Three years in power and Prime Minister Narendra Modi has introduced an array of new economic policies for India; two of the biggest being demonetization and GST.
It was Nov 8, 2016, when Modi announced complete abolition of old Rs 500 and Rs 1,000 notes to, what he believed, scrap the circulation of fake currencies and bring back black money. However, even after 11 months, his move is yet to yield the desired results.
Effective from July 1, 2017, the Goods and Services Tax (GST) is perhaps one of the biggest tax reforms undertaken by any government since India’s independence. The “one nation one tax” structure is a comprehensive indirect tax on manufacture, sale and consumption of goods and services throughout the country to replace different taxes levied by the central and respective state governments.
Let us now see what the corporates have nation has to say about the impact of demonetization and GST:
1. Chairman Emeritus of Tata Sons, Ratan Tata:
“Demonetisation of old currency notes by the Modi govt is a bold act that will wipe out black money and corruption. It deserves our support. Demonetization is amongst the three most important economic reforms in India’s history, along with Delicensing and GST.” [Twitter]
2. Former World Bank Chief Economist Kaushik Basu:
“GST was good economics; the demonetization is not. Its economics is complex & the collateral damage is likely to far outstrip the benefits.” [Twitter]
3. Engineering & construction company Larsen & Toubro’s group executive chairman AM Naik:
“If these two were not there, I think economic growth could have been 7 percent instead of 5.7 percent. I am assessing that things are not going to be better. May remain stagnant or steady for a maximum of nine months.” [As quoted by BloombergQuint]
4. FMCG major Hindustan Unilever’s MD Sanjiv Mehta:
“From double-digit growth in FMCG across urban and rural markets in 2012, the overall segment has fallen to single-digit growth, with rural lagging urban market.” [The Economic Times]
5. Bajaj Auto chairman Rahul Bajaj:
“It is questionable if it (demonetisation) really worked. For two months, people had to stand in line, at ATMs, bank branches and small and medium enterprises suffered…Demonetisation was a favourite (topic) of our PM, no one criticises it… People voted for him (in the Uttar Pradesh assembly elections) still, saying it is just a short-term pain for long-term gain…All the economists are waiting for that gain to come. I don’t see that yet.”
“It is very different with GST. It will be good for India, medium term, long term, India will gain,…Unlike demonetisation, which was a disaster, (where) overnight people had big challenges. I am sure there was no problem with GST. I have not heard of any problem so far, but they will take three-six months to settle down.” [at the company’s annual general meeting in Pune as reported in The Economic Times]
6. S&P Global Ratings credit analyst Abhishek Dangra:
“Indian government reforms will have long-term structural benefits but carry short-term execution and adjustment risks.” He said in an article “India’s Demonetization And The GST: Short-Term Pain For Long-Term Gain”.]
7. West Bengal finance minister Amit Mitra:
“The timing is not right for implementation…We all supported the GST under the premise that this would be the only destabilization factor…We did not know that there would be a much bigger destabilization in the form of demonetization that would be let loose on the country.” [He told a TV news channel]
8. Wharton emeritus professor of management Jitendra Singh:
“What will have been gained from this step, and at what cost and mostly borne by whom? …Even supporters of the decision would say that the implementation was far from perfect.” [Wharton official site]
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9. Finance Minister Arun Jaitley:
“It’s a movement that has become far beyond a governmental program. It a mass movement. Let’s see for even those why say that there is no short-term advantage, has the number of tax payers in India immediately increased in the matter of months? The truth is, it has.” [His address via video conference to the Berkeley India Conference]
10. Prime Minister Narendra Modi:
“Forty-eight hours before the launch of GST, we, by one stroke of pen, cancelled the registration of one lakh companies which, based on the mining of deposits made in banks after November 8, were found to have engaged in serious irregularities.” [at a function to mark the foundation day of the Institute of Chartered Accountants in India (ICAI)]
Sreya is based in Kolkata. She is a Senior Editor of Big Wire.