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Sunday, April 21 2024

Twin blow of demonetisation, GST, a complete disaster for economy: Manmohan

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Ahmedabad: Former Prime Minister Manmohan Singh on Tuesday said the “twin blow” of demonetisation and the “badly-designed” and “hastily-implemented” Goods and Services Tax (GST) was a “complete disaster” for India’s economy and asked Prime Minister Narendra Modi not to lower the democratic discourse by calling his critics anti-national or anti-development.

A day before the first anniversary of the government’s November 8, 2016 decision to spike 1,000 and 500 rupee notes, Manmohan Singh in his address to small businessmen and traders in this city of election-bound Gujarat said the move was a “black day for our economy and indeed for our democracy”.

He said the measure to recall large currency notes to curb tax evasion and black money had been suggested to earlier governments too but “we never took such a drastic measure because the… cause of demonetisation always exceeded the benefits very substantially”.

“One must also remember that nowhere in the world has any democracy undertaken such a coercive move (of) withdrawing 86 per cent of legal tender in one single (stroke). Neither would anyone advise bringing out even more high currency notes of Rs 2,000 after elimination of 500 and 1,000 rupee notes.”

The noted economist said he still remembered how “shocked” he felt when Modi announced the decision on the night of November 8 last year.

“I wonder who advised him to inflict such a reckless step on our nation and whether any considerable thought went into it. Black money and tax evasion are a menace that the country needs to tackle,” he said, adding “the demonetisation was clearly not the solution”.

He said the measure had failed its ostensible purpose of curbing wealth accumulated through tax evasion as it was known by now that none of the stated objectives of eliminating black money, terror financing and counterfeit currency have been met.

“The fact that more more than 99 per cent of the (spiked) currency came back into the banking system has punctured the government’s claim. There are also widespread reports of the rich converting their black money into white while the poor have undergone immense suffering,” he said “invoking the memory of more than a hundred people who lost their lives last year in the wake of the demonetisation”.

“Demonetisation has proved to be a mere bluster to reap political dividends while the real offenders have escaped.”

He reiterated how he described the measure in Parliament “as an organised loot and legalised plunder”.

He said while the demonetisation had reduced economic growth to 5.7 per cent, it was still a “gross underestimate as the pain of the informal sector is not adequately captured in the calculation of the GDP”.

“Every one per cent loss of our GDP growth rate annually costs our nation Rs 1.5 lakh crore. Think of the human impact on the lost jobs, the youth whose opportunities have vanished, the businesses who had to shut down.”

He said what was “more tragic is that none of the lessons from this monumental blunder have been learned by the Modi government.

“Instead of providing relief to poor and marginalised farmers, traders and small and medium business… the government chose to inflict on them a badly designed and hastily implemented GST. This twin blow is a complete disaster for our economy. It has broken the back of small and medium enterprises of India.”

He said the measures had deeply impacted the production sector of India, and China on the other hand benefited from demonetisation and GST.

“In the first half of fiscal year 2016-17, India’s imports from China stood at Rs 1.69 lakh crore. And in the same period in fiscal 2017-18, the import from China increased to Rs 2.41 lakh crore. This unprecedented increase of imports by more than Rs 45,000 crore which is a 23 per cent increase in a year can be attributed largely to demonetisation and GST.”

He said along with demonetisation, GST had sown a “deep rooted fear of tax terrorism among the business community”.

He said good governance involved both the “head and the heart and it pains me to say that the Union Government has failed to do its duty on both fronts”.

Manmohan Singh also criticised the government for the bullet train project to run between Mumbai and Ahmedabad, calling it “an exercise in vanity” that won’t benefit the nation as a whole.

He said the priorities of the government were “misplaced” and it should have instead improved the safety infrastructure of India’s railway network.

Manmohan Singh said people should be allowed to ask the government about its public policy.

“By questioning the bullet train, does anyone become anti-development? By questioning demonetisation and GST does anyone become anti-national?

“This attitude of suspecting everyone to be a thief or anti-national, low level rhetoric is damaging to democratic discourse.”


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