Skip to main content

India's GDP grew 0-1% due to "negative growth" in unorganized sector post-demonetization, GST: Economist

By Our Representative
One of the topmost Indian experts on black economy has said that demonetization and Goods and Services Tax (GST) have pushed the Indian economy to the brink, contradicting the Government of India figure of Gross Domestic Product (GDP) growth of 5.7%, has created a flutter by asserting, "Even former NDA Union minister Yashwant Sinha's estimate of 3.7% growth is an over-estimation."
"If we consider the sharp decelerations of the unorganized sector of the economy as a result of demonetization and GST, India's actual growth rate is either zero or 1%", Dr Arun Kumar, currently Malcolm S Adiseshiah chair professor, Institute of Social Sciences, and previously professor of economics at the Jawaharlal Nehru University, New Delhi, said.
Author of the best seller 'The Black Economy in India', republished thrice, last time this year, and 'Demonetization and Black Economy’, to come out in November 2017, both published by Penguins, Dr Kumar said, "The unorganized sector virtually collapsed during the demonetization phase, November-December 2016. Consisting of 45% of the economy, it's GDP, according to my estimate, went down to minus (--) 22%."
Asked about the status of the GDP of the unorganized sector as of today, Dr Kumar told a media interaction in Ahmedabad, organized by the Gujarat Lok Samiti, "It hasn't yet recovered. It's growth rate remains in the negative even today. It would be around minus ( -- ) 4-5%." 
Dr Kumar, who later delivered a lecture on black economy at the Indian Institute of Management, Ahmedabad, added, "We are actually passing through a deep recessionary phase."
Pointing out that the problem lies with the way the GDP is calculated, Dr Kumar said, "Even if the actual GDP rate was 5.7%, it would be quite a good performance. However, if one takes into account different sectors of the economy, we can see that something is fundamentally wrong with the way way one calculates GDP."
He explained, "There is no separate calculation for the unorganized sector, which consists of 45% of the economy. The GDP growth is calculated on the basis of the growth in the organized sector. Based on that, and taking into consideration the perception of other sectors, GDP is calculated. It is assumed that the unorganized sector would have grown at the same rate as the organized sector, which is totally flawed."
Coming to the GST, Dr Kumar said, all that it is doing -- apart from creating taxation problems for the small scale sector -- is to "fuel inflation". Pointing out that here too the problem is the way inflation is calculated, he underlined, "The service sector consists of 40% of GDP, yet it is not calculated in the inflationary push. It is the service sector which has been adversely affected the most by the GST."
According to Dr Kumar, "Taxes on the services sector have been successively rising, starting at 4%. Last they were 12%. GST on the service sector now is 18%, which is fuelling inflation, yet it is not being calculated. To say that the rate of inflation is 2.5%, as claimed by the officials, is an understatement. I think that the rate of inflation is at least 6%."
Noting that the joint impact of demonetization and GST has been especially felt on the jobs market, Dr Kumar said, "Officially, India's unemployment rate is 2.5%. However, in a country where to earn even a small amount is a compulsion, driven by poverty, underemployment is rampant. When you ask anyone whether he works, he will say he is working, however little the amount may be. According to my estimate, underemployment is about 18% of the able bodied population seeking job."

Comments

TRENDING

Whistle-blowing IPS officer Sanjiv Bhatt's wife suspects foul play after truck hits her car

By Nachiketa Desai*
Paranoia has seized Shweta Bhatt, wife of suspended Indian Police Service (IPS) officer Sanjiv Bhatt, after the car she was driving was rammed in broad day light. According to Shweta Bhatt, it was beacon light-flashing truck without registration number plate. The incident took place on January 7, just a day ahead of the Gujarat High Court was scheduled to take up the bail application of Sanjiv Bhatt, arrested last year for "involvement" in a 23-year-old case.

Call to support IIM-Bangalore professor, censured for seeking action against Uniliver

Counterview Desk
Sections of the Indian Institute of Managements (IIMs) across India have strongly reacted to the decision to censure Dr Deepak Malghan, a faulty at IIM-Bangalore. Prabhir Vishnu Poruthiyil, who is faculty at IIM-Tiruchirapalli, has sought wider solidarity with Dr Malghan, saying, "The administration has censured Deepak for merely suggesting a meaningful action against Hindustan Unilever for their abysmal environmental record" by “disinviting” it for campus placement.

99% MGNREGA funds "exhausted", Govt of India makes no additional sanctions: Study

Counterview Desk
A letter, addressed to Prime Minister Narendra Modi, and prepared by senior activists led by Aruna Roy on behalf of the Peoples’ Action for Employment Guarantee (PAEG), and signed, among others, by 80 members of Parliament, has regretted that, despite repeated public statements by his government promising employment and job creation that will boost the country’s growth, the country’s only employment guarantee programme, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), “is being systematically undermined.”

Morari Bapu, who has installed new statues of Ram, Laxman, Hanuman without weapons

By Sandeep Pandey*
A saint is one who can give some inner peace by his/her voice. This will happen only when s(he) will talk about love and harmony. Morari Bapu is one saint who has been conveying the message of love, peace, harmony, fraternity, etc. Today when a number of saffron clad figures with aggressive posture, spewing venom, fanning hatred to polarise voters are at the forefront of politics of Hindutva it is a relief to see Morari Bapu in a different mould.

Nuclear reactors sought from French giant "not safe": Letter to Modi on Jaitapur project

Counterview Desk
Amidst reports that the French nuclear giant EDF has submitted a “techno-commercial offer” for the world’s largest nuclear power park proposed in Maharashtra’s Jaitapur nuclear power park in Jaitapur on the Maharashtra coast, Dr EAS Sarma, India’s former Union Secretary in the Minister of Power, and an eminent voice in the civil society, has written an open letter to Prime Minister Narendra Modi, who also heads Department of Atomic Energy (DAE),  protesting the move.

World Bank clarifies: Its 26th rank to India not for universal access to power but for ease of doing business

By Our Representative
In a major embarrassment to the Government of India, the World Bank has reportedly clarified that it has not ranked India 26th out of 130 countries for providing power to its population. The top international banker’s clarification comes following Union Power Minister Piyush Goyal’s claim that India has “improved to 26 position from 99” in access to electricity in just one year.

Kaiga NPP expansion: Karnataka to get just 400 MW, but lose thick forest, fresh water

Counterview Desk
In an open letter to the chairman and members of the Atomic energy Commission (AEC) on the issue of Kaiga nuclear power plant (NPP) expansion plan in Karnataka, Shankar Sharma, well-known power policy analyst, has argued that that in case of expansion, the site will face “exponential increase in radiation emission risks”, underlining, “Nuclear safety experts identify such a scenario as enhanced risk for NPPs with multiple reactors and shared technical facilities."
Sharma says the questions that also be asked whether Karnataka should lose more than 54 hectares of thick forests and about 152,304 cubic meters of fresh water per day from Kali river for a meager benefit of 400 MW from the Kaiga NPP, for which “there are many benign alternative options available for the state at much lower overall costs to the state.”
Text of the letter: This has reference to the public hearing under the Environmental Impact Assessment (EIA) Rule 2006 of Ministry of Environment, Fore…

Uttarakhand High Court: Biodiversity boards can impose fees on Ramdev's Divya Pharmacy

By Mridhu Tandon
In a significant decision, the Uttarakhand High Court on December 21, 2018 has dismissed the writ petition filed by Divya Pharmacy founded by Baba Ramdev and Acharya Balakrishnan, challenging the demand of the Uttarakhand Biodiversity Board (UBB) imposing fees under the provisions of the Fair and Equitable Benefit Sharing (FEBS).

Modi becoming Prime Minister now appears to be an "accident" to the people of India

By Sandeep Pandey*
Anupam Kher's film 'Accidental Prime Minister' has targeted Dr Manmohan Singh who served for two terms and may be again acceptable for the job if his party regains power. But his tormentor Narendra Modi seems to be out of breath even before his first term is over. Disillusionment with him is so widespread and deep that people of India may not bear with him for another term. As the general elections approach again the difference between the two needs to be examined.

Story of a foot soldier of Gujarat riots coming from a vulnerable community, Chharas

By Rajiv Shah
He is one of the more prominent "foot soldiers" of the 2002 Gujarat riots. Suresh Jadeja, alias Langdo, alias Richard, is indeed a well-known name in the Naroda Patiya massacre case, in which 97 persons were killed on February 28, 2002, the first day of the riots that shook the nation. Ordinarily, such a person should have been subjected to sociological scrutiny. What have here is a keen journalistic account, with clear political-ideological overtone.