Forget Panama Papers, let's question Modi's 'development' first

In the nineteen fifties, there was an inquiry into the Dalmia-Jain companies, whose members included the Seth RK Dalmia, Shriyans Prasad Jain and Shanti Prasad Jain. The inquiry officer, the noted jurist Vivian Bose, found that the impugned industrialists, who included the owners of the Times of India group, had made huge profits by incorporating demands on their companies for large payments to the board of directors, failing which the companies would have to make additional penal payments to them.

Many of these companies were already in the red. Despite Nehru's rhetoric, Seth RK Dalmia never went to jail, as he was provided private medical care by a well known nursing home, nor did the Jains.

During the neoliberal period beginning with Dr Manmohan Singh's stint as Union finance minister in 1991, controls and penalties were drastically reduced, the public sector was further opened for sale to Indian big business and foreign capital, industrial licencing was abolished, private foreign capital was facilitated to enter the Indian economy on a priority basis. This was a complete reversal of the Nehruvian economic policy which stressed on the public sector and self-reliance, in order to bring about egalitarian development.

In fact in 1990, Dr Manmohan Singh was the chief author of the South Commission report, "The Challenge to the South", which advocated a strong self-reliant economy, controls on FDI, egalitarian development, and strengthening the global South. It showed how the balance of trade worked against the emerging economies of the South.

While relative prices in the developed North rose, the relative prices of the commodities of the South declined, causing large balance of trade deficits. Though Dr Singh tried to play down his role in the report, he was clearly the main author, as booklets on economic matters by him were also published by the South Commission.

However, the descendants of Nehru, such as Rajiv Gandhi, also welcomed neoliberalism. Since then, neoliberal economics has ruled the roost. Generally, given the skewed division of labour, real average income in the lowest strata has tended to fall, while that of the top 1-5 per cent has tended to rise. On the other hand, poverty has also tended to increase.

In their book on the Indian economy, An Uncertain Glory, 2013, Amartya Sen and Jean Dreze, using the purchasing price parity approach, calculated poverty in India to be 68.7 per cent. This extent of poverty means that the mass of the peasantry and urban poor are unable to buy wage goods. This would lead to a lack of effective demand and a shrinking market. Food prices have risen by 25 per cent.

Median families spend 60 per cent of income on food, so the economic situation is bad, especially for the poor. Of course, the government figures are quite different. Now, it is predicted that growth will be 7.4 per cent in the year. But other scholars predict growth to be closer to 5.2 per cent. Given the bad monsoon last year and the slowdown in industrial growth, the government figure doesn't seem likely.

In the latest Panama Papers leak and the International Consortium of Investigative Journalists (ICIJ) have disclosed massive, unstated foreign investments abroad, including by some 500 Indians. This after hassle-free FDI, permission to acquire foreign assets abroad, and land, including arable land sold dirt cheap to the likes of industrialist Gautam Adani (his elder brother Vinod is part of the Panama 500), who are close to the pro-corporate PM Modi, who is still silent about Panama. More information will come, but the pro-corporate NDA government will suppress whatever it can.

But if we look back at the neoliberalism story, we find that between 2004 and 2015, public sector banks had to write off Rs 2.11 lakh crore in debt, which was very largely big business debt. This information was given by the RBI on the basis of an RTI. Yet, the RBI claimed it had no information about the entities that had run up such staggering debts.

More unpayable debts are coming to light, apart from notorious cases of Subroto Roy of Sahara and Kingfisher's Vijay Mallya who has absconded to England. Well-known lawyer Prashant Bhushan has expressed his skepticism about return of much money, much less any serious criminal charges involved in the Panama scam. Noted lawyer Ram Jethmalani publicly criticised PM Modi for not taking action to get black money back. He resigned from the BJP on this ground.

The major political parties run their campaigns and organisation on taxpayers' money. They would not be interested in a cleanup of the black economy. If the poor and the middle strata suffer they would voice their concern. Few politicians might demand some fiscal support to help the needy, like the Aam Aadmi Party.

But, given the dimensions of the crisis, this would be a drop in the bucket. Such policies around the world including in the US, UK, Europe, Latin America, Africa and South and South East Asia, are already under austerity regimes or heading towards one. Greece has paid a heavy price to the European Bank and German PM Angela Merkel. Donald Trump has warned of an economic crisis in the US. Jeremy Corbyn's warnings about the austerity package in the UK have propelled the Labour Party's popularity. The charismatic leader of the Brazilian Workers Party Lula has been jailed for corruption, and so on. As the proverb goes, those who forget history are doomed to repeat it.