THE state has a significant role in shaping the socio-economic life of its nation. But in our country the situation is different. The market is becoming the most influential factor in public policy. The role of the state in protecting the poor is diminishing.
Being a part of the international community, our policy makers have been influenced by global policies and international world order. And the policy of liberalisation, being pursued, breeds social exclusion.
Although the economy has been growing at about six per cent per annum over the last four years, the fruits of development are mainly monopolised by 10 per cent of the privileged.
A detailed analysis of the income inequality depicts that the gap between the rich and the poor has been widening. The Economic Survey 2004-2005 revealed that the ‘income of poor tends to grow proportionately with the mean per capita income growth’ over the period of years, but the increasing inflation offsets the rise in their income.
The rich class constituted 10 per cent of the total population and their per capita income was $2,700 in 2006 and the inflation produced marginal negative impact on them. The middle-income group was 31.25 per cent of the total population and its per capita income was $1000. The extreme poor comprised 25 per cent (official figure) of the total population who lived below poverty line; their per capita income was $350. The big gap in the per capita income of these classes was the manifestation of the high degree of income inequality. The impact of progress and development on the income of the poor and middle-income group was negative due to abnormal increase in prices of essential commodities and rent.
According to the World Bank, the rate of poverty has been increasing and now it is ‘29 per cent’. The poverty rate began to increase in 1990s and now it has reached a very high level. The ‘poor class’ which is not extremely poor consists of 50 million heads and their per capita income is $425. Combining the ‘extreme poor’ and the ‘poor’ classes the population reaches 90 million which is 56.25 per cent of the total population. If the population is classified in terms of ‘poor’ and ‘not-poor’ then approximately 57 per cent of the total population is poorn and the economic managers’ claim that poverty is diminishing is wrong.
The liberalisation policy has significantly reduced the purchasing power of the poor in the presence of high rate of inflation. Buying a house or an apartment is a daydreaming for poor and the middle-income group due to three-fold increase in prices of property during the last five years. The three-time increase in rent of residential units has further increased the hardship of common man.
The price control mechanism is an important tool to ensure that the poor can buy essential items like flour, rice, pulses, sugar, vegetables etc., at affordable price. The government has left the people at the mercy of the market. A large number of local industrialists and multinational corporations have inflated prices unjustly on the pretext of rise in production cost. Anecdotal evidences reveal that if the per unit cost of production increases by 10 per cent due to increase in prices of raw material and energy, the producer raises the per unit sale price by 30 per cent. The end consumer has to pay this inflated price. The awareness about protection of consumer’s rights is extremely poor as many consumers are not aware of their universal rights, and the state’s institutions too are unwilling to protect the interests of common man.
There are prerequisite for adopting the free-market mechanism. It is necessary that policy-making institutions should be strong enough to adopt the market economy. The democratic culture should exist with high degree of pluralism before adopting free market-mechanism.
In our country, the perfect competition is missing at market place, the degree of unethical business practices is very high and the degree of cultural, religious and political tolerance is very low. Our policy makers have borrowed economic policies from developed countries while ignoring missing specific socio-economic and political conditions that are compulsory for the application of free- market economy.
For instance,. take for example, the sugar crisis.. Government waives off import duty on sugar and assumes that the bulk supply would automatically cut down the sale price of the item. But the imported sugar is stored in mills and stores instead of being sent to market for wholesale and retail sales. The objective of reducing prices is not accomplished. The traders follow unethical business practices by taking an advantage of weak price control mechanism. The absolute free market mechanism is not feasible here because the business environment does not balance the interests of all stakeholders.
The prices of petrol and diesel are reduced by Rs4 and Rs1.03 per litre respectively. The producers should have reduced the cost of commodities proportionately, as the input cost is reduced. But this would not happen here.
A number of disinvested industries have been closed down and a large number of workers laid off. The state never perceives the social impact in case of termination of production process of privatised public enterprises.
The increasing business activity and enhancing domain of Multinational Corporation (MNCs) is curtailing the authority of the state. There are at least 40,000 MNCs engaged in global business, their scale of operation is sans boundary as they operate across the world. The enormous production of goods and services has provided them huge power and according to one estimate the 500 largest global corporations produce more than $9.2 trillion in goods and services and it is about 30 per cent of the world’s total economic production.
The home countries of these MNCs speak on behalf of them to the host countries for formulating favourable policies and regulations that permit their operations in overseas markets. The economic policy of encouraging foreign investment is the tool to encourage MNCs to work in host countries. The large portion of their profit goes out of the country in terms of capital flight; this out flow of huge capital is disadvantageous for national economy of the host countries. Countries like India has let the MNCs to operate on its soil with some specific regulations that ensure that the prices of fast food of these chain of MNCs to be within the reach of most of the classes..
The regulations in our country are pro-corporate, it means that economic policies welcome these multinationals by encouraging foreign investment here and these policies are ignoring the social impact of multinational culture on the under-privileged ..
The government is morally and constitutionally obligated to formulate pro-poor policies.. The rising income inequalities can create social tensions.. A comprehensive and more balanced policy focusing on all stake holders including industrialists, multinational corporations , business and the poor needs to be evolved.