The question of taxation, especially direct taxes, of incomes and wealth, regulation of prices and management of supplies has been approached in terms of the needs primarily of the upper strata and partially of the middle segments in urban and rural areas. This has only been emphasised by the grim position as regards the supply and prices of essential commodities in contrast to commodities of elitist interest.

It is significant that inflationary pressures have not been addressed as a serious issue and economic growth is proposed to be achieved by tax concessions to and boosting consumption of the upper and middle classes. The protection of the vulnerable sections from the impact of inflation and slowdown of economic growth has been ignored in the last two years. To curb inflationary pressures on essential commodities should have been the first priority now. The real wages of the working people too must be safeguarded. But extravagant and wasteful expenditure by the government combined with policies that encourage extravagant consumerism among the upper and middle classes has resulted in fiscal stringency.

The linkage in the Indian economy between its growth and employment generation and improvement in the living standards of the mass of the people has indeed been snapped. This is the most striking impact of economic growth and price movements in India in the last two decades. The working people have been pushed out of jobs in the organized sectors and into casual/part time “self-employment”. The much-advertised rural employment guarantee scheme provides only part-time employment in rural areas. It suffers from inefficient implementation and corruption. Job creation after India gained Independence has, however, shrunk because of market-driven economic growth policy. Apart from managerial and marketing professionals, who may have found lucrative jobs in the so-called reform era, the work force in India, including the skilled cadre in it, has suffered loss of jobs and income in the organized industry and services.

The self-styled economic reformers applaud this position as rise in the efficiency of corporate business as well as labour productivity. Side by side, however, the prices of goods and services, especially those which are essential for the common people and even the middle classes have been rising. The organized industry and services provide jobs to hardly 10 per cent of India's working people. Unless there is steady shift of work force from employment at less than subsistence earnings at a rate faster than the growth of the working population, there can be no reduction in mass poverty. A sustained campaign is, however, being carried out by the owners of capital to deny the very concept of the right to work on fair and honourable terms. The right to hire and fire of the working people by the employers has been strengthened in the so-called reform era by legislation, judicial fiat or administrative action.

Powerful vested interests in India have worked for this denouement. It is now necessary to mobilize healthy, social and political forces to combat and reverse these trends. Such mobilisation on a sustained and effective basis has been missing on the part of those who have been critical of the so-called economic reform programme or the ruling elite.

Those in politics, media and academia in India who have switched their faith to market forces for economic growth are trying to spread the notion that so - called reform programme advocated by international experts and backed by strategic relations with the USA for national security are necessary to dislodge vested interests that are supposed to have grown strong in the developing countries because of what is condemned by them as failed experiments in state regulation based on social priorities, public investment and political direction. The vested interests have been identified as domestic business which does not and cannot produce goods and services of “international standards”.

It is suggested that the domestic market must be opened up for external economic, political and cultural inputs to usher in modernisation of the under-developed countries, in particular, India. The supposedly benevolent external force in their scheme of things is direct investment by transnational Corporations and international financial institutions. The structural adjustment of the Indian economy initiated in 1991 is thus so oriented that private business enterprise in India has to find maximum scope in speculative investment and extravagant consumption rather than self-reliance. There has not been, therefore, steady and equitable economic growth and social development. The claim of the UPA government that the Indian economy will be back to high rate after a brief period of facing the adverse impact of global recession, cannot be taken as serious. The trade-off between price inflation and growth is bound to be difficult to manage.

The economic reform process actually needs to be redefined and better understood in the Indian context. For instance, any revival of the public sector divestment will depend on how well its priority role is defined. Private investment will have to be regulated. in step with public investment. The UPA government will find it difficult to move away from the gradualist approach of the past to the potentially contentious areas of reform, including labour laws and capital account convertibility. RBI Governor D. Subbarao has correctly pointed out that economic recovery can be sustained only by sound financial position of the government. Its budget for 2009-10 should provide the lead by drawing up a timetable for fiscal consolidation, while it helps to build sound infrastructure for economic development and social welfare. Managing the trade-off between short-term compulsions and long-term sustainability will be one of the important challenges before the government. According to the Finance Minister, additional stimulus measures will be decided after the government completes its assessment of the impact of the three stimulus packages and the interim budget.

There is considerable scope for banks to lower the cost of credit and lend more. Monetary and fiscal policies will necessarily have to go hand in hand. The interim budget had led to a deterioration in the health of public finance. For 2008-09, the revenue and fiscal deficits estimated at 4.4 per cent and 6 per cent of the GDP are sharply higher than the budgeted one per cent and 2.5 per cent respectively. The consolidated fiscal deficit of the Centre and the States including the off-budget items is estimated at over 11 per cent of the GDP. While the presence of excess capacities in many sectors would help in containing inflationary pressures, the growing fiscal deficit will increase the already large government borrowing and militate against the softening of interest rates. There are no soft options for the UPA government; tinkering won't do revival of the economy demands policy corrections and their efficient implementation. (IPA Service)