Modi in Blunderland – The State of Indian Economy

We are on the cusp of a new year and one can be forgiven for feeling a bit nostalgic about the passing year. Looking back, 2017 has been an extraordinarily eventful year and much of the credit for this goes to our Prime Minister, Mr Modi as well as our finance minister, Mr Jaitley.

Thanks to demonetisation, we began 2017 waiting for cash, outside the ATMs. Cash, our prime minister informed us, is at the root of thousand ills that plague our country – black money, terrorism, counterfeit currency, tax evasion, high asset prices etc. We found solace in the thought that our pain will not be in vain, that we will finally be rid of black money and all the other problems along with it. We also had a secret hope that government will deposit some of the uncovered black money in our bank accounts.

As the year progressed, any hopes of the windfall of uncovered cash hordes have been dashed. The hopes of ending terrorism, counterfeit currency and corruption went the same way. Reserved bank after much hemming and hawing, finally accepted that almost all of the demonetised cash has come back and very little money black money is revealed. Counterfeit currency, it seems, was not as big a problem as it was made out to be. Attacks by terrorists continue, with no sign of abating. What more, we hear that more and more youngsters have started joining the militancy in Kashmir this year. We took solace from the knowledge that, at least, Mr Jay Amit Shah, son of Mr Amit Shah was doing fine.

Continuing Excitement

Halfway through the year, with the economy in shambles around us, we were waiting for some excitement to come our way.

We were promptly obliged by Mr Jaitley, as he went on to announce the introduction of Goods and Services Tax (GST). There were, of course, those who criticised this as a thoughtless move, which is going to finish of the small businessmen and unorganised sector, who haven’t yet recovered from the demonetisation. But we believed Mr Modi, when he told us, he is going to ‘liberate Indians from tax terrorism’. We felt good when Mr Jaitly announced ‘one nation, one tax’ – that sounded quite patriotic.

Soon, we were plunged into the chaos that was GST. The technical backbone of GST, the GST network promptly collapsed. Small businesses shut shops as they struggled to arrange for working capital to pay for the GST. And soon enough, as the indirect taxes increased from about 12% -15% to 18% after GST, we were paying through our noses for everything in the market – from Momos in restaurants to Baniyans in garment shops.

We couldn’t help but wonder if this was the ‘tax terrorism’ Mr Modi was referring to. It certainly terrorised the nation, with no sign of liberation in the near future - unless of course, Mr Modi meant to liberate the country from small businesses, unorganised sector and the non-corporate sector and the millions of workers that depend on them.

The finishing touch

As a finishing touch for the year, Mr Jaitley introduced the FRDI bill in the parliament in November. Coming in the backdrop of Rs. 15 lakh crores of bad loans in the banking sector – all of us were hoping that this bill will have provisions, that will bring to book the billionaires who have recklessly borrowed from banks, which they now refuse to pay back. Alas, we hoped in vain. The FRDI bill turned the table on the depositors, with the bail-in clause. It seems, now the depositors will have to pay for the perfidies of the corporates. Once the FRDI bill is passed, it gives the government complete powers to wipe out the deposits of the savers, to the extent of the bad loans in the banks. Banks will be happy, and the billionaire corporate promoters will be even happier.

We, the depositors, will be stuck in a trap that we can’t get out of. To keep the money in the bank or not? – is the question that we will face. The government has reduced the cash availability in the economy, in a bid to force people into electronic transactions. With the way cash is being demonised at the moment, we need not be surprised if the government decides to penalise cash usage. And, If the FRDI bill is passed, bank deposits will be the first line defence against bad loans and thus the first to be neutralised. So, depositors face the prospect of being stuck between the rock and the hard place.

Now as we enter the new year, still shell-shocked from the last year – we desperately pray that Mr Modi and Jaitley do not have any more bright ideas up their sleeves. Let us hope that new year brings with it, peace and prosperity to the Indian citizens and some sense to our rulers.