Over Production Under Consumption and the Government’s Prescription

After grabbing the bigger chunk from RBI, government has now directed the PSUs to loosen their pockets, and shelve out money for Capital Expenditure (Capex). What, does this mean? It is a jargon that amounts to ordering the few profit making PSUs to give money to corporates. When this amount would be invested into capex, it would translate to the corporates getting more work and ultimately getting sop indirectly from the government.

But, would this step like those taken in past and not so recent past help boost the slowdown as well as the sagging morale of the consumers? The money would certainly help the bourgeoisie, in fixing their books of account. But, it would have no impact on the working class.

India is not facing a crisis of under production, rather the situation is diametrically opposite.

Today, the crisis is of over production and under consumption.

According to a report published in LiveMint, the industrial capacity is running at 50 to 55 percent, though RBI stats shows it to be around 70 percent. That means, giving amount to industrial houses would not be utilised to increase the industrial capacity, which is functioning at half of the installed capacity.

Similarly, the stock and inventories are lying unsold. According to a report retail sales trends in two wheelers and commercial vehicles remained negative. The inventory levels in these two segments is also high. Retail sale of two wheelers declined 5 per cent in July 2019 at 13,32,384 units while in commercial vehicles the decline was 14 per cent at 23,118 units. These were also much lower than despatch numbers for the month at 15,11,692 units and 56,866 units, respectively indicating that inventory is still being built at dealerships for these vehicles even as overall demand remains subdued.
The piled up inventory currently stands at 500,000 passenger vehicles (PVs) and three million two-wheelers, according to The Economic Times newspaper. This has left seven of the country’s top 10 auto majors with little option but to temporarily shut down their factories.

Mahindra Vehicle Manufacturers, an arm of Mahindra & Mahindra, for instance, informed the stock exchanges on June 8 that it would be observing “no production days ranging between 5–13 days” in the April-June quarter as part of “aligning its production with sales requirements.”

Same is the case of other sectors.

On the other hand India is facing a crisis of under consumption. The policies being pursued in name of “reforms” has finally shown its side effects. Jobless growth, contractualisation of even posts tgat are of perineal nature constituting the core of business, decline in real wage growth and now massive unemployment, that the country is witnessing, has severely eroded the ability of the working class to buy, thus severely eroding the purchasing power capacity.

Business Today, reported about this decline in wages. According to its report, Indicator Foundation, along with earlier work on wage level analysis, indicate that from 2014 to 2018, both low-skilled and high-skilled workers saw a drastic dip in average wage growth levels. For example, in 2017, low-skilled workers in India on an average earned around INR 10,300 (USD$147) per month, compared to INR 11,900 (USD$170) per month in the previous year. Between 2014 and 2017, the average income for low-skilled workers—employed in occupations such as construction, small- and medium-scale manufacturing, and other sectors—decreased from INR 13,300 (USD$190) per month to INR 11,625 (USD$166) per month.

For high-skilled workers, average incomes decreased from INR 48,100 (US$688) per month in 2016 to around INR 44,000 (US$572) per month in 2017. In 2014, despite a lower level of economic growth (compared to today’s growth rate), the average daily wage rate in India was INR 272.19 (US$3.89) per day, an increase from INR 255.65 (US$3.66) per day in 2013. This rate has been falling ever since 2014. Thus, despite the reported rise in India’s rate of economic growth from 2014 to 2018, average wage growth has sharply declined since 2014.

Add to this the well known, documented and analysed agrarian crisis, and the picture becomes haze free.

With such curtailed capacity, it is but natural that majority of Indians are not buying goods. Thus, the present rot.

Add to this the CMIE reported about the severe decline in profit for the corporate India. Which as per its finding is hovering around a measly 2%. So, the corporates are weary on new investment. Thus, we are witnessing the classical crisis of capitalism. The cyclical period of recession, boom and more severe recession.

The government’s intention becomes perspicuous. In name of combating recession, the exorbitanat amounts snatched from various bodies, or by fudging the books of accounts,shows the desperation. That, firstly the government is in dire straits as far as money goes. Secondly, with its such act it has lost the maneuverability or cushion it had in terms of its intervention in finacial market. But, the most important aspect is, it is utilising the fund to keep up the corportes sector afloat, that, would other wise would be today in the quagmire of bankruptcy and closures. So, it is the public that is keeping the Indian capitalists afloat.

But, for working class recession means poverty, despair and a virtual doom.

No one is thinking about the working class, as in the eyes of the rulers, it doesn’t exist as a homogeneous class. Potato in sack rather than sack of potatoes!

Recession, doesn’t transcends into revolution, because if the working class movement is weak, on defensive, the ruling class would certainly be able to utilise this weakness to defer the crisis.

For revolution to succeed, apart from the revolutionary situation, the presence of vanguard party is must.

Damodar

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