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Small, medium firms were limping back when GST added to pain: Stakeholders (Note Ban Series)

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Small, medium firms were limping back when GST added to pain: Stakeholders (Note Ban Series)

New Delhi, November 3, 2017: The backbone of India’s manufacturing sector — micro, small and medium enterprises (MSMEs) — had not yet recovered from the demonetisation move when the Goods and Services Tax (GST) came in to add to the pain, according to industry stakeholders.

“The base of the MSME pyramid is comprised of informal sector, which has traditionally done business in cash. With withdrawal of cash, this market seized up for a quarter or so. They (MSMEs) are limping back to normality,” Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small and Medium Enterprises (FISME), told IANS.

“The recovery is slow because of the new disruption in the form of GST. In the short term, there could be loss of business opportunities because of lack of capital in the informal markets,” he said.

Bhardwaj said that the housing sector, which had more than 60 product categories linked to MSMEs, was drastically hit, both directly and indirectly.

According to D.S. Rawat, Secretary General of Assocham, except for some payment gateways, most of the sectors lost out.

“The impact of demonetisation would have evaporated, but the GST roll-out issues are being braved by some sectors, particularly the SMEs and the traders,” Rawat told IANS.

In the Economic Watch report by Ernst & Young for September 2017, demonetisation has been blamed for an adverse impact on the economy in the short run, as its “benefits are yet to overtake” the costs.

“The government and people at large did have to bear considerable costs in the immediate aftermath of demonetisation. Some of these costs may be difficult to quantify, but objective evidence of the short-term costs is available in at least some important dimensions,” the report said.

“There was an erosion of growth, output and employment,” it added.

The overall economic growth is still contested, however, as some argue that the downward spiral in gross domestic product (GDP) growth preceded demonetisation.

“Though the GDP growth has been lower post the exercise, it will not be fair to conclude that demonetisation was the only factor responsible for this. The growth had started slowing right after the third quarter of 2016-17 and the trend continued post-November as well,” said Ranen Banerjee, Partner-Public Finance, Economics and Urban, at PwC India.

Others like the EY’s report indicate that demonetisation resulted in a “tangible adverse impact” on GDP growth.

“Real GDP growth has been falling steadily quarter after quarter since the fourth quarter of FY16, when it was nine per cent. It fell to 5.7 per cent in first quarter FY18, a decrease of 3.3 percentage points,” the report pointed out.

“The two quarters that can be considered as the demonetisation quarters in FY17 were the third quarter of FY17 and fourth quarter of FY17. In these two quarters, the GDP growth rate fell to seven per cent and 6.1 per cent, respectively.”

It mentioned that the downward trend in growth preceded demonetisation and was largely caused by an investment slowdown.

On the industrial production front, in December 2016, the Index of Industrial Production (IIP) had contracted by 0.4 per cent from a 13-month high of 5.7 per cent reported for November.

However, it rose 2.7 per cent in January 2017. The latest IIP figures for August showed that factory output grew 4.3 per cent against the same month last year on the back of robust mining and electricity sector growth.

According to the Ministry of Statistics and Programme Implementation, manufacturing output in the country in July 2017 had grown marginally by 1.2 per cent.

“The event clearly pushed the economy towards a higher degree of digitisation and financial inclusion. Accordingly, the digital finance sector seems to have gotten a push while over the longer term financial services should be the biggest gainer,” said Anis Chakravarty, Lead Economist, Deloitte.

(Rohit Vaid can be reached at rohit.v@ians.in)

(Editors: The above article is part of a series of demonetisation stories leading up to November 8)

–(IANS)

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India’s President ‘Ram Nath Kovind’ Designates ‘Narendra Modi’ as PM for Second Term

The Election Commission announced that the BJP won 303 out of 542 seats in the Lok Sabha, the lower house of Parliament

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Newly elected lawmakers from India's ruling alliance led by the Hindu nationalist Bharatiya Janata Party raise their hands in support of Narendra Modi's election as their leader in New Delhi, May 25, 2019. VOA

India’s president on Saturday appointed Narendra Modi as the prime minister soon after newly elected lawmakers from the ruling alliance, led by the Hindu nationalist Bharatiya Janata Party, elected him as their leader following a thunderous victory in national elections.

President Ram Nath Kovind said in a tweet that he also asked Modi to forward the names of those to be appointed as ministers in his government and the date for the swearing-in for his second five-year term as prime minister. Modi and some leaders of his alliance met the president on Saturday.

Media reports said Modi was likely to be sworn in by Kovind on Thursday.

BJP president Amit Shah announced Modi’s name as the leader of the National Democratic Alliance in a meeting of the lawmakers in the Central Hall of Parliament in New Delhi.

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Indian Prime Minister Narendra Modi, second right, hugs senior Bharatiya Janata Party leader M.M. Joshi as L.K. Advani, left, watches after Modi’s election as ruling alliance leader, in New Delhi, May 25, 2019. VOA

The Election Commission announced that the BJP won 303 out of 542 seats in the Lok Sabha, the lower house of Parliament, after the official vote count from the six-week-long election was completed on Friday. That is well beyond the simple majority a party in India needs to form a government.

The BJP’s top rival, the Indian National Congress led by Rahul Gandhi, won 52 seats, and the All India Trinamool Congress led by West Bengal Chief Minister Mamata Banerjee won 22.

Unity movement

Critics say Modi and his party have applied divisive policies and used a Hindu-first strategy. But Modi said after Saturday’s vote that “this election has become a movement of social unity.” “It is generally said that the election divides, creates distances, makes walls. But the 2019 elections have worked to break the walls,” he said in his address.

On Friday, Modi met with his outgoing Cabinet ministers and later presented his resignation to the country’s president. The president asked the officials to continue to serve until the new government assumes office.

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The Election Commission announced that the BJP won 303 out of 542 seats in the Lok Sabha, the lower house of Parliament. VOA

Gandhi, whose great-grandfather, grandmother and father were all prime ministers, personally conceded his seat, long a Congress party bastion, to his BJP rival, India’s textiles minister, marking the end of an era for modern India’s most powerful political dynasty.

Counting of the estimated 600 million ballots cast over six weeks of staggered polling — the world’s largest democratic exercise — began early Thursday.

ALSO READ: Here’s How TikTok Made PM Modi Popular Among Young Voters

Hindu-first politics

The victory was largely seen as a referendum on Modi’s Hindu-first politics that some observers say have bred intolerance toward Muslims and other religious minorities, as well as his muscular stance on neighboring Pakistan, with whom India nearly went to war earlier this year after suicide attacks killed more than 40 Indian security officials in Indian-controlled Kashmir.

Modi effectively used the incident as a major campaign tool after responding to the attack with an airstrike in Pakistan that triggered nationalist sentiments, with the BJP saying Modi is the right person to ensure India’s national security. (VOA)