"Forewarned, forearmed; to be prepared is half the
victory."
-Miguel de Cervantes (Spanish, 1547-1616)
Word for the day
Auroral (adj)
Of or like the dawn.
(Source: Dictionary.com)
Malice
towards none
Does Donald Trump reminds you of Ronald Regan?
GST is not make or break
In past couple of months various segments of the government have
tried hard to sell GST as the panacea for faster economic growth. The sentiment
has also been echoed in matching notes by the captains of Indian industry. Both
the finance ministers have gone on record to say that GST will ensure double
digit growth of India in immediate future.
There can be hardly any doubt about the need for and importance of
a unified market and simplified tax structure. GST certainly promises to
fulfill this need. To that extent its desirability cannot be challenged. No one
is actually doing this. The opposition is mostly to the technical details. I am
sure the issue will be sorted out in the due course. Captain Amrinder Singh,
deputy leader of Congress party in Lok Sabha, has already condemned the the
party stance on this publicly. It is therefore not something I will lose my
sleep over.
The problem lies in the assumption that GST will catapult Indian
economy into top gear almost immediately, to which I beg to differ.
The high growth phases in India have so far been mostly a function
of sporadic rise in domestic demand catalyzed by fiscal profligacy,
unsustainable private debt and/or global commodity cycles.
Consequently, growth has been volatile and fragile. Every decade
we have struggled to remain out of the spectrum of "hindu rate of growth"
due to some global crisis, poor monsoon, or political stalemate, etc.
Sustainable productivity gains have not played major role in
India's economic growth structure, except perhaps for the green revolution that
saw material gains in agro productivity in 1960-1970s.
Unlike many Asian economies that chose the path of
industrialization on the road to economic development, we have taken the route
of services. This has resulted in poor infrastructure development and lower job
generation. Regional and socio-economic imbalances are two major outcome of
this, adding to the fragility of growth.
Using the words of Dani Rodrick, there are plenty of world-class
firms in India, and the expansion of the middle-class is unmistakable. But only
a tiny share of labor is employed in productive enterprises, while informal,
unproductive firms absorb the rest.
The prime minister's call of "start up and stand up" has
to be seen in this context. The recent trend in "start ups" is
distinctively reminiscent of dotcom bubble in late 1990s and early part of 21st
century. It is bound to bring pain to many people and riches to a few and
therefore has the larger potential to be a growth shock rather than growth
driver.
For a sustainable and consistent 10% growth we need much more than
GST. Mr. Jayant Sinha has rightly said that we need to focus on what could be
done through executive orders and without legislative approvals.
Next four months, before winter session of the Parliament begins,
will show how much the government is actually able to do that. I have not seen
any evidence suggesting that the government is making conscious effort to avoid
the path of confrontation. The managers from the government side would be
better off if they carefully study the implementation of VAT and failure of
HPCL/BPCL disinvestment program during Vajpayee regime.
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