Budget 2018 may be a good election weapon but given the difficulties faced by the economy and the incapacity of the government to deliver quickly, it can produce a political dividend for the BJP only if elections are held soon.
Arun Kumar is Malcolm Adiseshiah Chair Professor at the Institute of Social Sciences, and author of Demonetization and the Black Economy, Penguin (India).
The revival of the Indian economy in 2018-19 faces strong headwinds because the unorganised sector has been marginalised repeatedly in the last 14 months.
True income disparity cannot be captured by the World Inequality Report because the impact of the black economy is not taken into account.
Not only is the real rate of GDP growth less than what the data suggest, it is also likely to fall in the coming quarters.
While the negative impact of demonetisation can still be felt, the gains have been minor and could have been achieved even without the disruptive move.
The 5.7% figure, based largely on data from the corporate sector, does not capture the almost one-third of the economy hit by demonetisation and GST.
The Goods and Services Tax (GST) is awfully complex and has confused not only businesses and the public, but also the government.
Demonetisation as a means of tackling the black economy was destined to fail. What’s worse is that its ripple effects are having severe adverse effects on India’s economy.
While C. Rammanohar Reddy’s Demonetisation and Black Money tries to present a moderate view of demonetisation and its impact, what is missing is the way the impact is estimated and why official data may be lacking.
The confused narrative surrounding post-demonetisation growth consequences shows that we simply don’t have enough hard data on the non-agriculture, unorganised portion of India’s economy.
Demonetisation has not dented the black economy, but it has damaged the white economy, especially the unorganised sectors.
In Understanding the Black Economy and Black Money in India, Arun Kumar takes us on a journey from the origins of the black economy in India to what should come after demonetisation.
The survey does not lift the mist of confusion on India’s macroeconomic situation after demonetisation, while the conservative fiscal stance being proposed will only lead to an aggravation of the problems confronting the economy.
Making India a less-cash economy will not necessarily end the generation of black money. It only means that the circulation of black income will take place differently.