 Hello and welcome to NewsClick. The Modi government has completed four years today. And one among the promises that it made in 2014 was that it will revive economy, which, according to them, was in shambles during Manmohan Singh's period. To discuss about the four years of the government and the state of economy, we are joined by Professor Surajit Majumdar from JNU. Welcome to NewsClick, Surajit. So if you have to judge last four years when it comes to economy and the performance of the Modi government, what do you have to say about it? Well, I would say one thing that it is true that in 2014, the economy was in a state of crisis. And this has been true from the beginning of this particular decade. And one of the reasons why the present government got support in 2014 was it's promise to revive the economy resonated with the experience of the people. Well, as for four years, one can say by all the indicators that one can see that that state of crisis continues. So the promise is something that it has not been able to actually deliver. And the reason why it has not been able to deliver is that it fundamentally did not intend, ever intend, or actually do something different from what the previous government was doing in terms of its fundamental policies. And insofar as these policies are not adequate to deal with the real roots of the crisis, the problem has actually continued. The government also has been going all gaga about the growth rate and how GDP is prospering during the last four years of the Modi government. Well, there are also things that the how GDP calculation is done, the growth rate calculation is done. That's also that has also been altered. So can you throw some light on that part? Well, one of the issues with not taking the GDP growth rate as an indicator of the health of the economy is of course the fact that during the tenure of this government, a new GDP series was introduced where different methods were being used than earlier to determine the GDP and its growth. This change in method has been controversial and there are several economists who feel that the GDP growth rate will be overestimated. In fact, the GDP growth rate of the period even before this government took over went up as a result of this particular revision. So it's not that it's only happened for this particular. The second is that the GDP growth rate is only a summary indicator. It does not necessarily tell you everything about the health of the economy. And it certainly doesn't tell you about whether the economic processes behind that GDP growth are of a kind which are delivering the needs of the people. So in our context, large number of people ultimately have to work in order to earn their livelihood. So are they finding the work? Are they finding work which pays them adequately? As far as that question is concerned, we can be fairly certain that that's not happening. Especially when they promise a career jobs. Yes. So yeah, I mean, and then post the entire scheme of demonetization and GST there, there has been massive loss of jobs when it comes to small sector, medium scale industries. So fairly on that count, the government has failed miserably, right? Well, absolutely. You see, how do people get jobs? Either it is that people who have some land and all in the agricultural sector, they are able to work on their own land and find a reason of living. If one looks at the agricultural sector, one finds that in this four years of this present government, the production of food grain crops is barely 3% over what it was in the previous four years. In the case of non-food grain crops, it is actually fallen. The production is actually fallen and there are signs of severe agrarian distress across the country. If years, rains are bad, production is low, income is low. If there are rains that are a little better, production is a little better, that year the prices that farmers get for the, their produce is low. So either way they have been hit badly and demonetization has particularly also aggravated that particular problem. So agrarian sector is not able to generate livelihood opportunities for people. Outside the agrarian sector, how would you get employment growth? So what about industries like manufacturing and all? Yeah, so if either you have a process where the main sector which has absorbed most people who've come out of agriculture in the last two decades or so is the construction sector. But construction has been growing very slowly. The construction boom that lasted from the, around the mid-90s till the end of the first decade of the present century, that seems to have ended then for the last seven, eight years that construction has been growing slowly and it has that pattern or trend has not changed with the present government coming into office. So construction is growing slowly. If construction is growing slowly, obviously those who are doing that construction activity are not going to be generating a large number of jobs. In the manufacturing sector also, in the industrial sector also investment which has been stagnating for several years before the current government took over continues to stagnate. The index of industrial production also shows that industrial output figures have been stagnating. If so, then the industrial sector also is not able to create employment or jobs. So really you're only left with a certain category of services which are not generating, which have never demonstrated sufficient jobs in India. So as far as the employment situation is concerned, clearly every indicator is showing you that the employment situation is perhaps extremely grim. Directly we do have employment, some employment figures for the first two years of the current government which actually show that the employment fell in the economy. Actually declined in those two years and this is before demonetization, before GST. So therefore it's likely to have even worse. Estimate what would have happened after that. So even if you look at the cost of things, prices, they have been growing up massively. Petrol and diesel prices. On that front also it looks like the government has failed miserably. Yeah, as far as petrol prices are concerned, of course it's been not one trend throughout the four years. When the current government took office, it was very lucky that immediately after that began up the- The international- Extremely sharp drop in international oil prices which continued for a period of time. So from about $110 a barrel to $30 a barrel, that was the extent of fall. What the government actually did at that time, was that it used the fact that international oil prices were falling to increase the taxes on oil products, okay? In order to generate more revenue because otherwise the economic processes in the economy were not generating sufficient revenues. And actually if you look at the period since then, if you leave out the duties that have excised duties that have been generated through oil, government's revenue situation has remained completely unaltered from what it was in 2014, okay? So it used that to generate more revenues because otherwise revenues were not coming. Now what has happened is, as international oil prices have started firming up again, have gone on an upward trend, they are still far below the levels in 2014 July, okay? But they have risen from the lowest level of $30 a barrel to now about $70 a barrel. So when it has been rising, government has not been able to withdraw all the excised duties that it had imposed when the prices were falling. And therefore the prices have actually started rising. So actually you find a situation where today, international oil prices are being used as justification for explaining the high prices of petroleum products, but actually by international prices conditions and also taking into account what has happened to the rupee exchange rate, the price of petroleum products today should have been still lower than what it was in 2014, but they are higher. And that's because of the additional taxes that have been imposed in between. Now so it's actually a double failure that you're not being able to now deal with the problem of rising international oil prices. And the reason is because you've also failed in the responsibility of generating adequate tax revenues. So you're relying on the easy way out, which is higher duties on petroleum products as the way out of that particular problem. And this problem about inadequate revenues has in fact been aggravated by the introduction of the GST. So when we look at four years of this government, they've come out with various schemes, making India, skill India, digital India, all those schemes have been launched. Have they not helped in any way because the purpose of this was to bring more and more investment into the country and hence also generate more employment, right? Well, look at one indicator investment in the economy, generally in the total economy, it's been stagnant over the last four years. Look at a second indicator, which is your exports. Making India is supposed to attract investment to produce for the world market. So look at exports of, of course, exports and imports figures have affected by the international oil prices. So if you leave out the oil trade and you look at India's non-oil trade, exports have been stagnant over the last four years. Not only that, imports have risen a little bit more. So actually our non-oil trade deficit is today larger than it was in 2014. So instead of generating an exports, exports which will induce growth in the economy, you're having the reverse. You're actually having imports increasing slightly faster than, and imports would have risen much faster if the industrial sector had actually been expanding or growing, but it's not. And therefore, imports are still depressed, but exports are also stagnant. So if you do not get exports, you do not get investment, okay? These are the two things that you should expect to get out of a policy initiative like Make in India. But clearly that has not happened and it will not happen like that. It will not happen like that because it is always wishful thinking that you simply give a few tax concessions, you simply make procedures supposedly a little easier for businesses and that by simply improving the so-called confidence of business you can resolve the problem. Eventually the thing is that investment will happen when people find it profitable to invest. If they do not see in the international markets or in the domestic market adequate demand for their products, then they will not invest. That's the story of what is happening and there's nothing happening as far as generating demand is concerned. People don't have the means to buy and government is not helping by actually pursuing a policy in which its preoccupation is with cutting down the fiscal deficit. So you don't have revenues, you want to cut down the fiscal deficit so you keep expenditures in check. And it might have been worse, had it not been for the extra revenues that came from oil. So if you look at budgets that have been brought in the last four years, there has been a constant cut when it comes to social schemes, ICDs, NREGA, while the NPAs have been growing and also the relaxation given to the corporate houses. Do you think that could have helped actually if the riches would have been taxed and that money should have been spent on the social sector, they would have been, the scene would have been a bit different? Absolutely, absolutely. See the, at the moment, the thing is that even profits are not growing very rapidly. And because profits are not growing very rapidly, of course corporate sector doesn't want to be taxed more heavily. The point is that in the absence of adequate demand in the economy, your profits cannot also grow. So if the rich were taxed more heavily and there would be greater expenditure by the state, then that is what would break this cycle of inadequate demand leading to inadequate investment and inadequate investment leading to further inadequate demand and so on. The problem is that if your whole approach is that you want to make the economy expand, generate employment, generate incomes through private corporate investment, then all you do is try and so-called improve the state of confidence of that sector. So that's the whole strategy and that's not working. That's clearly not working. And if the problem of NPS of banks is an outcome of that policy, not necessarily only pursued by this government but also the previous government, but if you don't want the state to invest in sectors like infrastructure, but you want private capital to be invested, they don't have the means to actually invest, they don't want to take the risk with their own money, so you get public sector banks to actually lend it to them for them, then those investments don't pay off, that's a problem for the banks. Those private investors, they get away scot-free. So that's all the time we have for today, Professor Majumdar and as these things proceed and as the government again completes one year, which will be its last year, this will be its last year, we'll be again coming back to you to discuss these issues. Thank you. Thank you for watching NewsClick.