When will Modi government admit they've made a mess of Indian economy?
Why is it that so many people are worried about the economy even as the Modi government insists everything is "under control".
The Goods and Services Tax (GST) collection in November 2017 fell to Rs 80,808 crore from Rs 83,346 crore in October. Last year, the government collected as much as Rs 92,283 crore in July (the month it was launched), Rs 90,669 crore in August, and Rs 92,150 crore in September.
In the meanwhile, the Modi government decided to reduce the tax rate on 178 items, leaving just 50 items in the top 28 per cent rate slab under GST.
This means that the government has reduced the GST rates despite the loss of revenue, for the Centre and states.
Obviously, things are not going as the Centre predicted. The trading community felt hard done by.
Something major needed to be done. Thus, the relief given to the traders in GST, especially ahead of the Gujarat Assembly elections.
(But it still failed to pacify the traders completely as the recently concluded Gujarat elections saw the BJP’s tally at a historic low of 99 Assembly seats.)
The flip side of this is that the revenue receipts for the Centre and states will go down.
Considering the verbose exultation by the NDA government over the GST experiment, something has obviously gone wrong. This is not the first instance. Despite PM Modi’s enthusiasm, the demonetisation gambit unleashed on November 8, 2016, failed to bring in the massive amounts of black money that the NDA had claimed. The PM’s promise to voters in Uttar Pradesh of Rs 15 lakh in their bank accounts from the seized black money, for example, could not be delivered. Modi's demonetisation drive, compared with similar exercises of 1946 and 1978, failed badly.
From demonetisation of 86 per cent of the currency in circulation to the GST muddle, none of the government's much-touted moves has helped the already shaken state of the economy. The statistics speak for themselves. The most important single statistic is the Index of Industrial Production (IIP), which measures the growth of a range of industries. The IIP growth in October 2016 was 4.2 per cent. By October 2017, the IIP growth dropped to only 2.2 per cent. This is a major decline in industrial growth figures, which has an impact on other facets of the economy.
Matters are not better in the trade front as well. The trade deficit (the difference between the value of exports and imports), has increased from $13.4 billion in November 2016 to $13.8 billion in November 2017.
In other words, India has a trade deficit of $13.8 billion which is equal to the gap between the increase in imports and the decline in exports. Again not a good sign for the economy. PM Modi has repeatedly stressed the need for “Make in India”, but that is yet to take off.
Another matter of concern is the sharp increase in the cost of oil imports, which in November 2017 shot up to 39.1 per cent by $9.6 billion. This evidently led the PM and finance minister Arun Jaitley to withdraw their initial impulse to reduce the petrol and diesel prices by Rs 2 per litre, by including this item in the GST agenda. But with the economic situation becoming more serious, the Modi government backed out from its attempt to bring fuel into the GST Council.
The Centre is actually reaping huge profits from fuel. In Maharashtra, for example, the cost of petrol is Rs 79 per litre. The landed cost is Rs 29 per litre. So the government tax is as much as Rs 50 per litre of petrol. These figures vary slightly from state to state, but in all cases, the the Modi government has made massive profits from the taxes on petrol and diesel. While this greatly increases the NDA government revenues, it severely increases the cost of both fuel and freight, at the cost of the consumer.
This is clear from the Consumer Price Index inflation data which shows that the CPI inflation which was 3.6 per cent in November 2016, increased to 4.9 per cent in November 2017. This is the main index for the cost of household expenditures.
Similarly, the Wholesale Price Index inflation, which was 3.15 per cent in November 2016, went up to 3.93 per cent in November 2017.
As a whole, the data is damning. The NDA government by profiteering in fuel and other prices to increase its revenues, has pushed up inflation. Lots of poor, middle class, upper middle class, and rich people and families, have lost income, and future purchases and investments. Is this how an economy in India, should function?
Surely, this is not what the Modi government had promised.