While there has been sharp erosion, in the last two years of global recession, of real incomes of the mass people for purchasing goods and services in the market, corporate business and trade in India have been earning extortion rate of profit, which is largely hoarded or frittered away in speculative trade in stocks and shares and extravagant consumption by a thin upper crust of population in India. The volatility of prices in stock market exchanges has been striking in the particular during the last six months which has hurt the vulnerable investors very hard. The upshot is that investment for expansion of productive capacities is not picking up and prices have been rising not only of essential commodities of mass consumption but of all goods and services.

The UPA government has simply not been able to maintain, let alone strengthen the momentum of economic growth which had developed before it took the reins of governance and policy making in 2004. Its priority concern, to begin with, was to control the fiscal deficit of the government which crippled its capacity to find resources to step up domestic investment especially in the public sector, for economic growth. But it is now persisting too zealously to allow fiscal deficit to grow unchecked to provide wider access to cheap bank credit to big corporate business, Indian and foreign, and corner available resources, financial and material - the so-called stimulus, which is assumed to be the priority to protect and promote corporate sectors for market driven economic growth process to make further headway.

Making available cheap credit to private big business and trade, Indian and foreign as well as commercial farming cannot, however, result in step-up of domestic investment in the present conditions in India and stage of economic development even as it cannot help public investment to play the role of pump priming the economy of India out of global recessionary phase.

Indian private equity, in particular, funds in the infrastructure sector are hobbled by an unfriendly regulatory regime, with their big-ticket FDI proposals hitting a policy hurdle. The Finance Ministry has put on hold proposals by India - registered infrastructure trusts to tie up a total of $ 2.5 billion in foreign direct investment (FDI).

The UPA leadership too seems to rely on the good sense of the business community or, alternatively, on administrative controls and penal action for maintaining price stability. The Finance Minister also believes that moderate tax policy may induce the manufacturers and traders to pass on the benefit of some part of the tax concessions to the final consumer. But this has never happened in the market place in India. It is totally irrelevant in market-friendly policy. The talk of “voluntary price freeze” for selected commodities always turns out to be a hoax. It is interesting in this context that conditions are claimed to be attached to the regimen of self-denial by manufacturers and traders on prices. This cannot apply to private business, which cannot accept losses and sustain itself unlike the public sector enterprises, which often have to bear losses on official directions.

The prices management subject to capacity of the private business helps it absorb losses only as an excuse to cut wages of workers or throw them out of jobs. There is thus a quid pro quo. It is obvious that no business can be run at a loss, unless it is subsidised in some way. Such conditions and qualifications are not to be sneered at. They are based on sound economic criteria in the capitalist system.

Inflationary pressures have been a marked feature of India's economic situation under the so-called economic reform policy for the last two decades. It was only during the brief period between the mid-fifties and the mid-sixties that inflationary pressures were moderated and regulated in the framework of the planned development process. After the momentum of planned development petered out and the ruling elite opted for market-friendly development, inflationary pressures have tended to assume dimensions and forms totally out of step with the development of Indian economy to serve the mass of the people.

Fiscal and monetary concessions given to the so-called “viable sections” in the population in urban and rural areas have indeed distorted income distribution and the domestic demand in the market to a point where even the working of established productive capacity in the economy, let alone its expansion, has run into severe constraints. The adjustments in prices have further pushed up prices, in particular in oil, steel, cement, fertilisers, coal and power which are strategic inputs for the development process as well as food and other essential items of mass consumption.

A basic principle that must govern pricing policy and the determination of sound relative structure of prices, which is of far greater economic importance and social relevance, especially in conditions of sharp social and income disparities and scarcity of investment resources is that no part of the consumption of basic and intermediate goods and connected services should be subsidised. Subsidies tilt the consumption pattern in favour of only the upper strata of population.

The fact is, the policy priorities of the market-driven economic reform policy have been in total and cynical disregard of the interests and aspirations of the mass of the people in India and are focused entirely on the claims and demands of a thin upper segment, hardly 20 per cent of the population. The inflow of foreign capital and political - strategic subordination to the sole super power, the USA and its allies is seen as the panacea for this segment which talks glibly of benign external support for overcoming internal barriers to the “modernisation” of social, economic and political development of India. In this scheme of things, there is no short cut to economic growth. The structural adjustment of the Indian economy initiated in 1991 is so defined and shaped that it has resulted neither in adequate investment and steady growth nor in social equity and peace. It has encouraged private enterprise, personal and corporate, to go for speculative investment and extravagant consumption without the slightest concern for social obligations. (IPA Service)