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| Conquer fear to stimulate demand | | | The economy today seems to be a mirror image of what it was around the same time last year. With inflation riding high at that time, the problem was the supply side. Supply was not keeping up with demand. Today it is the reverse. There is no demand. The government has come up with liberal stimulus packages and has also hiked Plan and non-Plan expenditure in the interim budget and the Reserve Bank of India has released over Rs three lakh crores liquidity into the banking system, but this has not been able to stimulate demand. Demand is being restrained by the four-letter word fear. Fear of not knowing what is going to happen in the future. At present it does not look like an exciting future, except for the celebrities if you go by the incessant parties thrown and luxury brands being one of the few thriving segments. For the common man, it’s "future tense". They are unsure about employment and also fear wage cuts.
In fact, in India the only ones in cushy positions are government employees, particularly Central government employees whose dearness allowance has recently been hiked even as the government of India dishes out statistics showing that inflation is down. For the rest of India it is a mixed fare in the face of sectoral recession. For instance the information technology industry, BPO services, cement, consumer electronics, telecommunications, food-processing and financial services, particularly mutual funds, have not been hit badly. The export sector, textiles, ready-made garments, leather goods, construction, civil aviation, shipping and transport etc. have, however, been badly hit.
The average earnings of workers in labour-intensive industries, according to the ministry of labour and employment, has come down by 3.45 per cent. The global wage report predicts even further wage cuts this year. Combined with high volatile food and energy crises, it says the wages of workers would be further eroded.
On the inflation front there is not much cheer though inflation is well on its way to the magical zero figure. This is because prices of food articles, on which the general population spends most of its money, are still high. Some blame it on the high support price to farmers but the answer to this would be to strengthen the public distribution system so that vulnerable sections of society are not hurt. This exists mostly on paper as the civil supplies departments of the various state governments do not have the political will to see that the poor get their rations in time, and in reasonable quantities. Even in the cities holders of ration cards are cheated of their quota of kerosene, their only fuel source. They are forced to buy the same, which is available in plenty in the black market, at exorbitant prices. |
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