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Economy Will Grow After Demonetisation

Prime Minister Modi has once again floored his opponents who have failed to size up to him even after 30 months. Modi keeps maintaining a respectable distance from his political rivals. They have failed because they have become used to criticizing the charismatic leadership of anybody other than their own leader, on command, without applying their own mind.

If the language of the critics of PM Narendra Modi is examined carefully it will reveal a chasm between his leadership qualities and that of his challengers. How many opposition leaders are considered honest by the people?

The Congress has been desperately busy inventing some lapse on the part of Modi to hook him. Had Modi been guilty even slightly, the Congress leadership would have swallowed him alive long before 2014 when they were making many dirty accusations against him.

Their ministers made public statement of “zero loss” in scandals like the coal mines scam, which led to the cancellation of 200 plus coal mining licenses granted by the Man Mohan Singh led Congress government to ineligible applicants causing revenue losses to the exchequer amounting to a whopping Rs. 1,76, 000 Crore. The Narendra Modi government has auctioned these mines in a transparent manner and collected more revenue than that amount.

Funnily, the same Congress is trying to smear Modi  in the name of entries in some of the coal mines applicants, who were known  regular financiers of the corrupt regime before Modi entered the office of the Prime Minister and started cleaning the mess created by them.

Demonetization is one radical policy instrument which has exposed his opponents’ hollowness in economic, political, social and foreign policy space. More than 90% Indian citizens have supported demonetization, yet the disgruntled politicians, parties and their friendly media make loud claims that it is opposed by 90% people!

These prophets of doom are spreading the scare of decline in growth of the economy in the coming years, loss of jobs and real incomes. They are absolutely wrong.

If anything, the economy will grow and gain robust traction in the next few months. The change this time will be quantitative as well as qualitative.

India has already broken the stranglehold of the shadow economy on growth by disempowering the black money economy and in the process ousting the parallel government  on 8th November 2016. Hence the propagated decline in economic growth will be for the non-existent growth of the kind of the Kingfisher Airlines, which has defaulted on repayment of bank loans to the extent of Rs 9000 Crore. The owner of the airlines has simply gone abroad, defying the orders of the court to return and face trial.

There are hundreds of fake businesses whose total outstanding loan to public financial institutions exceeds 5.00,000 Crore rupees. Their names will soon become public as the Supreme Court has ordered yesterday that their names not be kept a guarded secret anymore. Once that becomes public knowledge, the manufactured data about growth and incomes will automatically be demolished like an ant hill.

The public has been looted for almost 70 years with impunity not only by Chit Funds like Rose Valley, Saradha etc. but also spurious industrial units, businesses, export oriented units enjoying political patronage.

It was the most sinful of loot sharing arrangement in the country between the politician and businesses. It stifled real growth, promoted falsification of data and killed all enthusiasm for new investment from genuine entrepreneurs. It promoted fake growth at the cost of real growth of the economy.

All means of production and income came to be controlled by a few people in collusion with the politicians, who openly promoted crony capitalism.

Nothing could move in for promotion of business or creation of jobs as the corrupt minded decision makers always considered it as a business for profit for the entrepreneur and not an instrument of economic growth. Politicians who had no money even to contest an election soon became millionaires through this route.

Today politics in India offers the best opportunities for becoming rich overnight.

Almost all the politicians have successful businesses in their own names or names of their spouses or children. It is so easy for a politician to get a petrol pump or Gas Agency allotted to his family. Energy is the most lucrative business. Similarly, they get government constructed houses, plots of land on priority basis and at rates dirt cheap.

There is hardly any business opportunity left for the first time entrepreneur- the young, educationally qualified and trained.

If demonetization helps vacate some of this encroached economic space for the youth, the politician need not shed crocodile tears for the “unemployed youth”.

The unemployed youth don’t need mercy but opportunities and fair treatment.

The same bank that blindly granted loans to the tune of Rs. 9000 Crore to a failed company even after knowing its details, has no sense of regret for refusing loans of less than 1 Crore (10 million)to a young MBA, Engineer or MBBS who opts for entrepreneurship over a job.

The small loan seeker is more concerned about his creditworthiness and hence is a good customer repaying his loan in time. He can’t, however, pay any commission to the banker. On the contrary, the one getting 9000 Crore loan knows he does not intend to repay and the banker also knows it. But he is prepared to give hefty commission to the banker and comfortably gets the loan.

This mental makeup of the Indian banking industry has to be changed so that it becomes a pro-active promoter of entrepreneurship development. Even on this day when digitalization is being aggressively pushed, the Indian banks don’t consider e-commerce as an industry eligible for financing!

I recall the days when “tourism” demanded to be treated as an “industry” some 30 years ago and granted same credit facilities as any other industry. The very idea of tourism as industry was nothing short of blasphemy for the decision makers of the time. But persuasion finally won the battle for it and got it included in the list of industries.

Our financing institutions follow from behind other countries rather than leading from the front. This will end soon, thanks to the bold onslaught on shadow economy.

India is at the threshold of exiting the vicious circle of poverty.

The masses will no more be compelled to suffer the drudgery, low wages and dehumanizing labor for less than 100 days in a year under the rural employment guarantee scheme.

In comparison to The Rural Employment Guarantee Scheme, which does not provide employment to all eligible unemployed persons in rural areas for the whole year on a sustainable basis, the program given by Mahatma Gandhi under the Khadi & Village Industries is many times more productive and constructive. The employment under the Khadi & Village Industries is a  better economic model as it offers employment on a regular basis, is available at doorsteps, allows flexible working hours, is remunerative and has a ready market. Technological up-gradation is not prohibited in the sector but mechanization on a large scale is not required. What can be made by hand should be allowed to be so done. If any Nobel Laureate can offer a better solution to the mass poverty and unemployment in the rural areas (better than the MNREGA), he is welcome. If we can make the rural population technically trained, even wrist watches could become a cottage industry like the Khadi & Village Industries. But we know, it is a very distant dream!

Rating agencies may say whatever they like but Indian economy is poised for double digit growth soon. All that was being contributed by the so called informal sector (some say 40%, others say 48%. How seriously we take stats?) will join the formal sector and surprise all economic pundits. The number of Jan Dhan accounts and the amount deposited therein indicates the real strength of the Indian economy. It is not for nothing that India could withstand the economic meltdown of 2008 so coolly.

When the revenues from the informal sector come to the government instead of being looted by rent seekers (politician, police, tax man, municipality and local goons asking protection money), tax rates will go down, interest rates will also come down and investment will get a boost.

India will then move from a net exporter of commodities to industrial products and services. It is a matter of some concern that we are importing mobile handsets, television, cars, stents, hip replacements, books and almost everything of some quality. The nation is a loser. The people are the biggest losers. To give just one example, the ex factory price of a stent is about Rs 8000 but the patient is charged 98,000. The variation increases in superior quality products. The whole consumer electronics industry is in the hands of companies like Samsung, Nokia, LG.

Their after sales service is not at all satisfactory and yet costs a lot. There are many consumer disputes being contested on grounds of poor quality products or deficiency in service against some of these companies in consumer courts in India. India can’t go on exporting carpets, handicrafts and iron ore to finance its imports of industrial products.

Maruti is a very said example of robbing the poor consumers in a developing nation by selling a useless car called Maruti 800 only on the strength of zero competition because of an absurd kind of crony capitalism. It is a valuable case study for all rating agencies to know how and why the Indian growth story has been so poor.

Like Prime Minister Modi , the first jolt to that economic policy was given by another Prime Minister, Rajiv Gandhi, in 1985 when he liberalized the industrial licensing policy. What used to take years for an industrial licence earlier, started coming in less than a month. It hit vested interests then, as demonetisation has done now.

Between 1989 and 2014 however, black economy grew faster than the formal economy.

The result was emergence of a parallel government, which affected all normal legitimate government functions. It paralyzed healthy functioning of financial institutions, especially banks, and made public sector undertakings sick. Air India, ITDC, BSNL, HMT, NTC are only some of them. The nexus of the corrupt is contained in the documents of the BIFR (Board for Industrial & Financial Reconstruction), Bank for Financial Reconstruction, IDBI, LIC, UTI and SBI. It was collectively responsible for slow economic growth in the country. In the present time, quick response is the need of the hour. There was no better option before the government than demonetize the black money hoarded by the corrupt controlling the economy with no accountability to anybody at all.

There is no justification to raise the horror of slow growth in this background. With enlightened political leadership in the states replacing the old guards, it is time for economic resurgence of India. That is the message the people have given by supporting demonetisation in spite of all the propaganda of the dirty tricks departments sponsored by vested interests lobbies.

The next 20 years need be devoted to advanced level research in all branches of knowledge. India should aim for patents and develop brands matching the best in the world. The innate inventive Indian mind capable of finding solutions to every problem should be encouraged and engaged in priority growth areas.

The current compensation policies drive away all national talent to foreign shores and need to be reversed. Merit should not be compromised at any cost. Equal opportunities should be made available to all to grow and make contribution. A fair and just, honest and transparent, visionary and functioning government can achieve it all.

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