Demonetization and GST: Is not Indian economy failing under Modi government?

Apparently, Indian PM Modi has managed to pump into Indian mindset, badly crushed by the Congress era corruption cum arrogance, a lot of empty optimism as he fed the people with empty promises. He knows that mere promises but with conviction are enough to get their votes, in the absence of credible alternatives in the country.

Demonetization and GST have been part of his effort to give the world an illusionary impression that India is fast moving, economically.  Like his predecessor Manmohan had done he only promoted the interests of the rich and corporate class whom Indian parliament and state assemblies dutifully represent for the money they have pumped into their accounts to make illegal wealth.

Economic gimmicks

Ever since Indian independence, the ruling class has concentrated on generating a strong rich class to compete with British and American lords and their public talks about the uplift of the poor is just a pure gimmick to fool the voters. 

Indian poor and common folk remain uncared for and purely a votebank stuff. PM Modi’s false promises have further disillusioned the people and shattered even their hopeless hopes.

Analyses of impact of demonetization and GST on Indian economy vividly reveal that these new modern trends launched by PM Modi as his own contribution to miseries of Indian masses suffering since the very shining Indian Independence in1947 have further confirmed the hunch of the people that Indian regime is systematically ruining the national poor.

Not just that.  Already privatization by the Congress-BJP regimes has created more economic lords and uplifted the rich and corporate lords while kicking the poor and common people deep into the hell.  Now demonetization and GST ha harmed the economy of India that has since then slumped as another historic phenomenon.

Both Congress and BJP, the top two national patties with huge economic resources at disposal, mostly kept secretly compete with each other to promote the interests of the corporate lords and the rich that represent the nation abroad. In fact, Congress party began the capitalist trend by selling most of state assets to the rich at throw away prices, making them internationally competitive corporate lords.

The figures of economic decline and job losses, academics, parents of the young and society in general are losing sleep over the fallout.  The strains on the social fabric of India which has been rent by Hindutva politics are huge.  As violent young men, presumably of no fixed occupation, roam the streets looking for soft targets to vent their rage, cattle traders of the minority community and the untouchables of Hindu society have already seen their livelihood disappear in the name of religion. Won’t the trend affect Indian economy? All this will have a serious impact on the economy with export of leather goods, an important foreign exchange earner, taking a beating.

Fixing the poor further by GST

Today, BJP has gone a step further making the rich the real owners of India while poor continue to vote to offer legitimacy to political outfits loot their resources.  PM Modi, busy with is foreign torus along with corporate lords at state expenses, believes in strong rhetoric to make Indians feel proud of him and pro-poor speeches while his government is entirely making all efforts to make the rich and compote lords economically and financially happier than ever before, while BJP leadership is worried only about the poor fate of IPL boss and BJP MP Vijay Mallya who now enjoys life in London backed by PM Modi but unable to return to his ‘mother land’. 

Mod’s demonetization and GST have on helped the rich and made the life of ordinary Indians miserable.

There are of course deep structure problems in the economy which have resulted in the economic mess. But what is also undeniable is that Modi’s capricious economic policies, such as the pointless demonetisation exercise, coupled with his government’s inability to implement the long planned GST — it has been in the making for 16 years — have come as severe blows to the economy and the hopes of a demographically young country.

Modimics with his novel gimmicks has driven national economy into a wilderness but he justifies everything he has or has not done and conveniently blames the previous Congress government for weakening economy beyond redemption.  “There are some people who sleep well only after they spread a feeling of pessimism. We need to recognize such people,” he declared at a national meeting of company secretaries. He dismissed the doomsayers as just a ‘handful of people’ who were painting a negative image of the economy based on the slowdown experienced during just one financial quarter. As the prime minister put it, the fuss over a decline in growth to 5.7 per cent in the last financial quarter was unwarranted since it had fallen to much lower levels below that during the previous Congress rule.

Economists have revealed that the private investment has shrunk as never before in two decades, industrial production has all but collapsed, agriculture is in distress, construction industry, a big employer of the work force, is in the doldrums, exports have dwindled, sector after sector of the economy is in distress.

Joblessness is looming large over India keeping awake millions of desperate young people who are finding jobs disappearing at an alarming rate. In industry after industry, from banking to capital goods, in premium sectors such as IT, the job losses are of staggering proportions. And the distress is widespread, encompassing agriculture and service, too.

India’s demographic bulge means that least 12m young people are added to the workforce every year but the government’s record on job creation has been dismal so far and has touched a six-year low. The experts offer no hope of the nightmare ending soon. It is forecast a further 30pc to 40pc reduction of jobs in the manufacturing sector.

While the government is now stirring itself to sort out the GST mess it continues to pretend that all is well with economy. the current figures of growth are all based on statistical fudge by changing the methodology for calculating the GDP which would be a mere 3.7pc instead of the boosted 5.7pc.

The fall

The hard truth is that India has slipped badly. The deficiencies of Modimics have been made worse by the economic disruption caused by the chaotic demonetisation exercise last November and the near standstill resulting from the GST, a poorly planned and implemented national tax system.

The fact remains that the decline in the growth has been consistent during the last two years but he neatly sidesteps inconvenient truths such as the lowering of growth rates by everyone from the IMF to the Reserve Bank of India.  The doctrine of denial and deflection relies on ad hominem attacks and uses the abrasive language of the hustings to demolish critics.  The rhetoric is dangerously delusional and sinks to ludicrous levels as when the BJP party chief Amit Shah claims the dip in growth rate is due to ‘technical reasons’ without explaining what these could be.

Clearly, nobody can sleep well except the fat cats of business who are close to the ruling regime and whose businesses flourish under official protection. For the rest, it appears to be a nightmare from which there is no escape.

For the youth  who naively but genuinely believed that Modi would indeed create 10 million jobs every year as he promised in his 2014 election campaign, the awakening has been specially bitter.

Greatest blunder

Of late, the ruling Bharatiya Janata Party's top financial minds have begun speaking out in strong words about the precarious state of the Indian economy. They are highly critical of the Narendra Modi government’s failure to act in time to arrest a major economic slowdown despite early warning signals, certain unwarranted economic moves that only worsened the pain and about the government’s reluctance to accept past mistakes and work on concrete remedies. The latest such caution has come from BJP leader and former union finance minister, Yashwant Sinha.

Sinha minced no words while accusing Union Finance Minister Arun Jaitley for the current mess built up in the economy. Sinha feels “it is his national duty” to speak up now and said that many in the BJP know the state of affairs in the economy but are afraid to speak up “out of fear”.

Yashwant Sinha did not elaborate on what are the reasons for the fear though. He has criticised Jaitley for ‘wasting’ the oil bonanza and letting the legacy problems (stalled projects, bank NPAs) persist and even turn worse. He listed certain economic ills such as absence of private investments, return of the “raid raj” and distress in “sector after sector” in the economy. Of course, Sinha isn’t the lone economic critic of the government from the BJP's own camp. It wasn’t long before BJP MP Subramanian Swamy, also a known academic/economist, hit out against the government’s economic policies and cautioned that the economy is on a tailspin and corrective measures are in order to avoid a depression.

Similarly, former union minister Arun Shourie too came down heavily on the Modi government saying it is only managing headlines and not the economy. Shourie called ‘demonetisation’ — Modi’s biggest economic move — as the greatest blunder in 70 years.

Empirical evidence suggests that the critics of Modi-Jaitley aren’t far off the mark in their allegations and something must have really pushed them to initiate friendly fire.

Multiple economic indicators and trends emerging from different sectors point out a serious economic problem that is difficult to ignore even for hardcore Modi fans who admire the bold rhetoric by former Gujarat CM who is now fully focused on the state elections to retain his rule as one man party at the centre. If his BJP loses in the poll, he would  feel the pinch directly and  anything might happen in his political career. 

Private investments are lowest in many years, GDP has been falling quarter after quarter and hit 5.7 percent in the June quarter, bank non-performing assets (NPAs) are too high and hence credit growth to industries at multi-year lows, industrial production has plummeted, inflation is inching up limiting room for the Reserve Bank of India (RBI) to cut rates and unemployment is rising posing a big question mark to millions of new entrants to the job market.

The government’s twin back-to-back disruptions — demonetisation and rollout of goods and services tax (GST) — have acted adversely to economic recovery. It will take a while before GST revenue streams stabilize and the consequences of demonetization become a distant memory.

Even the most optimistic of economists agree that a significant revival in the present economic scenario is unlikely in the near future even if the much-hyped bail-out package is rolled out now.

Economic crash and denial mode

Obviously, PM Modi and his ministers do not accept the defeat in the economic reforms like demonetization and GST taxing, etc  It is not in the book of RSS/BJP family to admit their mistakes even when people suffer. .

The BJP government is in a tight spot since any economic stimulus will compromise the hard-won gains of the improvement in fiscal deficit. But, with no pick up in private investment on the horizon, there is no option for the government but to loosen its purse strings. There is no easy way out of the current scenario.

The biggest cause of worry at this point, however, is that the Modi government continues to be in denial mode of the actual state of the economy and often opts for diversionary tactics to turn attention from the real problems. It was only recently that BJP President Amit Shah said the decline in gross domestic product (GDP) is only “technical”  Shah must remember that technical reasons have only helped to show GDP growth rate in a better shape. As Yashwant Sinha points out in his article, had it been the old methodology of GDP calculation, the growth rate would have shown even lower (by at least 200 bps). Jaitley too makes frequent statements to establish that critics are wrong. This denial is even more dangerous since the first step to solving a problem is to acknowledge it exists.

Even more worrying is Sinha’s comment that many in the ruling party are afraid to speak up openly on the state of the economy, despite knowing the facts. If that is true, this is the most unfortunate thing to happen in a democratically elected government. It reduces the whole affair to the work of a closed group, denying scope for discussions and gaining from collective intelligence. A room for discussions, criticism and dissent is crucial to generate consensus in a democratic set-up. If fear is preventing BJP leaders from speaking up and pinpointing important economic issues, it will be difficult to find newer solutions. Sinha’s caution should be an eye-opener for PM Modi. His government, particularly Arun Jaitley, would do well to stop pretending all is well in the economy and pay attention to informed criticism to seek solutions.

Yashwant Sinha, former finance minister in Atal Bihari Vajpayee government, has said that for Indian economy the shock of demonetisation and GST in quick succession was like two diseases hitting a person one after the other. "Demonetisation and right after that GST were like two diseases hitting the economy in quick succession," Sinha said in an exclusive interview. "The state of the economy is not good," the veteran BJP leader added. Sinha said his sentiment was shared by a large number of leaders within the BJP but people were not speaking up out of fear.  "It is extremely hard in the remaining 18 months of Modi government to get the economy back on track and for some concrete effect to be seen

Earlier, Sinha wrote that economy has been on a downward spiral. He painted a grim picture of economy and wrote that Modi government's statistical changes in calculating GDP have inflated the figures by over 200 basis points, or 2 percentage points, annually. This, he wrote, meant that the current 5.7% growth is actually somewhere around 3.7% only.

Sinha wrote that private investment had shrunk like never before, industrial production had all but collapsed, agriculture was in distress and the rest of the service sector was also in the slow lane. Exports had dwindled and most sectors of the economy were in distress. Demonetisation had proven to be an unmitigated economic disaster and a badly conceived GST played a havoc with businesses.

One of the most leading corporate lords, Mukesh Ambani Says India would be among top 3 Economies in 10 years but he has not mentioned about the other two economies to compete with India. Chairman and MD of Reliance Industries Ltd., Ambani said at the India Mobile Congress in New Delhi that India will grow from its current size of $2.5 trillion to over $7 trillion in the next 10 years to rank among the top three economies in the world.

Ambani said data is the “new oil”, and India’s mobile data infrastructure is unparalleled in the world. In the last one year, India jumped to becoming the largest data consuming country from the 155th slot in mobile broadband penetration, he said, adding that the pace at which India has grown is unparalleled in the world. At the event, Ambani said 4G coverage will expand in the next 12 months to overtake 2G usage in the country. Reliance launched Jio a year ago, which provides 4G data services.

Ambani added that, as a nation, India missed out three phases of the industrial revolution — mechanization, mass production and automation. However, the fourth industrial revolution has begun and India has an opportunity to lead. Mobile internet and cloud computing are the foundations of the fourth industrial revolution and data is the new oil, Ambani said. “We do not need to import it. We have it in abundance. It will help in creating prosperity and opportunities for India and 1.3 billion Indians. However, as a top business magnet Ambani would be interested only in expanding his wealth and control the parliament and state assemblies.

Observation

Emergence of Narendra Modi on the national scene happened all of a sudden. The fact that Gujarat CM Modi had fit into the need of the time when anti-corruption movement under Kejriwal-Anna Hazare was  in its peak, targeting the then ruling Congress led UPA coalition and obviously people at large were fed up with the  Congress misrule and sought a new leadership  with a promise of new life. Modi did exactly that, promising everything to everybody. Against a soft spoken and innocent looking Manmohan Singh,  BJP’s PM candidate who claimed  great development in Gujarat because of him and his  administrative capacity,  Modi presented himself as a strong leader with a heavy voice.

Modi knows poll promises are just a stunt to outsmart the opponents and need not to be kept. Since there is no leader at national level with a charisma, Modi continues to claim superiority over others without even naming the areas where he is better. Having been elected PM of India Modi began moving from national to international and he began earnestly by inviting every South Asian ruler for his inauguration ceremony and all of them came to greet him and then Modi moved on further to meet western leaders, met the US president more than once. So he is happy with his foreign tours.

Like Trump, Modi also wants to capture the global media attention by his abrupt demonetization and GST moves but that brought pains to common Indians.

PM Modi must know whether he, accepting defeat,  is allowing with totally wrong decision without  allowing any debate in public domain about possible consequences,  the Congress party to return to power after the next general elections. People of India would never like to bring the Congress party to power notwithstanding the fact that even the Left parties are also ‘bating and bowling’ for the Congress return. . 

All said and done, PM Modi is one of the luckiest men on the earth- from a small railway station tea vendor he has been able to become the PM of a large nation to make President of India and appoint big  people in offices, including judges and governors. .

It is quite likely, Modi wants to do something for India as a token of expression of his gratitude for his great fortunes that many top politicians missed in their career.

Oratory skills of a leader are not enough. Modi cannot compete with Trump who is the global leader, whether he deserves it or not.

Desires alone are not enough for real achievements in the nation as PM Modi has no real innovative thinking nor has any good honest team to advise him on India’s credible future. 

But now Modi lives only in dreams, foreign tours and pure gimmicks. He needs to revamp hs high taxing GST that has harmed the poor and common people badly after they underwent traumatic situation due to his demonetization drive announced in a midnight as the results of US Presidential poll favoring Trump were coming. Could he outsmart Trump? In order to somehow retain Kashmir within Indian constitution, PM Modi has also decided to buy plenty of oil from USA - a senior anti-Islamic strategic partner.  .

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