Why have Indian Banks become Financially Fragile? Prabhat Patnaik
The crisis at Yes Bank is only the concentrated expression of a deeper malaise afflicting the Indian banking system as a whole, namely its vastly increased financial fragility. The Chief Economic Advisor is no doubt right when he assures depositors, through the media, that the Indian banking system is quite stable; but this still does not negate the fact that it has become more fragile. The Congress Party is no doubt right in claiming that the crisis of Yes Bank is because of a phenomenally rapid increase in its loans over the last five years, from Rs.55633 crores in 2014…
Economy Sliding into Stagnation Prabhat Patnaik
Changes in estimation methods have of late made statistics on the Indian economy increasingly bewildering; besides, whenever the statistics show the performance of the economy in a poor light, the BJP government simply suppresses them. Nothing however can suppress the fact that the Indian economy is sliding into a serious state of stagnation. The third quarter (October-December) GDP estimates which have just been released show a 4.7 per cent growth over the corresponding quarter last year, which comes on the heels of a 4.5 per cent growth in the second quarter. The National Statistical Office (NSO) now believes that the…
The uses of “Populism” Prabhat Patnaik
Class struggle occurs in the realm of concepts too. The World Bank for instance systematically counters Left concepts by employing a novel tactic: it uses the very same concepts as are used by the Left, but gives them a wholly different meaning; as a result they either come to mean something entirely different from what the Left had originally meant by them, or, at the very least, they become fuzzy and hence useless to the Left. In either case the power of the Left concept is neutralized. For example, the term “structural” used to be an integral part of the…
Capitalism, Socialism and Over-production Prabhat Patnaik
These notes are meant to clarify a point made earlier (Peoples’ Democracy, June 30, 2018) about the erstwhile socialist economies not having over-production crises as capitalist economies do. It is in the nature of capitalism to have “over-production crises”, i.e. crises arising from “over-production” relative to demand. “Over-production” does not mean that more and more goods keep getting produced relative to demand, so that unsold stocks keep piling up. This may happen only for a brief period in the beginning; but as stocks pile up, production gets curtailed, causing recession and greater unemployment. “Over-production” in short is ex ante, in…
Budget 2020-21: Short-term “Fixes” Endangering the Economy Prabhat Patnaik
The budget figures these days mean very little. The difference between what the budget provides and what actually happens does not come to light even after a time- lag of two years, while earlier two years were the limit. And knowing this, the government provides figures in the budget which are extravagant and hence meaningless, but look pretty. What is remarkable about the 2020-21 budget however is that notwithstanding massive liberties taken with figures, this budget still has been so non-descript that hardly anyone outside of government has had a kind word to say about it. Despite its extravagance it…
Layers within the Corporate-financial Oligarchy Prabhat Patnaik
Marxism teaches us that every totality is composed of elements which are different and hence among whom there are contradictions. Even when the totality is conceptualized as a totality, there must be an implicit awareness of these contradictions. This injunction should not be forgotten when we study the political economy of authoritarian or fascistic regimes. Marxists have for long seen such regimes as being based on the solid support of monopoly capital; indeed this is crucial for their coming to power. The renowned Marxist economist Michal Kalecki for instance saw the European fascist regimes of the 1930s as resting upon…
India’s Shameful Record on Wealth Inequality Prabhat Patnaik
Wealth data are quite unreliable; and wealth distribution data even more so. Not much faith can be reposed on the absolute figures; but cross-country comparisons, and also movements in the shares of the top decile or percentile of the population over time in any country, are less likely to be affected by the infirmity of the absolute figures. The fact that India has been witnessing growing wealth inequality, in the sense, say, of the share of the top 1 per cent in total wealth, is quite indubitable, as is the fact of its having a higher level of wealth inequality…
Inheritance and Bourgeois Ideology Prabhat Patnaik
If a head-load worker were to ask a bourgeois economist “Why does Ambani have so much wealth but I do not?”, that economist’s answer would be that Ambani has certain “special qualities” which the headload worker lacks. Bourgeois economists however are not all agreed on what exactly these “special qualities” are that are supposed to explain wealth inequalities. These “special qualities” that supposedly explain a person’s being wealthy must be independent of the fact of that person’s being wealthy, if this explanation is to have logical soundness. In a capitalist economy for instance capital accumulation occurs, and hence wealth increases…
Demand-constrained versus Supply-constrained Systems Prabhat Patnaik
The idea is an old one, but the Hungarian economist Janos Kornai clearly conceptualized it, by drawing a distinction between a “demand-constrained system” and a “resource-constrained system”. A demand-constrained system is one where employment and output in the system are what they are because of the level of aggregate demand is what it is; if the level of demand increases then output and employment in the economy will increase, with very little increase in the price-level. By contrast, a “resource-constrained system”, which can also be called a “supply-constrained system”, is one where an increase in the level of aggregate demand,…
The Rise in Inflation Rate Prabhat Patnaik
Even as the growth rate of the Indian economy is slowing down, and the index of industrial production actually showing negative growth for three consecutive months, August to October (over the corresponding months a year ago), the inflation rate in the economy has started accelerating. Significantly, the acceleration in inflation has been the sharpest precisely during these very months when the contraction in industrial output has been the most pronounced. India’s retail price inflation for the month of November 2019 (over November 2018) was 5.54 per cent. The inflation rate so calculated has been rising every month since January 2019,…