The Gathering Storm

The government is in denial amid a deepening economic crisis

01 November 2019
A 2018 survey by All India Manufacturers’ Organisation showed job losses across sectors between 24 percent and 43 percent, and profits falling by between 24 percent and 70 percent.
mahesh kumar a / ap
A 2018 survey by All India Manufacturers’ Organisation showed job losses across sectors between 24 percent and 43 percent, and profits falling by between 24 percent and 70 percent.
mahesh kumar a / ap

On 4 October, the Reserve Bank of India announced that India’s projected growth rate for 2019-20 was 6.1 percent, and admitted that the economy has considerably slowed down. The latest government data for the April-to-June quarter showed the growth rate declining to five percent—falling from 5.8 percent in the last quarter of the previous year. This was an unexpectedly sharp decline from the eight-percent growth rate five quarters ago. Since the indications for the current quarter are that the economy has further slowed down, the likely growth rate may turn out to be 4.5 percent, or even less.

Four days after the announcement, the new chief of International Monetary Fund, Kristalina Georgieva, said that the effects of slowdown in the world economy would be “more pronounced” in India this year. However, the world economy is not the only cause of India’s economic woes.

The CEO of Dassault Aviation, Eric Trappier, told Rajnath Singh, the defence minister, that India should not “terrorise us” with its tax and customs rules. This implies that investments in India have been hurt by the prevailing environment in the country, since several businessmen have accused the government of tax terrorism. A 2018 report Global Wealth Migration Review, by Morgan Stanley Investment Management, found that nearly twenty-three thousand dollar millionaires—with assets above $1 million—have left the country since 2014. The 2019 edition noted that a further five thousand millionaires did so in 2018. This should be seen in comparison to the fact that, in 2019, there were only 6,361 individuals declaring an annual income above Rs 5 crore—around seven hundred thousand dollars. The Indian businessmen are apparently unhappy.

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    Arun Kumar is the Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences, and was formerly a professor of economics at Jawaharlal Nehru University. He is the author of Demonetization and the Black Economy, and the forthcoming Ground Scorching Tax, both published by Penguin India.

    Keywords: economic slowdown unorganised sector GST unemployment economic growth
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