The typical Indian scenario is hit by inflation, global job cuts, bank crisis, agitated farmers and passing the Union Budget and other sanctions amid pandemonium. Stickier politics in the wake of Congress leader Rahul Gandhi’s disqualification from the Lok Sabha may have its cost on overall functioning if it does not turn out to be a whimper.
There is nothing technically wrong. A discussion paves way for solutions. The budget has 45 amendments increasing overall tax collections. It is likely to make living costlier, but no one discusses the price hikes. Inflation despite a lower rate now is pre-pandemic problem. It is misconstrued as a mere problem of purchasing power. It impacts a government the most, being the largest spender. Evolving ways to check it could help the government in reducing expenses, debt, and accelerate welfare and development schemes. Inflation is bleeding the government despite slump in Brent crude prices to $70 from $90, a few weeks back. Co-chair of G20 Framework Working Group V A Nageswaram says that in several countries’ inflation is stickier and growth would remain around 6.5 per cent.
The government feels upbeat that growth would remain around 7 per cent. Now it needs to check inflation, not an easy task in an uncertain world. It’s not an easy task amid job cuts by IT giants like Accenture –19000, including 7000 in India, Amazon — 9000 and Meta 11000 in March 2023 in addition to their earlier staff reduction. It impinges on the domestic IT companies as well. The privatised economy is finding creating jobs not easy.
The global economy finds governments slipping in a world that is controlled by private capital. Banks almost all over the West are uncomfortable with periodic siphoning. The US banks do not have a good record. The US Federal Deposit Insurance Corporation (FDIC) closed 465 failed banks from 2008 to 2012. In contrast, in the five years prior to 2008, only 10 banks failed. At the end of 2022, the US banking industry had a total of about $620 billion in unrealized losses as a result of investments weakened by rising interest rates. Post 2012, 67 banks have collapsed till 2019.
Credit Suisse is not the only European bank to suffer. There could be many more. At the stock market banks remain unimpressive. Indian banks took a few haircuts due to failure of some large loans not being repaid. There have been mergers and recapitalisation till a few years back. Defaulting on payment, write-offs are the common aspect that afflicts the banking industry everywhere. India is not absolutely insulated. Life Insurance Corporation and a group of some banks have lost a tidy sum due to crashes.
Inflation remains a key issue. The interest rate hike is a reality. As this happens anywhere, the inflation indicator may shoot up in India. At 6.44 per cent rise consumer price index (CPI) is beyond the Reserve Bank of India tolerance level. Last year, CPI hit the highest of 7.79 per cent in April, and WPI reached 15.88 per cent in May 2022. Compared to inflation in February 2020, CPI is down 0.14 per cent, whereas WPI is up 1.59 per cent. That is an indicator of over three years of inflationary trend. The WPI at 2.95 per cent in January and 2.75 per cent in February 2023 looks at a low level. It is over the high of 15.88 per cent WPI and 7.79 per cent CPI, that RBI despite rate hikes struggles to keep it under check.
The prices are at a high plateau. Each small hike robs the purchasing power of the people. Except for the most essentials all other goods lack demand. It is causing production slump.
Except during seven-year drought in 1960s, never have the prices been on a continuous upward trend for so long. Ironically, it has fomented once again the farmers’ stir. About 10,000 of them marched to Mumbai as onion prices slumped to a never before level. The farmers dharna in Delhi also during the last week is no solace for anyone. The situation is piquant. Prices of farm inputs are going up while costs of produces are plummeting. Potato and onion farmers are finding the going tough forcing them in many parts to throw these away.
Across the country farmers demanding profitable minimum support price are marching to vent grievances all over the country. Farmers are demanding remunerative prices and support to the largest segment of population dependent on agriculture. The government purchases of wheat and rice still remains the highest but so does the problems of the sector.
These all have bearing on the job market. The crisis in the secondary industry of IT is a pointer to the crisis in the primary industry. The manufacturing and core sectors are yet to have normal operations. Pandemic-driven enthusiasm around digitisation & technology drove companies to go on hiring spree came to screeching halt towards later part of 2022, as workforce reductions started. Mass lay-off has become the norm.
The Layoff.fyi, website on job tracking in tech industry, says globally 153548 jobs were cut in 2022 by over 1000 companies. It continues through 2023. Despite NASSCOM saying that India is least affected, overall the IT industry is reducing manpower though it has 51 lakh on rolls with a value of $227 billion.
The reduction in manpower comes with higher software and hardware costs. It increases industry input costs across the industry and the government sector. Unethical tech “upgradation” is virtually a no-discussion zone. It hikes cost on the consumers without a rise in production cost and makes inflation worse. The tech and pandemic linkages remain a mystery. During Covid19, digital technology is credited with minimising social risk factors, but many questions on whether it orchestrated a fear psychosis for imposition of the lockdown to increase its footprint has not yet been scrutinised.
The complex questions of job losses across the board from the rural, farm sectors to every other conceivable area adds to the social, law and order and governance costs. Again, it means inflationary trends to continue. Is it all going beyond the capacities of the government? That’s a critical question. It can happen just as a process or may have been deliberately planned. The society and governments need to study these. Inflation cannot be accepted as natural when critical input costs like crude prices slump. India should lead the probe as every cent increase in prices delays India’s journey progress.— INFA