Home truths from an unexpected quarter

After innumerable voices of pain emerged from the streets of India on account of there being no signs of achhe din , last week two experts from the Sangh Parivar surprised the nation by giving negative points to the economy.

First, the maverick BJP MP Subramaniam Swamy lashed out in an interview to a television channel that the Indian economy had gone into a “tail spin” and went as far as to predict, not a recession, he clarified, but a depression. But Swamy’s penchant for all kinds of fantastic claims is well known, and has to be taken with a pinch of salt, even though the occasional googly he drops does hit home.

Within a couple of days of this interview, when RSS ideologue and brilliant chartered accountant S Gurumuthy said in Chennai that the Indian economy was “hitting the bottom now, and there is no way this situation can continue”, alarm bells must ring. Speaking at a meeting organised by the Chennai International Centre on ‘Demonetisation — Its Role, Impact and Follow-up’, he blamed “too many disruptions” such as demonetisation, NPA regulations, GST and bankruptcy rules for this state of affairs.

His tone was measured, he was not critical of the top political leadership — in fact, he praised demonetisation as a “corrective step and an investment” that had resulted in 30 crore bank accounts being opened — but he did not mince words when he said that while demonetisation was a badly needed measure, its implementation was bad enough to make it a “gas chamber”.

You may disagree with Gurumurthy’s political ideology, but you can’t quarrel with his razor sharp analytical skills, especially when it comes to matters of finance and economy.

At the Chennai meeting, while maintaining that he was not there to “defend the Government”, he refrained from projecting a doomsday scenario and expressed optimism that economic revival could happen immediately if the Government took the required measures.

Former RBI governor Raghuram Rajan, who became the first to be denied a second term in many years, didn’t mince words either when he finally broke his silence recently on demonetisation. He revealed that as governor, his views on demonetisation had been sought, and were orally given.

He had opposed it for the simple reason that he felt its short-term economic cost would outweigh any long-term benefits. Rajan made this disclosure in his latest book, I Do What I Do , which is a compilation of his speeches on various issues as RBI governor.

Economic growth has indeed decelerated with GDP growth slowing down from 7 per cent in the October-December quarter, to 6.1 and 5.7 per cent in the following two quarters. The withdrawal of 86 per cent of currency brought shock and awe, and the cash squeeze has badly hurt both consumer spending and investment decisions by businesses. The wane in confidence at all levels is palpable, irrespective of the bursts of upward spikes on Dalal Street that have sent the Sensex roaring to new highs.

It is now common knowledge that the lethal blow that demonetisation — particularly its implementation and the snail’s pace at which the new currency was made available in the market, necessitating initial restrictions on cash withdrawal — dealt on the informal sector isn’t going to heal soon. As the cash crunch forced tens of thousands of small manufacturing outlets across India to shut down, lakhs of people lost their jobs; the generation of new jobs is just not happening.

Fruit and vegetable vendors, or the guy selling fish, who still deliver at the doorsteps, continue to borrow money for their daily grind at atrociously high interest rates, going up to a crazy 500 per cent or more. Digital India remains a dream for them, as the moneylenders’ noose tightens around their necks.

Add to this the confusion that prevails on GST, coupled with the mindset of a section of our business community — which in the first place is largely responsible for the generation of black money — that continues to think of devious ways to escape the tax net. You have a lot of anger among honest taxpayers, largely the salaried classes, that they have ended up paying much higher prices through GST for goods and services that are an essential part of their day-to-day living.

So the mood among ordinary people, who lustily cheered the prospect of hoarders of black money getting bashed, but only ended up finding bundles of new notes being delivered by some corrupt bankers to homes/offices, and the RBI confirming that most of the banned old notes got back to the vaults, is turning dark and angry. Any ruling dispensation that doesn’t walk the talk is treading on thin ice.

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