Private Investment: The God that Failed

There is a new catch-phrase among the ruling circles: public spending. Over the last year, “captains of industry”, ministers, economists, bankers and financial journalists all appear to have become converts to the cause of increasing Government expenditure. In the last fortnight, their chorus has become almost shrill. What is even curiouser is that international credit ratings agencies Moody’s and Standard & Poor, staunch opponents of public spending, have not opposed this move outright.[1]

This is a stunning about-turn from the days of the 2003-08 boom, when the same circles abhorred public spending, and depicted private investors as having virtually magical and limitless powers to conjure up funds and power growth. Even as recently as May 2014, they were convinced that Modi’s victory would revive corporate growth with a wave of ‘reforms’.

The champagne of the 2014 victory is now flat. Now the captains are no longer confident that ‘reforms’ will revive corporate growth. It is worth looking into this about-turn for what it points to about a profound underlying problem of the political economy of India: namely, the problem of demand.

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Globalisation without Global Demand

Three years after Narendra Modi was handpicked by the corporate sector for prime ministership, and a year and a half after the corporate sector bankrolled his victory, the Indian economy remains in a slump. The latest series of official Gross Domestic Product(GDP) data paints an unconvincingly rosy picture of growth, but these have been widely questioned, even within the establishment. Most other conventional economic indicators point to stagnation or deterioration.

This situation has created confusion and some alarm among ruling class circles. Different interests are coming to the fore on how to tackle the crisis. These differences reflect different shades of interest within the ruling classes, as well as between the native ruling classes and international capital. While there is no fundamental contradiction between these interests, there are secondary differences, and these are worth noting, for they shed light on the underlying situation. There is, however, a real chasm between all these interests and the interests of the masses of people. (We have discussed similar themes in Aspects no. 50.)

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