So You Thought 2017 Was Traumatic? The Worst Is Yet To Come

Raman Swamy

The good news is that 2017 is ending on a bright and cheerful note. 

The year gone by has been marked by strong economic revival, vibrant market sentiments and good governance. 

And, as the glad New Year dawns, optimism is at a high, all economic indicators are on the upswing, the economy is booming, the fiscal deficit is under control and it will be roses, roses all the way from here on.

Sorry, that was not the real news.  It was the fake news. Put out by Team Modi and faithfully broadcast to the nation by the captive media.

Let us begin again, without using adjectives like ‘good’ and ‘bad’, and make use of economic jargon as much as possible.

So, the news at the end of the year is that the fiscal deficit is widening.  It was announced in Parliament on Friday that as per the latest data for the period April-November 2017, the fiscal deficit is 112 per cent of the target, while the revenue deficit is 152.2 per cent of the budgeted amount.   

But what does this mean in layman’s language? It means the Finance Minister’s confident forecast in his Budget speech that he would keep fiscal deficit under control at 3.5 per cent has been proved wrong in November itself, with four more months of financial year 2017-18 still to go. 

It also means that the high hopes that GST would boost tax revenues have been belied.   On the contrary, according to the government’s own figures, collections from the Goods and Services Tax slipped to their lowest in November. 

In fact, total collections under the GST in November declined for the second straight month compared to October, which was in any case less than September.   This means that the trauma triggered in business and trade by the ruthless imposition of GST by amalgamating excise duty, service tax, VAT and several other indirect taxes in July, continues to be crippling. 

This in turn means that because of lower tax collections, The Modi government has no other option but to go in for emergency extra borrowings -- something that the Finance Minister had said earlier in the year that he would never do.

But he has already been forced to eat his words.  In simple terms, he is faced with a grim situation where the difference between expenditure and revenue is already a staggering Rs. 6.12 lakh crore (April-November). 

These are not fictitious figures put out by private economists with an anti-establishment bias.  Nor is this Rs. 6.12 lakh crore figure “notional” or “presumptive”.   They have been officially released by the Controller General of Accounts (CGA).   It is all the more scary and stark when compared to the situation during the same period of the previous year 2016-17 -- the fiscal deficit then stood at 86 per cent of that year's target.  This year the gap has already become bigger than what had been planned for -- it was 112 per cent more than the target in November itself; how much wider the yawning chasm could be in March 2018 is too distressing to even contemplate. 

Nobody knows this more than the Finance Minister.  That is why he has decied to immediately go in for a Rs. 50,000 crore additional borrowing.  The stock markets got a scare when this news was announced on Wednesday. 

Market operators evidently positive thinkers who believe everything that the Prime Minister and the Finance Minister have been telling them – that FDI would flow in like a river of joy, that India will become a global manufacturing hub by 2020, that India would soon Swatchh, that all daughters would be educated and all women would be safe from rape, that unemployment will replaced by total self-employment, that Digital India would lead to a cashless economy, that Demonetisation would cleanse the system, that GST would lead to Eldorado,  etc., etc.

That is why, when they heard that GST collections have been poor, the fiscal deficit is precarious and the government would have to borrow more money to keep the kitchen fires burning for another three months, the market operators got a jolt.  They regained their poise only after yet another sincere-sounding assurance from the articulate Finance Minister -- don’t get nervous, he said, this is just a one-time borrowing, all is under control, it is just an unexpected slippage in our calculations.   

But there were some more unexpected data from other fronts too.  It seems online fraud has increased and digital India is not so secure after all. 

As Information Technology Minister Ravi Shankar Prasad admitted in the Rajya Sabha, over 25,800 fraud cases involving about Rs. 179 crore related to credit and debit cards and Internet Banking were reported in 2017 (up to December 21).   As per the data provided by RBI on frauds related to ATM/Credit/Debit cards and net banking as reported by the banks, there have been 10,220 cases of fraud so far in the December quarter alone.   Compare this with 2016 data - only 4,147 cases were registered the December quarter.  Is the country becoming fraud-free?  Are electronic transactions really safe and secure?

Meanwhile, the farm economy has deteriorated and small enterprises were hit badly in the year gone by.  The middle peasantry is rising in revolt across parts of central, northern and western India (where the BJP got 90% of the Lok Sabha seats in 2014).

Finally, as everyone now knows, GDP growth declined to a new low of 5.7 per cent in April-June 2017. There is realistically little hope of a recovery in rural demand any time soon because the agriculture sector continues to do poorly in the somewhat-improved GDP data (6.2%) for July-September. 

As the year draws to a close, perhaps it is best to allow Team Modi to make a plaintive appeal -  Koi Galti Hai To Maaf Kijiye,  Kuch Achcha Lage To Yaad Kijiye.  Regrettably there is nothing at all about the Modi government’s performance in 2017 to feel good about.  The only consolation, for want of a better word, is that 2018 looks like being a lot worse.  The people have yet to experience the full impact of all the monumental blunders since Demonetization.  If you thought 2017 was painful, just wait for the 12 months ahead.   

Jan 09, 2017

Raman Swamy [email protected]

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