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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)
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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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Waves of black as Modi visits Chennai

Tamil Nadu has been in turmoil since the six-week period for setting up the Board expired, with opposition parties and a host of fringe Tamil groups attacking the Centre

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Prime Minister Narendra Modi (FILE PHOTO)

Black flags and balloons and activists in black shirts and trousers greeted Prime Minister Narendra Modi as he paid a whirlwind visit to Chennai with helicopter as the chosen mode of transport in the wake of statewide agitation demanding constitution of the Cauvery Management Board (CMB).

Protests were also held with black flags and placards throughout Tamil Nadu in cities like Tiruchi, Thanjavur, Coimbatore and Tuticorin against the Prime Minister’s brief visit to the state and the Centre’s failure to constitute the CMB despite a Supreme Court order. Black flags were hoisted on homes and business establishments across the state.

Prime Minister, Narendra Modi stressed on the importance of service to others in his last Mann Ki Baat edition for 2017.
Narendra Modi welcomed with black flags in chennai.

In a bid to avoid protesters, Modi, who arrived here by a special aircraft in the morning, chose a helicopter to reach Tiruvidanthai, in neighbouring Kanchipuram district where he opened the 10th DefExpo organised by the Defence Ministry. From there he took another chopper to come to IIT Madras, in the heart of the city. From there, he took a one-kilometre ride by car to the neighbouring Adyar Cancer Institute for an event.

The Prime Minister walked a few steps from the helicopter to the car that ferried him to the Cancer Institute. As he did so, he encountered some 30 students from IIT Madras who stood silently but held posters demanding a Cauvery Management Board as ordered by the Supreme Court — an issue which has whipped up emotions in Tamil Nadu. Modi then left by helicopter to the airport before returning to Delhi.

Also Read: Modi is anti-Dalit, will defeat BJP in 2019: Rahul Gandhi

#Go back Modi trended on top as netizens took to the cyberspace to register their protest against the Central government’s failure to set up the CMB as directed by the Supreme Court to ensure proper sharing of Cauvery waters between Tamil Nadu and Karnataka and other states.

DMK leader M.K. Stalin, who was on a padayatra of the Cauvery delta areas, wore black shirt and trousers as he protested along with state Congress President Thirunavukkarasar and CPI-M state unit chief Mutharasan. “The Prime Minister may be flying in the air today but he has to come down when the elections come,” he said taking a dig at Modi.

A black flag was hoisted at DMK chief M. Karunanidhi’s residence. The ailing leader wore a black shirt. DMK MP Tiruchi Siva and leaders of DMK allies wore black dress and marched on the road near the Chennai airport.

In the morning outside the Chennai airport, activists of the Federation for protection of Tamil Art and Culture, led by noted film director Bharatiraja and other film personalities like Amir, Gautaman and Vetrimaran protested against Modi’s visit. They were arrested.

will also hold a meeting there with the Indian community. Wikimedia Commons
Cauvery River Dispute is going on for a while now. Wikimedia Commons

While MDMK chief Vaiko held a black flag protest in Velachery, Naam Thamizhar Katch convenor Seeman, a film director, was arrested elsewhere. Vaiko called Modi a “coward” for choosing to fly. Political leaders Velmurugan and P. Nedumaran were arrested from Alandur metro station in Chennai for holding black flag protests.

Tamil Nadu has been in turmoil since the six-week period for setting up the Board expired, with opposition parties and a host of fringe Tamil groups attacking the Centre, saying the BJP was interested only in winning the Assembly elections in Karnataka. Even the hugely-popular IPL cricket matches have been shifted out of Chennai to Pune in view of the disturbances on Tuesday. IANS