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Industrialists will only invest when it they see returns and it makes business sense.

In Kishkinda Kanda, the fourth book of the epic Ramayana, the wise Jambavan reminds Hanuman of his own strength. As Jambavan observes the several hundred thousands of the army of monkeys dejected and perplexed about how they cross the sea to Lanka, he approaches Hanuman and says:

“vīra! vānaralōkasya sarvaśāstravidāṅ vara.
tūṣṇīmēkāntamāśritya hanūmankiṅ na jalpasi৷৷4.66.2৷৷

… balaṅ buddhiśca tējaśca sattvaṅ ca haripuṅgava!
viśiṣṭaṅ sarvabhūtēṣu kimātmānaṅ na budhyasē৷৷4.66.7৷৷”

“O Hanuman! you are the choicest one among many scholars well-versed in all sastras. Why do you sit alone? Why do you not speak?

O leader of the monkeys! you are superior in strength, wisdom, brilliance and valour to all beings. Why do you not realise your own strength?”

At a summit on September 13, Finance Minister Nirmala Sitharaman referenced Hanuman as she told off Indian industrialists over investing in the country: “Is it like Hanuman? You don’t believe in your own capacity, in your own strength and there has to be someone standing next to you and say you are Hanuman, do it?”

Sitharaman said she has repeatedly defended the private sector “when even provocatively people have said what would you want to tell the private sector”. There was frustration in her tone at her futile efforts.

The finance minister asked the Indian industry why it was hesitant to invest: “We will do everything to get the industry to invest here…[but] I want to hear from India Inc what’s stopping you?”

She listed the measures the government has taken to encourage investments, from massive corporate tax cuts over the last three years to the Production Linked Incentive schemes, where companies get financial incentives for meeting production targets.

But as several economists had predicted, the idea of making life easier for corporations and hoping that they will lift the economy is fundamentally flawed. The problem, they note, is on the demand end of the economy: ordinary Indians do not have enough money in their pockets to spend.

Professor Surajit Mazumdar traces this slowdown to having started much before the Covid-19 pandemic led to global disruptions in 2020. The index of industrial production made it clear that growth in production had slowed even before the pandemic.

Despite all the concessions and tax cuts, the corporate sector was hesitant to invest. On the eve of the pandemic, India’s factory output had shrunk to its lowest level in eight years.

All three broad-based sectors – capital goods production, consumer durables, and infrastructure and construction goods – recorded a contraction. Experts said that this slowdown in structural growth was caused largely by declining household savings rate and low agricultural growth.

Compared to the high growth and investment boom of the previous decade, Mazumdar showed how apart from the service sector, other sectors, including manufacturing and agriculture, had been sluggish.

The ruling Bharatiya Janata Party government has constantly tried to find external reasons for the crisis – blaming the pandemic as “an act of God” and “the war in Europe”. But the real reasons for the declining trend have been, to a large extent, homegrown.

The seeds of this slowdown, Mazumdar explained, were sowed in the very nature of growth in the first decade that relied heavily upon and also resulted in significant depreciation of wages, informalisation and an insecure workforce with dwindling incomes. 

So, in the “good days”, the early 2000s, the real estate sector catering to a thin crust of the population and the global demand for manufactured goods and services from India could sustain the boom. But as that ended by 2007-’08, there was no home grown demand that could have sustained investment at the same pace. 

Consumer spending in India declined for the first time in more than four decades in the financial year 2017-’18. There was no incentive for businessmen to invest.

The pandemic and the reckless lockdown delivered a crippling blow to already dwindling consumer demand as incomes plummeted drastically. Studies say that it caused a 47% decline in the average seasonally adjusted per capita real household income in April 2020 compared to February 2020. 

The green shoots of recovery that Prime Minister Narendra Modi refers to in his speeches are largely concentrated in the contact-intensive hospitality and service sector, whereas the consumer goods sector is in real crisis. 

The Index of Industrial Production data on September 12 showed that the consumer non-durable sector contracted by 2% in July and was almost flat in the April-July period this year. Rising inflation and stagnating incomes has meant that the demand situation is not going to improve as ordinary Indians continue to cut down on purchases.

At a time when there is a need to invest in people to lift consumer demand and boost the economy from below, the government put its faith in corporations. It continues to try to find supply-side solutions for demand-side problems. 

Learning nothing from the pandemic, the government refuses to spend substantially more on the social sector, be it on health or education, and instead derides welfare spending as freebies

The government takes pride in the fact that the government did not shower “helicopter money” on those whose livelihoods were wrecked by Covid-19. Instead, it continued to shower its blessings on the rich. 

From more tax cuts for corporations and further diluting labour laws to making clearances for investment easier by the day and selling public assets, all its efforts of easing business at the cost of unease of ordinary people has still not made Hanuman lift. 

According to the Reserve Bank of India’s own reports, corporations, far from shoring up their investments, simply used the tax break to pay off their debts. India’s investment-to-gross domestic product ratio slippedfrom 41.2% in 2011 to 30.7% in June 2022.

In the epic Jambavan was after all able to inspire Hanuman.

“tatastu vai jāmbavatā pracōditaḥ
pratītavēgaḥ pavanātmajaḥ kapiḥ.
praharṣayaṅstāṅ harivīravāhinīṅ
cakāra rūpaṅ mahadātmanastadā৷৷4.66.38৷৷

“Then Hanuman, son of the Wind-god, inspired by Jambavan, enlarged his body, ready to leap. The army of heroic monkeys were pleased (to see him).”

But India Inc has been in no mood to take a leap. After all, the Hanuman in the mythological epic was loyal to his master and considered his master’s cause as his burden and his duty without placing any demand on the master in return. Unlike in this case where corporations are only loyal to profits. They are not the public sector that can be commanded to rise up to a national call, to a higher cause.

Industrialists will change their social media display pictures as per the ruler’s whims, fund government jingoism and even back the polarisation manufactured in the name of god. But they will invest only when they see returns.

At a time when the Centre is bent upon handing out freebies to corporations, Chief Executive Officer of Hindustan Unilever Sanjiv Gupta is in fact suggesting that the government comes up with an urban employment guarantee scheme, like the rural employment guarantee programme for the distressed. 

The government must spend more on the social sector and concentrate on uplifting the poor. It is higher disposable income in the hands of the poor that spurs spending, lifting the economy from below. For this, the government must reactivate the redistributive mechanisms that it has shunned over the decades. 

This includes taxing the super-rich so as to generate the resources necessary to guarantee universal social and economic rights for all. If countries like BoliviaArgentina and Columbia can conceive of such mechanisms to support those ravaged by the pandemic, why can’t we do the same in a country in which 1% holds 58% of individual wealth? 

This article was originally published in Scroll.in and can be read here.

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