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A Poverty of Imagination but Richness of Data

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I think Modi has tried to change the status quo in Direct & Indirect taxes & Governance...Going the full hog against tax offenders ....what other rulers did not venture into...It is like removing the weeds...We may have to endure a bit of pain...The economy will soon boom...We will have a better & brighter future for sure in the mid terms & long term
[h=1]A Poverty of Imagination but Richness of Data[/h]
There is creeping negativity about the Modi Government’s economic performance over the past few months, some of it is valid, but much of the hand-wringing is simply not true. Perception appears to be turning against them, while facts tell a very different story, albeit with some areas of concern. When the Government sold hard painful structural reforms to the people in 1991 then, it was acceptable, why not the pain of similar structural reforms being undertaken by this Government being acceptable now? Or have the story tellers changed with their own agenda and motives?



16 October, 2017
by Srivatsa Krishna




First, can India grow to a $6 trillion economy as estimated by Morgan Stanley research, while still having a 30-50% unaccounted, informal economy? Reserve Bank of India’s (RBI) Annual Report 2016-17 mentions that more Fake Indian Currency Notes (FICN) were detected in now than in previous years – 762,000 pieces compared to 633,000 pieces in 2015-16 and 594,000 pieces in 2014-15 Further, the number of suspicious transactions reported by Banks, other financial institutions and intermediaries jumped more than four-fold from 106,000 in 2015-16 to 473,000 in 2016-17. When the black economy is significant in size, curbing the black economy was bound to slowdown growth which it did, but it will pick up too, so why the continuous hand-wringing?
Government is using such uncovered data and analytics expertise of Fractal Analytics (and Opera), one of India’s best companies in this space to ferret out economic offenders. When was the last time India had a Prime Minister like Narendra Modi and a government which has got after economic offenders using various new benami property and tax laws, making tax evasion a criminal offense and not just a civil offence. Every credible journalist screams hoarse and asks for a financially clean India, but then cries hoarse when hard, much needed reforms are initiated to achieve the same!
A frictionless economy is happening with gross card payments growing from 1737 m (2014-15) to 5450 m (2016-17) and value from Rs.3326 billion to Rs.7421 billion over the same period. Total retail level payments have grown from Rs. 154,126 billion to Rs. 220,634 billion over the same period. Digitization and formalization of the Indian economy is a necessary condition for becoming a multi-trillion-dollar economy and is well underway.
Second, Financial savings have gone up from 10.4% of Gross National Disposable Income (GNDI) in 2013-14 to 11.8% in 2016-17 and most heartening of which is that shares and debentures which stood at 0.2% has jumped to 1.2%, a heartening sign for markets and sentiments of people. Indeed, private sector gross fixed capital formation is muted, and has dropped from 11.8% of GDP in 2013 to 11% in 2016, and is because of the structural changes. However capital investment in railways has increased from Rs.55000 crores in 2014-15 to Rs. 110,000 crores in 2016-17 and Rs. 130,000 crores in the current year. A 2.5X increase in just 2.5 years!
Third, there is much talk of stalled infrastructure projects but what does data say? What is the truth vs what is the negativity being projected? Total stalled infrastructure projects stood at 600, with Rs.7500 billion locked up (2014) which have come down to 300 and Rs.3200 billion in 2016-17. Isn’t this something to be proud of, for much of this has been done by the famous “banging heads in a room” by Modi and the entire PMO using PRAGATI and conventional meetings.
Likewise, in roads, there were 73 stalled projects which are down to 6 now. Government is doing one-time fund infusions where more than 50% work has been completed and is working on deferment of toll premiums, including traffic risk which is now borne mostly by government. While highways construction is happening at the rate of about 20,000 lane km per annum (or 8000 km), the Pradhan Mantri gram Sadak Yojana is happening at another 20,000 km per annum something which is astonishing.
Most importantly there is almost no major infrastructure developer worth his salt who doesn’t take out all his equity before the first brick is laid and replaces it with debt. How can there be a 90% debt draw down when there is just 30% physical progress on the ground? This government is changing this fundamental flaw in infrastructure projects by tightening the screws.
Fourth, companies which are over-leveraged and banks with bad balance sheets are two key problems which not only this government needs to untangle by itself, but must be led by RBI, a point which no one is raising. Corporate India never raises any finger at RBI for they are terrified of punitive action against them, but are quick to blame government, while the action largely lies in the domain of RBI.
Indeed, some in IAS are terrified to take decisions for if as history suggests, honest officials are punished and sent to jail, 10 years after a decision is taken, often for specious political reasons, that too with the benefit of hindsight and political wisdom, then that is what prevented the privatization of IDBI Bank which was even mentioned in the budget speech! The privatization decision of IDBI was announced in the budget speech indicating political will, but the failure to implement it, illustrates the problems of honest civil servants, unwilling to show bureaucratic will. No system can be better than those who run it, and indeed Government needs to find not just honest officials, which it has done brilliantly over the last 3 years, but also find the right officer for the right job, where it needs to do much more!
Fifth, on GST, outstanding ground level research done by Spark Research in 12 states shows that 50% respondents to be positive, 30% negative and 20% neutral about impact on business, while channel sales have been affected. Teething issues of poor understanding of law, IT systems not ready and input credit non-availability remain.
Yes, growth has slowed for the last six quarters, and was nothing to do with demonetization or GST; Yes, jobs creation has slowed as captured by limited formal employment indices, despite the internet economy creating 0.75 m jobs. Yes, private investments have slowed considerably. Yes, bank’s recapitalization and asset privatization hasn’t happened and has to be done in the right way, not in haste.
Should we still hammer Modi and PMO, despite the hard structural reforms underway? Of course, data be dammed! We have to find something wrong with him and this government, somehow! Selective memory, selective indignation, selective evidence, coupled with wholesome hypocrisy, wholesome intellectual dishonesty, and wholetime frustration can’t hide facts and evidence.


http://businessworld.in/article/A-Poverty-of-Imagination-but-Richness-of-Data/16-10-2017-128601/
 
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