Prakash Karat on what it will take to get the Indian economy up and running
Excerpts from an interview with Communist Party of India (Marxist) general secretary Prakash Karat, by Karan Thapar for the programme “Devil’s Advocate,” broadcast on CNN-IBN on Sunday night.
As you look at the economy days before you might actually be in a position of having to handle it, do you see green shoots of recovery or do you see an unmitigated, continuing crisis?
I think the government has underestimated the adverse impact of the global economic crisis. They started off by saying that our fundamentals are strong, and then came the gradual realisation that things are not so good. I think that for a pretty long time we’ll be faced with serious problems in our economy.The government claims that in 2009-2010 the economy could grow between 6 and 6.5 per cent.
I think the government is again underestimating the crisis … so the growth will be lower. And more dangerous is the fact that they are not recognising the serious loss of jobs in the country. I think in the last six months we’ve lost over 20 lakh or 25 lakh jobs and they’re not talking about it also.Would you say the unemployment aspect of this crisis is the most serious one?
In terms of the human cost immediately, it’s the job loss. But I think more serious is the fact that the government’s fiscal stimulus package and all the measures they are taking have been far too inadequate. Among the G20 countries we’re the fourth lowest in terms of the fiscal stimulus we’ve so far offered.You’re arguing for a greater fiscal stimulus, a boost to get demand going. Yet, already the overall stimulus of the Central government alone could be heading towards 9 [per cent]. And if you add the 3 to 3.5 percent of the States, we’re coming close to 12 per cent.
No, I think what we should focus on is not the … deficit. We should focus on increasing public expenditure. You’ve to pump money into the economy and the government has to do that. And that will create demand, protect jobs and create new jobs.You’re saying you need to put in more money and not worry about the fact that a consequence of this is rising fiscal deficit.
They’re going about it the wrong way. They’re trying to see that cheap credit is available, interest rates are lower … But the real thing is, you need to put money in people’s pockets. Purchasing power has to increase.But how do they put money in people’s pockets?
You see, in the fiscal package they gave a Rs. 20,000-crore increase in Plan expenditure, which is nothing. It’s half per cent of the GDP. So you should spend more. The government should not worry about fiscal responsibility, budget management and all that and has to pump in money.If on May 16 you were to be in a position to determine the response to the economic crisis, how high would you let the fiscal deficit go? It’s teetering around 8-9 [per cent]?
Definitely it’ll be beyond 10. How much higher, we’ve to see. I can’t tell you off-the-cuff. What I’m saying is, you can go for increase in Plan expenditure … much more.Your manifesto commits you to what many would consider draconian tax measures, which will frighten investors and entrepreneurs.
We’re talking about taxes on a very narrow spectrum of areas, where you could have easily raised money — like the capital gains tax.But you’re also talking about increasing the securities transaction tax and wealth tax, reintroducing inheritance tax …
Well, some of it is long-term. I’m saying that in the immediate situation, the FIIs have taken out money, not because of any kind of problems of taxation, or problems within the country.If you were to come to power, you’d notice the gravity of the situation. Could you, therefore, push the fiscal deficit first, increase spending and therefore increase the demand and say, we consciously hold back on the tax increases for a while?
In our manifesto we’ve put in a section on immediate measures to be taken to meet the economic crisis. And we also pointed out — that’s a longer-term argument — that our financial sector has been relatively protected, not thanks to Dr. Manmohan Singh and Mr. P. Chidambaram, but because the Left would not allow them to completely liberalise and open up the financial sector.The challenge you’ll face is to get the economy moving again. And in that wider interest, could you say look, we’ll hold back the tax increases we’re committed to in our manifesto, not implement them immediately, let’s get the economy moving, boosting the fiscal deficit and therefore creating money.
We’ll increase public investment and public expenditure, but there’re areas, certain areas, we will not … for example, participatory notes, you see. That we’ll stop.One of the great fears people have of the Left parties, perhaps the CPI(M) in particular, is that when you come anywhere near power, they get frightened about what that’ll do to the economy, to growth …
I think the record of the Left-led governments in West Bengal and Kerala makes it clear they have nothing to worry about, or be unreasonably afraid of.Are you confident you have the experience and the capacity to handle what must be the worst economic crisis?
I think the combination we have, the Third Front, has very experienced people … Most of them have been Chief Ministers.Has the Third Front sat together and worked out how to tackle this crisis?
We’ve started looking at all the manifestos. I find it very interesting that a lot of common things are there in all these parties.So you haven’t done it till now …
No … We’ve to work on it after the elections. That’s how it’s done. The United Front Common Programme came after the elections.