Gabbar Singh Tax, Dr. Dang Demonetization And The PC Sorkar Stimulus Illusion

Raman Swamy

When your house is on fire, what is first thing you must do?

Should you brush your teeth, have a leisurely breakfast, grumble about how hot the weather is and call your office to say you might be a bit late today?

No.  You raise the alarm, call the fire station, try to douse the flames with buckets of water and check to see if there is anyone trapped inside that needs to be rescued.

You do not send messages on Instagram and Twitter denying there is any fire at all.  You do not immediately set up an inquiry commission to find out the likely cause of the fire.  Nor do you issue a stern warning to the arsonist, if any, that he or she will be tracked down and punished severely.  There is time enough for all that.

Similarly, when the national economy is on fire, the first thing to do is to realize that things have gone badly wrong -- and to take corrective action on a war footing. 

You must acknowledge that your note-switch brainwave has bankrupted millions of citizens, destroyed informal livelihoods and strangulated the entrepreneurial spirit.   

You must recognize that your mother-of-all-tax-reforms have turned into a monstrous form of tax terrorism.   For the crores of Indian businessmen and traders who are still cyber-virgins (not technologically savvy), the very thought of online filing of GST returns has led to instant mind-freeze. 

(It is not without reason that Rahul Gandhi’s phrase ‘Gabbar Singh Tax’ is catching on as quickly as his stinging ‘Suit-Boot Sarkar’ crack, which many believe forced the Modi government to water down its initial brazen pro-tycoon posture).      

When the economy is in a tailspin, when GDP falls with a thud, when unemployment numbers soar, you must stop pretending that all is well and that the dark clouds will soon roll by on their own.

You must not come out with alternative statistics based on cherry-picked data.  There is time enough for the spin-doctors to display their talents. Right now the need of the hour is to alleviate the suffering of the masses, to ease their pain with steroid doses of fiscal spending.    

In the past week, the government has indeed come out of denial mode and unveiled a stimulus plan of sorts.  However, a closer look at the specifics of the seven-lakh-crore rupee infusion of funds raises doubts about whether the announcement is intended to boost the economy, spur investments and create jobs in the immediate future.

Firstly, the amount of Rs 2.1 lakh crore for bank capitalization is far less than what is needed for public sector banks to reduce their humongous Rs. 7.5 lakh crore non-performing assets burden.

Secondly, the Rs. 5.35 lakh crore sanctioned for the Bharatmala highway project can hardly be called a short-term stimulus -- it will take five years to complete just the first phase.  It involves building 24,800 kms of roads, apart from completing pending highways worth another Rs 10,000 crore.  Moreover, as the Finance Secretary himself has said, the funds will not come from the Exchequer – Rs. 2.09 lakh crore will be raised as debt from the market,  Rs. 1.06 lakh crore will be mobilized through private investments and Rs. 2.19 lakh crore is to come from collections from toll collections of NHAI,  Toll-Operate-Transfer earnings and the existing Central Road Fund.

Thurdly, as for job creation, the Finance Secretary’s claim that the stimulus package will “generate 14 crore man-days of jobs in five years” only sounds impressive. 

The arithmetical reality is that when man-days are converted to yearly figures, it works out to hugely inadequate numbers -- just five lakh jobs over five years.  In other words, just 1.13 lakh jobs a year.  Or, less than 10,000 new jobs a month. 

Oct 30, 2017

Raman Swamy [email protected]

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