If you are a passionate devourer of the stuff that is peddled on social media, replete these days with feel-good and “nationalist” messages of how good times have begun for India, you can happily join the band of ostriches burying their heads in the sand. If not, a discriminate scanning of the recent stream of news ranging from the lynching by the cow rakshak gang to the not-so-shining reports on the state of the Indian economy, will cause distress.
The Economist ’s cover story in the week that Prime Minister Narendra Modi was travelling to the US, titled “India’s prime minister is not as much of a reformer as he seems”, and dubbing him “more of a nationalist firebrand”, was damning enough. Forget political comments such as the appointment of Yogi Adityanath as Uttar Pradesh’s Chief Minister, the article put a magnifying glass on the Indian economy, which would seem to be growing at a sparkling pace if you were to go by the Sensex and Nifty making new highs regularly. Alas, the reality on the ground is different and the euphoria on Dalal Street is barely visible on the dust-laden and grime-filled streets of India. Or in the trading and business community engaged in the small and medium sectors, which is struggling to come to terms with the complications that riddle the GST, touted as the panacea for all ills.
It can be argued that it’s early days yet and the benefits of this mother of all tax reforms will take some time to percolate to the marketplace. The Economist, by the way, has been slammed on social media as a “leftist rag”, and worse, has labelled the GST as “unnecessarily complicated and bureaucratic, greatly reducing its efficiency”.
And now, more recently, The New York Times has put the scanner on the hyperbolic expectations from the Indian economy by the acid comment that “Mr Modi’s economic promises are so extraordinary they must be taken with a deep slurp of salty lime juice”!
Demonetisation aftermath
The adverse effects of demonetisation, which The Economist had described as “counterproductive, hamstringing legitimate businesses without doing much harm to illicit ones”, but were lustily cheered then by the common Indian, because as a businessman put it succinctly “ameeron ko mara hei” (the rich have been bashed), are more plainly visible now. Tens of thousands of enterprises in the informal sector that works mainly on the cash economy and were devastated as the old ₹1,000 and ₹500 notes were pulled out, have failed to recoup. However well-meaning and welcome the intention to thrash the black economy of India built on the back of corruption, this move has been a nightmare for those daily wage earners whose livelihood has been destroyed.
And now there is loose talk of the new ₹2,000 being withdrawn from the system! Small wonder that the dampened consumer sentiment has failed to pick up, and the economy grew by a very modest 6.1 per cent in the first quarter. A far cry from what we have been led to expect from a “dynamic, corruption-free government”.
Job creation blues
Even worse, a government that had come to power promising creation of millions of new jobs, on the hype of a manufacturing boom under the “Make in India” brand, is presiding over an India that is witnessing a decline in job creation. There have been a slew of reports detailing how job creation has shrunk. The IT industry has been laying off huge numbers; the reasons cited are both automation and restrictions in foreign countries, particularly the US. The other big employer of Indian blue-collar workers, the Gulf region, is sending back Indians home in droves as the sons of the soil clamour gathers pace there too. Another sector hit by demonetisation is real estate, where construction activity has plummeted. Of course, black money sucked out of the real estate market and falling property prices are both welcome, but the results on the ground are a steep fall in the livelihoods of both the skilled and the unskilled labourers in the construction industry. They have very little to fall back upon.
In the midst of this gloom what is galling is that those who can work their way around the system are thriving. There are media reports that tax sleuths are investigating old, dormant companies that have suddenly become active in the post-GST regime – barely two weeks old – to avoid GST. Shell companies are also being formed to work around this tax. Apparently a sudden spurt in economic activity has been noticed by old, dormant companies. It’s mind-boggling to note how crooks are always two steps ahead of the system; while genuine traders and businessmen are scratching their heads to figure out the intricacies of GST and comply with the tax, the benamis and the corrupt are already in action. Just as in the post-demonetisation era, while Indians lined up at ATMs, huge bundles of new notes were seized, often in crores, from the corrupt.
All this leaves us with little option but to leave the bubbly alone, and slurp on salty lemon juice in the meanwhile!
(The article first appeared in The Hindu BusinessLine.)