Recession Reaches India
- Worse times ahead for the poor -

Amar Yumnam *

For about a fortnight, India pretended that the global recession would not affect it much; she was conjuring up to herself as insulated from the global massive slowdown. But it can no longer claim to be so insulated and remain silent spectators.

The Government as usual would try to play down the impact and keep reassuring the general public that the financial system is in perfect shape. But it definitely is not in perfect shape.

The Reserve Bank of India has already pumped in Rs. Sixty thousand crores into the system besides lowering the proportion of reserves the banks need to maintain with the central bank.

The most visible index of the economy's health in real time, the Bombay Stock Exchange sensitive index, has to come down to about half of it was in the beginning of the year. The industrial growth of the country now hovers around a little above one percent. These are really bad pointers.

It Is Not Over: But what is really disturbing is that, even after assuming that all the interventions now being envisaged by the various governments around the globe and the international financial agencies, the present phase of recession would not immediately take a turn for better.

The present slowdown, despite all the efforts, would last at least one to one and a half years. The business expectations do take time to play out their full impact, whether of the bearish or the bullish type. So we all need to prepare ourselves until the economic recovery starts from about one to one and a half years from now, to be optimistic.

The Implications: There are two implications of the various policy measures, so called rescue plans, being adopted around the globe. First, it is a kind of empire striking back by the state by default.

The market cannot be left to itself to take care of the economic recession for it would be too costly both in terms of miseries and time.

Still worse, the market left to itself may even lead to the collapse of various national economies and nations themselves. So the market failures are being addressed now through state interventions. This implies a kind of reversal of the market orientation prescription around the globe of the last three decades or so.

Secondly, in terms of policy, the various interventions imply a kind of revival of fiscal policy vis-a-vis monetary policy. It is resurrection of Keynes through the backdoor.

Effects of the Policies: Now it requires for the layman to understand what the various policies mean for them. The overriding objective of the various rescue plans and interventions is to rev up the economy and arrest the slowdown.

In other words, they mean to induce inflation in the economies. So the policy objective for the forthcoming months would be to keep inducing price rises by somehow raising demand in the economy.

Now this is where the poor in India, and more so in Manipur, have to ready themselves for the pangs of adjustment. It is going to be really painful for the poor. The inducements of price rises come in the wake of the rises in prices of agricultural products and the slowdown of industrial growth.

In this atmosphere the poor were already put under pressure to tackle with the crisis of non-availability of items of their daily needs at prices they could afford.

In this background arrive the various interventions of governments to induce price rises. Instead of the decline in prices of items of their consumption and greater availability of these, they are now forced to face another round of induced inflations.

What Needs Be Done: We now need to ponder over what needs to be done so that the poor suffer less in the process. We may think of Manipur specifically. The nature of the state, as of today, should be necessarily welfarist.

The various public employment programmes need to be pursued with greater vigour so that the poor somehow keep enjoying a source of income in one form or another. The various planned programmes require to be seriously pursued.

It is not the time when the administration can be excused for the very slow progress of Plan expenditure. The administration should now act responsibly, at least in these trying times of global slowdown.

Remember, we have always been at the receiving end of any policy measures anywhere. The time has now come for us to reap benefits out of the adjustment process, courtesy the administration of the land.