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Home Activities Conference Indian Government not learning lessons from Economic Crisis - Prasanjith Bose

Indian Government not learning lessons from Economic Crisis - Prasanjith Bose

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Dr. Prasanjith BoseAs you are aware,  in  the last year 2009, the world economy had undergone the worst economic crisis since  the great depression of1929. The world  economy actually shrunk  for the  first  time since 1929. The global economicoutput fell by almost 1% throughout 2009.The latest projection made by  international agencies  like  IMF,  that had come up on  January 26, 2010,  states  that  the world economic crisis have bottomed down. They also claim  that  in 2010, 3.5  to 4 percent overall output growth will be witnessed all across  the world. The  IMF also says that the economic recovery has happened  due  to  extraordinary  fiscal measures.

After  two decades of reaching  the entire world, the free market capitalism has notdelivered good. The biggest promoter of  free market  capitalism,  the  United  States  of America,  is having a  fiscal deficit of over 10% of  their  gross domestic  product. All  the capitalist countries,  including  the  IMF, are now the advocates of state intervention. IMF is warning all  the governments against  the premature withdrawal of special extraordinary fiscal measures, which will immediately  lead to a situation where growth will plunge, because the normal  functioning of capitalist economy across  the world  is yet  to revive.

What is the state of American economy now?  Unemployment  in  United  States  is around 15 million, which is the highest for the  last 50 years. It has crossed 10% of their total work force. In European Union also, unemployment has crossed 10% of  their work force – double digit unemployment. Such situations has never been witnessed in such advanced capitalized countries  for  the past 5 decades. The recovery of economic crisis has not been based on  the revival of economic or industrial activity  in  the advanced capitalized countries. Even  the  IMF  is not saying that  the American or European economy will revive. They are saying that the slow growth will continue  till  the end of 2010-2011 at  the rate of  2%.  Their  optimism  is  based  on  the unprecedented and high  level of growth witnessed  in  emerging developing economies like China and also  India.

China has  stood out  in  the global economic crisis with a 586 billion dollar  fiscal stimulus plan. China has recorded 8% growth during the entire period of global recession. President Obama has also  introduced several recovery plans to revive the economic crisis  in  the US. But  there  is difference between what US President and Chinese President did. Both were bailing out  there economies. Over 50% of  the  tax payers money spend  in America had gone  to bail out  the  financial  firms and banks, who were gambling with  the peoples money. In China,  the banks were not speculating with other peoples money. The dominant sector  in Chinese  financial system  is  the state owned banking sector.  It is true to some extend in the case of India also. China had spend the 586 billion dollar  in  the  infrastructure  and  rural areas  – mainly  for  expansion  of  roads, highways, power, telecommunication and social  sector  like  health  and  education,especially  in  rural areas. Due  to  this, China was able  to withstand  the global economic crisis. Also  they are growing as  the new emerging economic centre of  the world economy.

The  reasons which  had  caused  the economic crisis has not been  fundamentally addressed. There are three main reasons. Firstly,  it  is  the deregulated  liberalized  financial system of the US and the American model copied by several countries across  the world, especially in Europe and to some extend in Japan also. The entire liberalized  free market financial system has collapsed. Taxpayers money was used  for reviving the collapsed financial  institutions. Even  after witnessing  the crisis due  to  liberalization,  the basic  featuresof  liberalized economy has been  retained. Thisis because,  the political economy in  the UShas not changed. The  officers  in Obama administration  are  former employees  of collapsed financial  institutions. The nexus between  the  financial  players  and  the administration  is  intact. Those people whose policies  resulted  in creating poverty and unemployment and causing people to lose their homes in the US are included in the Obama administration.

America  is  telling  countries across  the world that they will buy commodities from all over the world. Services are also imported from countries like India,  in software field. Every country wants  to grow  through exports. This means,  the US should have infinite capacity to absorb goods and services from  the rest of the world, which  is not possible. The US has to buy goods using  their currency,  the Dollar, the value of which  is coming down. The value of Dollar  is determined by the political mind of US.  If the  trade deficit  increases,  the value of the dollar will decrease. The  limits of the US economy  to absorb  the goods and services has also been exposed  . But nothing has been done to address this problem, which  is the second reason  for economic crisis.

Finally,  the crisis of  resources, energy,  food and  it’s control and  the ecological crisis. The resources  like oil, coal are  finite. While  trying to solve  the problem of food, countries like US  are  shifting  towards  bio-fuel.  Food production went  down  and  food  crisis resulted which ultimately ended  in  food riots. Even  in  the Copen Hagen Summit,  the US were not ready  to compromise or re-look  into  their unsustainable patterns of development, which will cause problem  in  the areas of  food, energy etc.  Such  arrogant  and  anti-democracy approach by US  led developed countries against  the  interest of global population  is a threat  to democratization of global economy.

Now there  is shift of global economic power  towards  the developing countries.

Much  similar  to  China,  India  was untouched by  the  financial crisis. During the previous UPA  regime  the  then Finance Minister was asking  to  follow  the economic policies  in US. Due  to the political situation at  that  time, the then UPA government was not able to completely introduce his  ideologies  in  India. But now, the present UPA government is claiming that it was their policies that hadprevented  the  financial crisis  in  India  But  India is  facing  the crisis of consumer price  inflation, which is about 10 to 11 percent now. The Central  government  is  blaming  state government  for  the price inflation. They are not ready to control the black market and big corporates, who are now controlling the price of commodities. The public distribution system has been destroyed due  to  the policies of  the central government. These approaches of  the central government are  increasing  the price of commodities.

The central government  is in aggressive mood to restart  the disinvestment process-disinvestment of profit making public sector units. The public sector units are now giving 20,000 crores of  rupees every year  as dividend to  government.  By  disinvestment,  the ownership of public sector units are handed over to private sector. Only 1% of  the people are engaged in stock markets. The public sector units, which are owned by 100% of  the people of India were handed over to 1% of the people through stock market and the government says  that  it  is people’s ownership. The new  tax  code  introduced by  central government  is also helping  the corporates. The central government  is not upholding  the interest  of  common  people.  The  Indian government  is not  learning  lessons  from the problems  faced by  the US during  the economic crisis.

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