I read the article by Surjit Bhalla titled ‘Private Investment decline behind India’s growth slowdown’ published in the portal indicanews.com
https://indicanews.com/privati e-investment-decline-behind-indias-growth-slowdown-surjit-bhalla/
I regret to say that I have found most Indian economists, like Surjit Bhalla, totally superficial and inane.
Surjit Bhalla says in this article that the cause of India’s economic woes is that we have made it difficult for foreigners to invest in India, by heavy taxes on them. His solution is lowering taxes on foreign investors and encouraging export oriented manufacturing.
I cannot imagine a more superficial analysis. Foreign investors can create some jobs in India, but they will destroy many times more, as Indian businessmen will not be able to face their competition, and will have to close down, throwing thousands or millions of Indians out of employment. We might as well invite the East India Company to come back to India.
The economic problem in India is not that we cannot increase production ( we have a huge pool of competent engineers, and immense natural resources for this ), but that we lack purchasing power in our people. After all, the goods manufactured must also be sold. But how can they be sold when our masses are poor and lack purchasing power ?
So the problem boils down to this : how do we raise the purchasing power of the Indian masses ?
I may mention one way how this was done.
In Russia there was a Revolution in 1917, but the real industrialization and modernization of the country began after adoption and implementation of the first Five Year Plan in 1928.
The methodology followed by the Soviet government was broadly this : it reduced prices of commodities ( which were fixed by the government ) by 5-10 % every 2 years. In this way the domestic market was steadily expanded, since with the same salary or wage people could buy more goods ( real wage increases when prices of goods goes down, as wage is relative to the price index.
Simultaneously, industrial production in the Soviet Union was stepped up, and this increased production could be absorbed in the domestic market as people had more purchasing power ( since prices of goods were steadily reduced ).
It may be mentioned that for stability a country must mainly rely on its domestic market. Excessive reliance on foreign markets is very precarious, as that market may be captured by another foreign country, or there may be a recession in the country buying our goods.
After 1928, with this new policy, the Soviet economy grew rapidly with 18% growth annually, and unemployment disappeared.
This was at a time of the Great Depression in the Western countries after the Wall Street Slump of 1929, when half the industries in the West closed down, throwing tens of millions out of employment.
I am not saying that we must necessarily adopt the Soviet model. But we must, using our creativity, find out some way how to raise the purchasing power of the Indian masses. Without doing this, it is idle to talk of economic growth in India
