On the eve of the first anniversary of demonetisation, the man who rescued the fossilised Indian economy in 1991 and firmly put it on the path of globalisation and liberalisation, on Tuesday, blasted the November 8, 2016 move as a “disaster” that only benefitted China, and also trashed GST as promoter of “tax terrorism”.
Due largely to demonetisation and GST, India’s imports from China in the first half of 2017-18 increased by 23 per cent or Rs. 45,000 crore, from Rs.1.96 lakh crore to Rs. 2.41 lakh crore, former Prime Minister Dr Manmohan Singh said. “These twin blows damaged India’s MSME sector and our businesses had to turn to Chinese imports at the cost of Indian jobs.”
In a powerful address to traders, businessmen and others here, he said “with immense pain and a sense of deep responsibility I declare that the 8th of November was a ‘Black Day’ for our economy and indeed our democracy. I remember feeling shocked when I heard the Prime Minister’s (Narendra Modi’s) announcement and I wondered who advised him to inflict such a reckless step on our nation, and whether any considered thought went into it.”
Stating that demonetisation had been suggested in the past to eradicate black money but “we never took such a drastic measure because, in our reasoned analysis, the costs of demonetisation always exceeded the benefits.”
“Demonetisation has proved to be mere bluster to reap political dividends while the real offenders have escaped. I repeat it was organised loot and legalised plunder.”
He said no democracy in the world has undertaken such a “coercive” move, withdrawing 86 per cent of legal tenders in one single swoop. Neither would anyone advise to bring out an even more high-value currency note of Rs. 2000 after invalidating 500 and 100 rupee notes.
Due to demonetisation, Dr Singh said, the GDP growth rate dropped to 5.7 per cent. “Even this is bound to be a gross underestimate as the pain of the informal sector is not adequately captured in the GDP calculations. Every one per cent loss of GDP annually costs our nation Rs. 1.5 lakh crore. Think of the human impact from this lost growth — the lost jobs, the youth whose opportunities have vanished, the businesses who had to shut down and the entrepreneurs whose drive to succeed has turned into discouraged disappointment.”
“What is even more tragic is none of the lessons from this monumental blunder have been learnt by the government, which, instead of providing relief to the needy, chose to inflict on them a badly designed and hastily implemented GST. These twin blows — demonetisation and GST — have been a “complete disaster” for the Indian economy.
Citing statistics and examples, the ex-PM pointed out that the UPA’s GST envisoned a single tax capped at 18 per cent, while the current one has transformed it into a “complicated mess with multiple slabs”. “This was done by the government without paying any heed to our advice…Compliance requirements have become a nightmare for small businesses. The unending notifications and changes, a repeat of the chaos of demonetisation, have caused needless confusion.”
He said, along with demonetisation, GST has sown a deep-rooted fear of tax terrorism among the business community. At a time when the economy has slowed down considerably, despite favourable global economic conditions, the fear of tax terrorism has eroded the confidence of businesses to invest. “As you know, the growth in private investment is at a 25-year low. This is terrible for India’s economy.”
“Did the Prime Minister (Narendra Modi) stop to consider the wisdom of the Mahatma while asking the RBI Governor to sign on the dotted line or while implementing the GST in haste? Did he think about the impact on those who toil in the informal sector whose earnings dried up because of shortage of cash? Did he think about the millions of people who lost jobs and had to return to their villages in despair? If the Prime Minister had paid attention to the Mahatma’s talisman, the poor of India would not have suffered the way they did.”
Dr Singh said the UPA Government had lifted 140 million people out of poverty, a task no democracy in the world had achieved.
Source : The Hindu