“Your supply side policies have completely failed”: Amit Mitra writes to Nirmala Sitharaman
“Your policies on the supply side have totally failed,” wrote Bengal FM, asking the Union Minister to stimulate demand by putting money into the hands of the people.
Posted on 09.11.21, 01:25 AM
A day after the Modi government expressed confidence in the economic recovery, Bengal Finance Minister Amit Mitra sent a letter to Nirmala Sitharaman, calling on the Union Finance Minister not to prevent the distress widespread in the unorganized sector and in the lives of citizens. man.
“Your policies on the supply side have completely failed,” Mitra wrote to Sitharaman, asking him to turn things around and stimulate demand by putting the money in the hands of the people, a policy followed in Bengal under the leadership. scored by Mamata Banerjee.
Mitra pointed out that the Modi government’s policy of getting banks to lend and the corporate tax cuts have failed to stimulate investment as companies are unwilling to take a bet due to the lack of of request.
He listed five parameters to demonstrate that the economy continues to be weak despite the 20% growth seen in the first quarter of this year.
Citing data from the Indian government, Mitra pointed out that the unemployment rate has climbed to 8.32%, implying that 3.6 million people are unemployed today.
He linked it to distress in the unorganized sector which accounts for 60 percent of workers in manufacturing. As there is no work, these workers return to their rural base resulting in reverse migration. GoI’s periodic labor force survey showed that those lucky enough to get a job in their village as a casual farm worker would likely earn half of what they earned in factories.
While incomes are falling, expenses are increasing due to soaring inflation. Mitra noted that the wholesale price index and the consumer price index at 12.3 percent and 6.06 percent, respectively, eat into the meager income of the common man. It is not surprising, according to Mitra, that private consumption has collapsed and consumer confidence has dropped significantly.
Private consumption, which accounts for 56% of GDP, has fallen 12% below pre-pandemic levels of 2019-20 and is comparable to that of 2017-18. Consumer confidence is also gradually declining. The RBI’s current situation index fell to 48.5% in May from 53.1% in March.
“The informal sector has collapsed. Large companies do not invest the surplus generated by tax cuts. The banks don’t have anyone to lend. We cannot get out of this rut by flooding the supply with liquidity. We need to stimulate demand by putting money in the hands of the people. The GoI just isn’t listening, ”Mitra said tonight.
Gross fixed capital formation, an indicator of investment, fell from Rs 2.1 lakh crore in the first quarter to Rs 10.2 lakh crore, compared to Rs 12.3 lakh crore in the first quarter of 2019-2020.
Mitra argued that Bengal had managed to show positive GDP growth of around 1% in 2020-2021 thanks to its policy.
About 85 percent of the state’s planned spending goes to programs like Lakshmi Bhander, which deliver money directly to people.
“The marginal propensity to consume in this economic segment is 99%, which means that money is coming back into the system, creating demand and stimulating economic activity,” Mitra said.