Indian economy is facing a grievous slowdown and the only way to correct the course is through sustainable measures promising longevity
Can't believe it's September already! Eight months have swiftly passed us by and before you knew it, we are staring at the last quarter of the calendar year. I have always quite liked September. It's that slightly under-appreciated month of the year. Can't complain too much about it like in the summer months but can't rejoice too much either, with the end of the year merry-making months holding on to their throne of importance. But I have always liked the understated month of September. September brings with it a melange of religious festivals – Ganesh Chaturthi, Hartalika Teej, Onam, Muharram, etc.
September also signals the turn of the season. Along with the cough, cold and viral fevers come some thundershowers and some clear azure skies pitted with just the right amount of cotton candy clouds. Ask any Bengali and she/he'll take one look at the blue sky and another at the sprouting perennial grass, saccharum spontaneum (popularly called 'kaash'), and proclaim, Ma aaschen! Indeed, September is the precursor, and sometimes even host, to the famous Durga Puja. With September, it is safe to say that the festive spirit well and truly starts in India as we tease ourselves with little celebrations while prepping for the big ones such as Diwali and New Year's Eve. But for the third time in a row, the festive mood is slated to be a damp squib.
India has gone from the scare of an economic slowdown to being smack in the middle of it. The country's gross domestic product (GDP) is at 5 per cent in the first quarter this fiscal; a staggering 6-year low. Compare that to an 8 per cent growth in the same period in the last financial year. The culprits of this situation? Low consumer spending and poor corporate investment. Consumer demand was so muted in the first quarter that if you look at the gross value added (GVA) i.e., GDP minus taxes, it paints an eerie picture of economic activity in the country. The GVA was 7.7 per cent in April-June 2018 while in the same period this year, it plunged to 4.9 per cent. The manufacturing sector, one of the strongest indicators of economic activity, grew only 0.6 per cent in April-June 2019 versus 12.1 per cent in the first quarter of 2018.
No wonder then that auto inventory is piling up, auto majors are opting to stop production for a few days and have also been shutting down factories, laying off contractual workers. Apparently, 3.5 lakh people in the auto sector have lost jobs since April. It's not just the auto sector that has been burnt by the economic downturn. India's household biscuit brand, Parle G, is looking to fire over 10,000 workers. A high rate of GST on biscuits costing as low as Rs 5 did the company in. More job losses are sure to follow in other sectors.
So, who indeed are the real culprits of this economic slowdown? Let's start with Culprit No. 1: Demonetisation. As was predicted by economists, the demonetisation drive would make India lose 1-2 per cent of GDP. At the cost of turning the country corruption and tax evasion-free (there was really no other economic reason for demonetisation – political, yes but no economic reason), the currency ban almost wiped out the disorganised sector. Not surprising that there is a "demon" in demonetisation. Culprit No. 2: Goods and Services Tax (GST). The ad hoc implementation of GST has gravely harmed the industry. Take Parle G's case for instance. And the confusion that ensued due to tedious GST compliances has created another mess for the government. Forget about accruing more tax, only 15 per cent of taxpayers have filed annual GST returns citing the complexity of forms.
The state of the economy is serious but it's not on life-support yet. Simplification of GST returns, lowering of GST tax rates, and additional sops to certain sectors can immediately help alleviate the crisis. The government must stop spooking foreign and domestic investors with higher surcharge as they pump blood into the economy. But only long-term policies with longevity will steer the economy towards the right course. Instead of witch-hunts such as 'angel tax', the government must simplify compliance as well as regulation. The economy must be urgently resuscitated.
(The writer is an author and media entrepreneur. The views expressed are strictly personal)
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