By Sakshi Ranjan
According to this report on Firstpost, the GDP for the April-June quarter were stuck at a pathetic three-year low of 5.7 percent, and according to economists, this slowdown can be attributed to the recent changes brought about by the Government, more specifically, demonitisation and the reckless and hasty implementation of GST.
A 7 percent increase was expected and it would have certainly been an achievable goal had it not been for the note-ban and the implementation of the indirect tax reform.
The Double Blow:
It has been close to one year since the demonetisation was announced by the government. And since then, the move has resulted in a massive disruption, especially, in the rural sectors and the un-organised sectors, resulting in a massive increase in unemployment and a sudden decrease in consumption.
The informal sectors and the small-scale sectors that have been thoroughly hit, are responsible for at least 50 percent of India’s GDP, if not more. The majority of the population in the country, is found in rural areas and the informal sectors. And these sectors, being already distressed, have slid down the spiral, reducing the overall demand in the economy.
It has been opined that this series of Demonetisation and GST was preceded by back to back droughts in the country, which makes us question the timing of the conceptualisation and the implementation of these reforms.
Reportedly, the former finance minister Yashwant Sinha said that an expeditious revival of the economy cannot be expected, at least not until after the next general elections and, that if the old calculation methods are used to calculate the GDP growth, then the same for the April-June quarter will fall farther to 3.7%.
As per the Organisation for Economic Co-operation and Development (OECD), these surly after-effects that the implementation of demonetisation and GST have brought about will continue even into the next financial year.
Results After GST Implementation:
It was also reported that, trading companies had started de-stocking in the hope that they would buy up fresh stocks under the new tax system after the implementation of the GST on July 1, 2017.
But analysts say the re-stocking process being carried out by the companies is futile and firms would rather wait for the GST system to stabilise before going full swing again due to it’s haphazard implementation.
This development being put into play just before the festive season has further slowed down consumption by the consumers and is bound to impact GDP growth in the second half of 2017 resulting from massive ‘demand squeeze’.
A major risk of revenue shortfall is to be expected in 2017-18 due to the patchy working of the GST network (GSTN). As reported, the finance ministry received GST refund applications that totaled Rs 65,000 crore for July when total collections were Rs 95,000 crore. And if all refunds are allowed, the Centre would be left with a minimal Rs 30,000 crore when in actuality the net collections are budgeted at over Rs 90,000 crore a month on average.
These glitches that have unceremoniously occurred since the software of the GSTN has been incorporated, showcases the shoddy implementation and the lack of preparation by the government before they decided to roll out of this ‘landmark reform’.
The Government’s Explanation:
The government, however, has been adamant in its stance that that the current economic slowdown only reflects the temporary “teething troubles” of the GST and moreover, demonetisation has been termed as a major step towards fighting corruption by the BJP, according to an article on Hindu Business Line.
Inspite of the angle that the govt. is trying to give to demonetisation of how it has been and will be good, no one can deny that so far it has just been a big fat disaster, and even known economists are backing up this point. Whether you take black money or you take terrorism there has been no positive change in either of these areas.
In fact, all this has only resulted in the resurfacing of counterfeit money and robbing a couple of million daily earners off of their only source of income as per Moneycontrol.
One could argue that demonetisation has introduced about 9.1 million new taxpayers, as reported by Livemint, thus indicating an increase in revenue of the country, but unfortunately, this will not be bringing the kind of big and impactful change that we are being made to believe.
The said reforms obviously have ignored the interests of the ‘last man’, who’s faced the brunt and continues to do so. In a non-inclusive economy like ours, social costs of changes attempted to be ushered in cannot be overlooked. Dwindling economic status of the population is bound to lead to overall insecurity, giving rise to ruptures in societal fabric.
The government needs to shake off its state of denial, to admit and acknowledge errors towards rectification. Questions and criticisms are increasingly seen as pessimism and national disloyalty; a facet that poses grave dangers to the democracy. The dead habit of paying attention to conformists is certainly not the need of the hour to rescue the economy out of its current tailspin.
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