The brave official rhetoric of India remaining insulated from the ‘made in USA’ economic crisis has now officially given way to a measured discourse of caution. On November 3, in a meeting with top corporate heads Prime Minister Manmohan Singh described the crisis as ‘unprecedented’ and cautioned that the global downturn triggered by the US financial crisis would prove to be ‘more severe and prolonged’ than expected earlier. He also talked about the need to minimize the impact of the financial crisis on the real economy and appealed to corporate heads to avoid any ‘knee-jerk reaction’. A group of ministers has been set up to monitor the ‘abnormal situation’ on a daily basis and a former chief economist of the IMF, Raghuram G Rajan has been named as a special economic adviser for the government.
The Prime Minister’s appeal to avoid large-scale lay-offs came in the wake of an ASSOCHAM assessment that the corporate survival strategy would entail an across-the-board 25% layoff in India. On the eve of Diwali – the much celebrated festival of lights – India’s biggest private airline carrier Jet Airways had in fact announced retrenchment of 1900 employees, a decision which was withdrawn after two days following widespread protests. The public sector aviation unit is also reportedly toying with the idea of a different kind of lay-off, giving its staff an ‘option’ to go on leave-without-pay for five years! The PM is obviously bothered only about the political fallout of large-scale lay-offs, in the same breath he also emphasized the need to make every effort ‘to cut costs and raise productivity’.
One could compare Manmohan Singh’s appeal to corporate honchos to avoid ‘knee-jerk reaction’ to his remark at the recent meeting of the National Integration Council where he famously said, “Any impression that any community, or sections amongst them, are being targeted, or that some kind of profiling is being attempted should be avoided.” Large-scale lay-offs should be avoided because they might unleash ‘a negative spiral’, the impression of anti-Muslim witch-hunt should be avoided for “it could lead to a major polarization of society.” For Manmohan Singh and company, crisis-management is essentially an exercise in managing ‘impression’, while continuing with the very policies that generate such ‘impression’. Such an approach is obviously no match for a crisis of ‘unprecedented’ proportions, if anything it can only contribute to an exacerbation of the crisis.
In the homeland of the financial upheaval, realisation has started sinking in that the present turmoil is not just a cyclical storm that can be weathered by some routine corrective measures. The unprecedented economic crisis is accompanied by a matching crisis of US foreign policy, with the US-led global war having lost its way in the rough terrain of Iraq and Afghanistan. Even an ardent ideologue of US supremacy like Francis Fukuyama who had described the fall of USSR as the ‘end of history’ has characterized the present juncture as the fall of America, Inc on both economic and political planes. The Great Depression of 1929 had been limited to the economic sphere while on the political plane the stars of America were steadily rising. This time round, the crisis is much more comprehensive, encompassing the very basis of US supremacy.
Manmohan Singh has already subjected India to a strategic partnership with the US and would like us to believe that the present crisis can be weathered just by administering heavier doses of American medicine. The appointment of a former chief economist of IMF as honorary economic adviser is an indication of this direction. Raghuram Raman has already presented a roadmap for further liberalization of India’s financial sector, and in his new capacity as economic adviser to the Prime Minister, he will certainly try to push the Indian economy in that direction. But it is precisely the ‘incompleteness’ of India’s financial integration with the global network of speculative finance which has to an extent saved Indian banks and other financial institutions from the kind of crisis that has spelled the doom for US banks and investment and insurance companies.
The economic model of the Indian ruling classes relies heavily on the foreign factor while systematically undermining the potential for self-reliant development and domestic economic growth. It is this foreign factor which has now exposed India to such uncertainty and recession. The flight of foreign capital has triggered a stampede in the share market, and Sensex has nosedived from the peak of 20,000 to the 10,000 mark. Even as the once dominant dollar has been badly bruised in the meltdown, the rupee has depreciated sharply vis-à-vis dollar. Textbook economics tells us that such a devaluation of the domestic currency can promote exports but Indian exports are declining in the face of global recession! And export-oriented employment whether in low-paid sectors like textile and gems and jewellery or the ‘lucrative’ BPO backrooms of foreign corporations has already become a direct casualty.
Yet the crisis-management measures of Team Manmohan revolve around boosting external confidence – FDI cap in insurance sector has been raised to 49% and commerce minister Kamal Nath keeps talking of more sops for foreign capital. This is the surest way of courting disaster and not saving the country from the crisis. The ‘Titanic’ of neo-liberalism and US hegemony is sinking, India must leave this sinking ship and seek safety on the shores of economic self-reliance and foreign policy independence. That of course calls for ousting the Indian compradors from the helm of economic and political power in India.