Finance Minister Pranab Mukherjee and bourgeois economists in general try to hide the connection between the rise in National Debt and the rise in economic burdens that are piling up on the backs of workers and peasants at this time. In fact, the rising national debt is one of the major factors, and a permanent one, leading to ever increasing burdens being imposed on the toiling people, in the form of higher taxes and prices of everything they need to buy in the market.
The total outstanding liabilities of the Government of India amounted to Rs. 35.2 lakh crores as on 31st March, 2010. If this debt belongs to the entire people, as the rulers are claiming, it means that every Indian man, woman and child, on average, is carrying a debt of Rs. 30,000 on his or her head on account of the actions of our rulers. This is more than the average annual income per head, and it does not include the debt owed by state governments. It is a burden that the majority of our people can simply not afford, without further cutting back on their already low levels of consumption.
If a poor working family of five had a debt of Rs 1.5 lakhs, requiring interest payments of more than Rs. 1000 every month, such a family will be forced to buy less food and other essential articles of consumption every month. This is what is actually happening, but the cause of this growing burden is hidden by the fact the borrowing is being done by the government and the toiling people are being made to pay through higher taxes and prices. The rulers are covering up the truth by claiming that higher inflation is a result of higher rate of economic growth, and other such lies they spread in the name of economic wisdom.
Composition of National Debt
Of the total outstanding liabilities of Rs. 35.2 lakh crores as on 31st March 2010, the first component is the largest part called ‘Internal Debt’, amounting to Rs. 23.4 lakh crores or 67% of the total. This ‘internal debt’ is owed to the monopoly financial institutions – the big banks, insurance companies and various financial investment agencies – in the form of treasury bills, special securities, market loans and other instruments of central government borrowing from the domestic institutions of finance capital.
The second component is External Debt, the part owed to international institutions, including the World Bank and Asian Development Bank, of Rs. 1.4 lakh crores, about 4% of the total.
The third and last component, called ‘other liabilities’, amounting to Rs. 10.1 lakh crores or 29% of the total, consists of the National Small Savings Fund, Public Provident Funds and various special deposits. This component is owed to a large number of people in the country, including many retired workers, working families and members of the middle strata.
Interest payments by the Government of India on the ‘national’ debt rose from Rs. 17 lakh crores in 2007/08 to 22 lakh crores in 2009/10. This is a jump of 28% over two years. This is the result of massive borrowing by the central government over the past two years, to finance the so-called “fiscal stimulus”. For every rupee that the Government of India raises as its revenue, almost 40 paise goes out as interest on the national debt; and this proportion is rising each year. The ratio of interest payments to revenue had declined between 2001/02 and 2007/08 but has started rising since 2008/09.
Rising debt servicing burden is one of the major reasons why the central government is imposing heavier burdens on the toiling masses of people every year, by raising commodity taxes, income taxes, petrol prices and so on.
For whom did the government incur this massive debt?
The Manmohan Singh government decided to incur massive additional debt to benefit the capitalists, to keep up their profits in spite of the global crisis. This was declared to be a necessary ‘stimulus’ to the economy. In the years 2008/09 and 2009/10, the central government not only went on a massive spending spree, largely on infrastructure investments that the capitalist corporations wanted for their global expansion, and on weapons required to defend their interests abroad, but at the same time it also extended hefty tax sops to the capitalists.
In other words, spending on behalf of the monopoly houses of the Tatas, Reliance, Birlas and others, and extending tax sops to them, are the principal factors that drove up the national debt in the past two years.
Why should the working people bear this burden?
The government incurs debt on behalf of the big capitalists, but when it comes to servicing this debt, paying annual interest on it, the burden is imposed on all the people. If it was for the sake of the capitalists that the massive additional borrowing took place, why should the burden of debt servicing not be borne by the capitalist class? Why should it belong to all of us? This is a question that the working people of our country, and any political party that is genuinely concerned about the rising economic burden on working families, must raise at this time.
Demand for Moratorium
Let there be a thorough probe as to who benefited from all this borrowing and who should pay for it. Until then, let the working people be spared the burden of servicing this debt. This is the meaning of the demand for a Moratorium on servicing the national debt.
The working class and its organisations, including political parties that represent its class interest, can and must direct this demand for Moratorium especially at the Internal and External Debt of the Central Government (see Box). If such a Moratorium on servicing the Internal and External Debt is imposed, it will only hurt the profits of finance capital and not the savings of working and retired people. Such a measure will save as much as Rs. 1,71,000 crores of interest payments in 2010/11, which is more than the entire central budget in that year for all social services combined -- including education, health, water supply, sanitation, child nutrition and social welfare.
To direct the demand for Moratorium especially at Internal and External Debt, exempting ‘other liabilities’, means to target the profits of the giant institutions of finance capital, both domestic and international, while allowing small savers to keep receiving their interest incomes. Let the monopoly financial institutions wait for the verdict on why this debt was incurred, on whose behalf, and who should bear the burden. They have in any case sucked out much more from the public treasury than they put into it.
Agitating for the demand for a Moratorium would lead to further questions getting raised, such as the question why banks and insurance companies should be oriented towards maximizing their profits, rather than to serve the needs of the socialised economy on a no-profit and no-loss basis.