ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Making Sense of Government s Macro-Economic Stabilisation Strategy

Making Sense of Government's Macro- Economic Stabilisation Strategy Amiya Kumar Bagchi THE present Indian government has been accused of not promoting growth, not making a real dent on poverty, not seeking to bring down the burden of external debt and thereby eliminating the threat of yet again getting near a situation where foreign bankers would not honour Indian letters of credit, and finally not promoting technological self-reliance through an appropriate policy of innovation, adaptation and absorption of technology. Suppose that all these accusations are true. One reply would be that apart from the charge of not seeking to promote growth, the rest would also apply to the policies of most governments at the centre since the middle of the 1960s. Which government's policies made a real dent on poverty? It is claimed that during the late 1980s the proportion of population living below the poverty line tended to decline. But surely this was more a by-product of the growth- promoting policy of the Rajiv Gandhi government and the lucky occurrence of several good monsoons than of any properly target-oriented poverty eradication strategies. And the near-default situation that India reached was a direct result of the policy of the Rajiv Gandhi government which sought to promote growth by borrowing heavily abroad. So why should the new government take upon itself the task of promoting poverty reduction, technological self-reliance or a greater degree of independence when the immediately preceding one had not done so? Has its support base shifted towards a set of classes or groups which would feel aggrieved it growth is not accelerated, poverty is not reduced or dependence on external loans or aid is increased? Or, look at another aspect of its revenue and expenditure policies. This government has further accelerated the process of revenue gathering through indirect taxes and administered prices and has made it clear that those who possess money-earning assets will contin ue to be favoured by the tax policies, policies geared towards a creeping privatisation of public sector enterprises, and further deregulation of the capital and money markets. Again, some of the instruments for shovelling incomes towards the rich may be relatively novel, but is the general policy of favouring the rich and especially the up and coming dealers in money and assets who want to make money hand over fist all that different from the policies pursued by the undivided Janata Party government or the succeeding Congress governments? After all, it is the up and coming rich who provide the money, muscle and media coverage lauding the achievements of this liberalising government who want to get India into the mainstream of liberalising policies as a means of allowing the Indian Joneses to imitate the life-styles of Donald Trump, Adnan Khashoggi, Alan Bond or Ravi Tikkoo. Money is needed in order for the government to be able to manipulate voters, legislators and opinion-makers and the government cannot afford to alienate people who have money and who expect to continue making money and ever more money through the policies pursued by the government.

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