nadu of damaging India’s economy.
According to the IB, such protests have reduced India’s growth by as much as 3 percent per annum.
The IB report singled out the environmental group Greenpeace for special criticism, accusing it of “organizing antinuclear protest and other agitations against economic projects in India to serve the strategic interests of western nations.”
The IB report accused the NGOs of violating the Foreign Contribution (Regulation) Act, legislation originally intended to prevent foreign money from influencing government decisions. No sooner was the IB report “leaked” than the Home Ministry pounced on it to order the Reserve Bank of India (RBI) to instruct all Indian banks that they now need the Ministry’s approval to release funds to Greenpeace that were contributed by its parent and allied overseas organizations.
Later this week, Jaitley will deliver the BJP’s first budget. While the government has indicated that major structural changes will only be made in next year’s budget, it has also made it known that it will demonstrate its commitment to slashing the budget deficit and, in particular, to eliminating fuel subsidies.
The government has also pledged to move forward with longstanding plans to establish a regressive national Goods and Services Tax of 15 to 20 percent.
According to recent reports, the Modi government aims to “unload” an unprecedented $11.7 billion in “asset-sales” in the coming year. This would be an increase of about $2.2 billion from the target set by the previous Congress Party-led government in its interim “election period” 2014-15 budget, which was tabled in March.
Jaitley, who doubles as the Defence Minster, has also vowed to significantly increase military spending and speed up India’s military procurement program. India is already the world’s largest arms importer.