Did Both GST and Demonetization Do More Harm Than Good to the Indian Economy?
The introduction of GST (Goods and Services Tax) and demonetization have sparked intense debate in the Indian economic landscape. While proponents argue that these reforms have brought significant changes, critics contend that both measures have, in fact, caused greater harm than good. In this article, we will delve into the negative impacts of demonetization and the improper implementation of GST, showcasing the substantial harm they have inflicted on the Indian economy.
The Negative Effects of Demonetization on the Indian Economy
Demonetization refers to the practice of withdrawing high-denomination currency notes from circulation to combat illicit financial activities, such as black money, tax evasion, and corruption. However, this policy brought about significant economic disruptions.
A 67,000 Crore Rupee Loss to Taxpayers
According to experts, the demonetization led to severe financial hardships for many taxpayers. A substantial 67,000 crore rupees were lost due to the lack of adequate currency in circulation. This loss not only affected individuals but also undermined the economic stability of the nation.
Banking System Under Pressure
The sudden withdrawal of high denomination notes from circulation caused banks to become inundated with a significant amount of 500 and 1000 rupee notes. The liquidity in the banking system increased, and banks found it challenging to loan money given the uncertainty and crime definitions post-demonetization.
55,000 Businesses Wiped Out Due to Cash Crunch
The cash crunch was particularly devastating for businesses. Between December 16, 2016, and February 17, 2017, a staggering 55,000 good and decent businesses were wiped out due to the sudden shortage of cash. This substantial loss of business activity had a ripple effect, impacting employment and overall economic growth.
Real Estate Sector Suffered Long-Term Consequences
The real estate sector also bore the brunt of demonetization, leading to a glut and a long-term downturn in the market. Property sales slowed down, and returns on real estate investments became virtually non-existent, affecting significant portions of the economy.
Conclusion: The Economic Impact Was Devastating
The overall economic damage caused by demonetization is estimated at a massive 4.5 trillion rupees. This figure exceeds the economic damage caused by all the Congress scams and corruption combined, which, over 70 years, amounted to a mere 1.75 to 2 trillion rupees. In just 6.5 years, the BJP and Modi-led government inflicted economic harm twice as severe as the entire 70-year reign of the Congress.
The Negative Effects of Improper Implementation of GST
The implementation of Goods and Services Tax (GST) brought significant changes to the taxation system. However, the process was not without its flaws, leading to a number of negative consequences.
Huge Deficit in Revenue for 3 Consecutive Years
One of the major criticisms of GST implementation is the significant revenue deficit that ensued for three consecutive years (2017-18, 2018-19, and 2019-20). Instead of the expected revenue growth, the government faced a substantial shortfall that hindered its financial stability.
Penalization of Smaller Businesses
Smaller businesses that were supposed to be exempt from GST were subjected to penalties. This move was not only unfair but also counterproductive, as it contradicted the original intent of simplifying the tax structure.
Center’s Shortchanging of States
The central government has been criticized for shortchanging states and distributing financial assistance based on political considerations rather than merit. This practice has led to an uneven distribution of resources and a lack of transparency in the financial system.
Conclusion: Economic Hole Caused by Improper Implementation of GST
Despite the intent, the improper implementation of GST has created a significant economic hole of 650 billion rupees. The cumulative damage to the economy, considering the demonetization and the effects of GST, is estimated at 7.65 trillion rupees.
Final Thoughts
In conclusion, while demonetization and the implementation of GST were attempts to modernize and streamline India’s economic policies, their execution has had significant adverse effects. The legacy of these reforms will likely continue to be felt for years to come, as they have each caused substantial harm to the Indian economy. It is crucial to learn from these experiences to ensure that future reforms are carefully planned and implemented to maximize positive outcomes.