The Indian Budget
The Indian Union Finance Minister in his budget speech said that the budget aims to create India as a manufacturing hub in the world, and this in turn will result in creating millions of jobs in India for the youth.
There is a fundamental fallacy here, which is usually overlooked.
As I have repeatedly been saying, the problem in India is not how to increase production, the problem is how to raise the purchasing power of the masses, so that the goods manufactured are sold.
The India of today is not the India of 1947. In 1947 we had very few industries, and very few engineers. Our British rulers had a policy of keeping India broadly unindustrialized, because if a large industry grew up in India it would become a rival for British industry. So the British permitted setting up in India only of some textile and plantation industries, which too were initially in British hands. They did not permit setting up of heavy industries ( except a small Tata steel plant ).
This situation has since then drastically changed. Thanks to the vision of Pt. Nehru and his modern minded colleagues, after Independence a heavy industrial base was set up in India, and a large number of engineering and technical training institutes were also set up,some of them like I.I.T.s of a very high standard .
Consequently, the position in India today is that we have thousands of big, medium and small industries and thousands of bright engineers, technicians, managers and scientists.
Coupled with the immense natural resources available in India ( India is not a small country like England, France, Germany or Japan, but is a sub continent ), this huge pool of technical skills enables us to increase production several times, which will of course result in creating a large number of jobs.
The problem, however, is very different : how will the goods manufactured be sold ? After all, if goods are manufactured, they have also to be sold. Where is the purchasing power in the Indian people ? 75% of our 1250 million people are too poor to buy these goods, as they are already at the subsistence level. They hardly have money to buy food, how can they buy motor cars and other industrial products ? Yes, there is a middle class in India consisting of 15-20% of our population ( which amounts to 200 million people ) which had some purchasing power, but in view of the skyrocketing inflation ( foodstuffs etc are very expensive in India today ) even their purchasing power has been largely eroded.
Some people say that we should manufacture for exports. There are 3 things to be said here (1) foreign consumer markets are already saturated with Chinese goods (2) there has been a recession going on for several years in the Western countries. From time to time it is claimed that there is a recovery in the economy, but such recoveries are not genuine recoveries (3) to be stable India must basically depend on its domestic market. Over dependence on foreign markets is very precarious, as that market may be captured by some other country, or there may be a recession in that foreign country, etc and then our factories will have to close down.
So the problem really boils down to how to raise the purchasing power of our masses, because without doing that it is meaningless to talk of making India ' a manufacturing hub in the world '.
http://timesofindia.indiatimes.com/budget-2015/union-budget-2015/Union-Budget-2015-Govt-to-emphasize-on-job-creation-to-create-millions-of-jobs/articleshow/46411083.cms
The Indian Union Finance Minister in his budget speech said that the budget aims to create India as a manufacturing hub in the world, and this in turn will result in creating millions of jobs in India for the youth.
There is a fundamental fallacy here, which is usually overlooked.
As I have repeatedly been saying, the problem in India is not how to increase production, the problem is how to raise the purchasing power of the masses, so that the goods manufactured are sold.
The India of today is not the India of 1947. In 1947 we had very few industries, and very few engineers. Our British rulers had a policy of keeping India broadly unindustrialized, because if a large industry grew up in India it would become a rival for British industry. So the British permitted setting up in India only of some textile and plantation industries, which too were initially in British hands. They did not permit setting up of heavy industries ( except a small Tata steel plant ).
This situation has since then drastically changed. Thanks to the vision of Pt. Nehru and his modern minded colleagues, after Independence a heavy industrial base was set up in India, and a large number of engineering and technical training institutes were also set up,some of them like I.I.T.s of a very high standard .
Consequently, the position in India today is that we have thousands of big, medium and small industries and thousands of bright engineers, technicians, managers and scientists.
Coupled with the immense natural resources available in India ( India is not a small country like England, France, Germany or Japan, but is a sub continent ), this huge pool of technical skills enables us to increase production several times, which will of course result in creating a large number of jobs.
The problem, however, is very different : how will the goods manufactured be sold ? After all, if goods are manufactured, they have also to be sold. Where is the purchasing power in the Indian people ? 75% of our 1250 million people are too poor to buy these goods, as they are already at the subsistence level. They hardly have money to buy food, how can they buy motor cars and other industrial products ? Yes, there is a middle class in India consisting of 15-20% of our population ( which amounts to 200 million people ) which had some purchasing power, but in view of the skyrocketing inflation ( foodstuffs etc are very expensive in India today ) even their purchasing power has been largely eroded.
Some people say that we should manufacture for exports. There are 3 things to be said here (1) foreign consumer markets are already saturated with Chinese goods (2) there has been a recession going on for several years in the Western countries. From time to time it is claimed that there is a recovery in the economy, but such recoveries are not genuine recoveries (3) to be stable India must basically depend on its domestic market. Over dependence on foreign markets is very precarious, as that market may be captured by some other country, or there may be a recession in that foreign country, etc and then our factories will have to close down.
So the problem really boils down to how to raise the purchasing power of our masses, because without doing that it is meaningless to talk of making India ' a manufacturing hub in the world '.
http://timesofindia.indiatimes.com/budget-2015/union-budget-2015/Union-Budget-2015-Govt-to-emphasize-on-job-creation-to-create-millions-of-jobs/articleshow/46411083.cms
