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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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PM Narendra Modi Hails India’s Position in Astronomy in Mann ki Baat

Referring to the contributions of astronomy centres in places like Pune and Ooty, the prime minister commended the strides the nation has taken in the field

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Modi advises Scientists
Prime Minister Modi tells scientists that science and technology should be used to bettering the lives of citizens. Wikimedia Commons

Speaking about the last solar eclipse of the year which happened on December 26, the prime minister Narendra Modi recalled India’s mastery over astronomy since ancient times.

In his Mann Ki Baat address to the nation, the Prime Minister mentioned the request from Ripun who hails from the northeast but is staying now in south India because of his job.

The prime minister mentioned Ripun for his request to find ways to popularise astronomy in rural areas of the country.

PM Modi
India’s Prime Minister Narendra Modi speaks to the media inside the parliament premises on the first day of the winter session in New Delhi, India. VOA

Referring to the contributions of astronomy centres in places like Pune and Ooty, the prime minister commended the strides the nation has taken in the field.

Also Read: Samsung, LG to Show off Latest AI Tech, Displays at CES: Report

“The eclipse reminds us that that we are travelling in space while residing on the earth…. Friends, India has an ancient and glorious history of astronomy. Our connection with the twinkling stars in the sky is as old as our civilisation. Many of you might be aware that at various places in India, there are magnificent observatories (Jantar Mantars) – which are worth seeing. And these observatories have a deep bond with astronomy. Who doesn’t know about the prodigious talent of the great Aryabhatta,” PM said. (IANS)