Luxurious follies, high debt, infra devastate Sri Lanka

|
  • 0

Luxurious follies, high debt, infra devastate Sri Lanka

Tuesday, 05 April 2022 | Shivaji Sarkar

Luxurious follies, high debt, infra devastate Sri Lanka

The crisis was in the making for a decade largely due to the country’s excessive dependence on imports and borrowings

The Sri Lankan economic crisis is a grave warning that reckless consumption promoted by global MNCs, IMF and World Bank at the cost of localised economies and ignoring decentralized agriculture, rural or small entrepreneurship is not a sustainable model.

The Sri Lanka crisis and the disquiet among the working class in India as reflected by the March 28-29 all-India strike by labour unions are both pointers to an impending danger. It is due to the faulty global designs of curbs on wages, cash transactions, over-dependence on banks, extreme stress on high-cost infra and other facilities.

India has to recall the strength of its mixed economy. That was the people’s economy and overcame the Soviet Union collapse or the 2008 meltdown. But since 1948 Sri Lanka had never been in such a deep economic crisis. It has 10-hour power cuts, extreme fuel crisis and rice is selling at Rs 500 a kg. Exams are put off for shortage of paper and two newspapers cease publication. It rushes to sign six pacts with India with a $2.4 billion credit line and assured petroleum supply.

A small neighbour in deep trouble with forex reserves falling to $2.3 billion, not enough for immediate imports, and external debt pegged at $45 billion, $8 billion to China alone, and outstanding sovereign bonds of $12.55 billion shakes India in more than one way. The 119 per cent Lankan debt to GDP now has started a distress refugee influx into Tamil Nadu. Lanka, hit by globalisation, reckless imports, multiplexes, malls and artificial glitter, has lessons for all.

The crisis was in the making for almost a decade, largely due to the country’s excessive dependence on imports and borrowings for a raft of massive infrastructure project. It highlights how unbridled borrowing for big-ticket infra projects such as those under China’s Belt and Road Initiative, can lead to complications. The government’s tax cuts and switch to organic agriculture further squeezed revenues.

The trade union strike in India underlined the problem of growing unemployment, increasing  privatisation, giving employers greater leeway in setting wages and extending working hours. Sale of PSUs throws more out of jobs. The Government is repeatedly telling them it is trying to create jobs, continuing with free food grains and edible oil dole at least till September for 80 crore people belonging to the families of farmers and labourers.  It is a heavy burden on the exchequer. The Government, committed to welfare, is spending almost Rs 4.5 lakh crore since 2020 through a regime of high inflation and not-so-high production as purchasing power capacity has reduced.

In Sri Lanka, the workers’ stir and the global economic crisis testify that the 1991 privatisation prescription of the IMF-World Bank was not the solution. The G-20 prescription of monopolization and centralization of the economy at the cost of the labour have caused more problems for real growth while multiplying profits of the MNCs and large companies.

The world did not learn from the follies of 2007-08 Lehman Brothers collapse The US public sector AIG took the worst hit. It also shows that a globalised war by the US in Afghanistan, Iraq, Syria and the Middle East has helped none but the arms lobby. It weakens the economies of the super power and its NATO allies. Shaky European economies are afraid of going to a war with Russia or even check its aggression in Ukraine. The people in the US are against Joe Biden administration rushing into another war. They do not want more body bags. The US today has almost $27 trillion of global debt, largely from five countries, including China.

Lanka is learning the hard way that high consumption is not sustainable without higher production, income and self-reliance. India has been trying to be self-reliant - the reincarnation of Gandhian swadeshi -- but at the same time opting for FTA with Australia and West Asian countries. It also has 87.8 per cent debt to GDP ratio. The model of expensive toll roads, high-priced transportation-communication, high income tax and other taxes are leading to soaring costs and inflation.

It is India’s turn to give a viable alternative of sustainable consumption and a mix of people-centric independent low-cost mixed economy free from the control of big banks and large corporations. Lanka exposes the dangers; the world has to tread cautiously.

(The writer is a senior journalist. The views expressed are personal.)

 

Sunday Edition

CAA PASSPORT TO FREEDOM

24 March 2024 | Kumar Chellappan | Agenda

CHENNAI EXPRESS IN GURUGRAM

24 March 2024 | Pawan Soni | Agenda

The Way of Bengal

24 March 2024 | Shobori Ganguli | Agenda

The Pizza Philosopher

24 March 2024 | Shobori Ganguli | Agenda

Astroturf | Lord Shiva calls for all-inclusiveness

24 March 2024 | Bharat Bhushan Padmadeo | Agenda

Interconnected narrative l Forest conservation l Agriculture l Food security

24 March 2024 | BKP Sinha/ Arvind K jha | Agenda