BUDGET 2003 A deflationary Budget PRABHAT PATNAIK
[snip] The claim that the Budget is "growth-oriented' is based, however, on invoking a myth, namely that doling out concessions to the capitalists (including foreign ones) ipso facto promotes growth. This self-serving proposition, which capitalists always put forward and which has now become officially respectable, is utterly vacuous, both theoretically and empirically. Capitalists invest only when demand is sufficiently buoyant; when this is not the case, no matter how large a transfer is made to them from the public exchequer, they would not invest. They would simply pocket the transfers, which is why this self-serving argument is put forward with particular vehemence precisely in periods of recession when profits are otherwise low. Our own experience bears this out. For several years now, every successive Budget has given concessions to the private corporate sector for stimulating investment and output growth; and yet gross capital formation in the private corporate sector as a proportion of Gross Domestic Product (GDP) has stagnated and, of late, even come down. DEFLATION is the inevitable fate of any economy that gets trapped in the vortex of international speculative financial flows. For the promotion of growth, therefore, it is necessary that the economy gets out of this trap, by arresting and reversing the process of so-called "financial liberalisation" (which is the mechanism through which economies get trapped). The Budget, however, does the very opposite: it allows foreign direct investment up to 74 per cent in Indian private banks, an increase from the current 49 per cent, even as it removes all restriction on voting rights in banking companies. At the same time it allows the "merger" of private banking companies with nationalised banks. By these measures, it opens the way for the takeover by foreigners of Indian banks, and the takeover by the private sector, whether Indian or foreign, of nationalised banks, that is, for both the de-Indianisation of private banks and the privatisation of nationalised banks. These measures clearly carry the neo-liberal agenda forward; the deflationary nature of the Budget is a symptom of this. [snip] full at: http://www.flonnet.com/fl2006/stories/20030328004702600.htm
