Reasons for the Slowing of the Economy of India Since last 5 years
Today, there is only one root cause for the economic crisis we are facing: the poor leadership of PM Narendra Modi. Here are some of Modi’s acts of omission and commission directly responsible for bringing the Indian economy to a point of crisis.
1. Letting banking crisis fester
It was only in late 2015, with then RBI governor Raghuram Rajan’s push that the banks started cleaning up their balance sheets, ridden by hidden non-performing assets. The Modi government should have seen this risk, to begin with, and addressed the problem first thing. The bank recapitalisation that began later should have begun much earlier too. Rajan had also sent the PMO a list of top defaulters, but no action was taken. Stressed with NPAs, banks reduced giving out credit to industry, contributing to a liquidity crunch.
2. Not moving projects
Thanks to the ‘policy paralysis’ of the UPA-2 years, a number of infrastructure and industry projects were stalled. Land acquisition and environmental clearances were a major hurdle. Like a statesman, Modi needed to get his hands dirty to clean up the mess, get the projects going. Instead, he made it clear his priority was politics over India’s progress when he went back on amending the land acquisition law. Perhaps just because Rahul Gandhi called him “suit-boot ki sarkar”. The stalling of projects was a big reason why loans went bad, particularly in the case of the infrastructure-lending IL&FS.
3. Gimmicks as policy
Narendra Modi launched one big plan after another, and each one was launched almost as if it was the beginning of a revolution. But nothing has come out of most of them. Make in India, Skill India, Digital India, Startup India, Stand Up India, this India, that India… none of them has brought about the revolution they promised.
The ‘Ease of Doing Business’ rankings have been gamed because the rankings matter more than reality. Arun Shourie will always have the last laugh over Modinomics – headline management over economic management.
Instead of doing what was needed, Modi enforced economic quackery over 1.3 billion people. This plan to finish the black economy overnight was supposed to mop up Rs 4-5 lakh crore,but brought loose change. Demonetization killed the informal economy, disrupted age-old economic systems and caused job losses. We are still facing its consequences and it brought no benefits at all. The government did what it does best: suppressed a report that showed corporate investments dropped by 60% per cent in the demonetization year.
The move also scared investors about policy uncertainty in India: no one knows when Modi could come on TV and change everything, just like that. Rumours of the demonetization of even the Rs 2,000 note keep circulating in the market.
5. Vilification of business
Along with demonetisation came the culture of vilifying business. Business people were being painted as corrupt crooks and Modi made them stand in a queue. The truth is that everyone managed to convert their black money into white through demonetisation, but the vilification of business for political gains further made business reluctant to invest.
Modi did say demonetisation was the first of many things to straighten the corrupt.
6. Messing up GST
You can find nut job propaganda platforms defend demonetisation, but you will be hard-pressed to find anyone explain how the Indian economy has benefited from the Goods and Services Tax.
Unlike demonetisation, this was actually a good idea. But if you want to see how good ideas are turned into nightmares, see the Modi government’s execution of the GST. Modi defined it as a Good and Simple Tax, but it has turned out to be neither. It further made life tougher for small and medium enterprises. With five tax rates and absolute compliance requirements from day one, the GST was launched in a hurry without even testing its software. Its rules were changed again and again, as if chartered accountants were super-computers. Even now, the GST needs a lot of reform.
7. Keeping inflation too low
The Modi government’s policy has been good politics with bad economics. They have been reluctant to put money in the hands of rural India, measly with increases in minimum support prices or NREGS wages. Low inflation helps Modi win elections, but it comes at the cost of reduced purchasing power and low demand. People are neither saving nor spending — because their incomes aren’t going up.
8. Not making disinvestment a priority
One of the biggest economic reforms India needs is disinvestment of white elephants – that are the many public sector units. Many of them keep borrowing from public sector banks to make up for their losses. This concentrates the use of capital in unproductive assets.
Unlike Atal Bihari Vajpayee, Modi hasn’t made disinvestment a priority. There’s lip service, and some jugglery, but no real intent. If the Modi way is to revive PSUs rather than sell them, that hasn’t been happening either. In fact, prized PSUs have been going south
10. Tax terrorism
Instead of relaxing tax rates or reforming tax laws to make them simpler, the Modi government has come to be known for “tax terrorism”. Once again, Indira Gandhi would be proud. Faced with a revenue shortfall and fiscal deficit constraints, the government wants to extract tax out of an economy that is going through a crippling slowdown. Hence the tax terrorism.
Corruption in Economy: It is the root cause for Indian Economic slowdown
- Transparency International in its study on index of corrupt countries in 2012 placed India at 94th rank out of 176 countries while Somalia tops the list. Corruption in all walks of life in India is making it weak and has adverse impact on its growth. As per an estimate 80% of the public servants in India are corrupt because of which the wheel of growth is being pulled down.
- The Constitution of India describes the country as “Sovereign Socialist Democratic Republic” leading to socialist-inspired policies for an entire generation from the 1950s until the late 1980s. Extensive protectionism in Industry, license Raj had contemporary policies vulnerable to pervasive corruption and slow economic growth, Rajagopalachari"Chakravarthi Rajagopalachari always stated that the system of License Raj would remain at the core of corruption and would pull back the economic growth in the country.
- How does the growth is adversely affected due to rampant corruption - the former Indian Union Home Secretary, N.N. Vohra, in October 1993, submitted a report on corruption in politics and its criminalization. Politicians have the nexus with criminals. This criminal network is running a parallel government and satisfying the selfish ends of vested interests. More than 100 Members of Parliament are facing charges of corruption or related criminal charges. Public money which has otherwise been utilized for the growth of economy and for welfare of the public was misused to satisfy the greed of such networks.
- The people have to pay bribe to get a job done in a public office. Taxes and bribes are common between state borders. As per an estimate more than Rs. 24,000 crores is paid in bribes. Government regulators and police share in bribe money, Transporters have to pay bribes to cross the state borders within the country and this phenomenon can be witnessed at any state border including the capital. These stoppages including those at checkpoints and entry-points take up to 10-12 hours in a day. This is despite the fact that many of the sates have done away with many taxes or the same have been made centralized. About 60 percent of these (forced) stoppages on road by concerned authorities such as government regulators, police, forest, sales and excise, octroi, weighing and measuring department are for extorting money. The loss in productivity due to these stoppages is an important national concern. The number of truck trips could increase by 30 to 40%, if forced delays are avoided. According to a World Bank report, the travel time for a Delhi-Mumbai trip can be reduced by about 2 days per trip if the corruption and associated regulatory stoppages to extract bribes was eliminated.
- Various government officials, politicians in connivance with Criminals tend to grab the public property illegally. This land and property is meant for infrastructural or community development. These activities hamper the growth of economy.
- Corrupt construction contractors in association with corrupt politicians and Public Works Department officers get the contracts and deliver poorly constructed roads, buildings, bridges. News of building, bridge collapse, are very common.
- Corruption caused problems in government funded projects are rampant almost in all the states. Only 40% of grain handed out for the poor reaches its intended target. The World Bank study finds that the public distribution programs and social spending contracts have proven to be a waste due to corruption. MGNREGA, (Mahatma Gandhi National Rural Employment Guarantee Act), NRHM (National Rural Health Mission), and other such programmes have become controversial as poor quality of infrastructure is built, Poor is still poor to the same level, Funds assigned for rural health care and Medicines are misappropriated. Corruption, waste and fraud-related losses from this government program has been alleged to be around Rs.10, 000 crores.
- Mineral resources are the back bone to the prosperity of the country. The corrupt Ministers and government officials of such states go for awarding illegal mining of such rich resources. They illegally help transport the minerals like coal, iron ore, bauxite, copper, etc. to other places for their personal benefits. The economic growth is severely affected by such corrupt activities.
- According to a report corrupt officials in India may be making the country poorer by more than Rs.90, 000 crores every year, (More than 1% of the GDP, through corruption) These politicians, corrupt officials and business associates have black money in Swiss banks to the tune of Rs. 10,000 crores or more depriving the Indian Economy of its path on sustained growth
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