Look beneath government hype, and signs of deep economic distress are evident
By Kapil Sibal – This government is in denial.
It believes that black economy has been given a fatal blow. At 7.1% India continues to be the fastest growing economy in the world. Spurt in public investment has created jobs. FDI flows are evidence of investors’ confidence in the growth story of India. Reforms have led to ease of doing business.
Let us critically examine each of these claims.
On November 8, when the prime minister announced demonetization of all 500 and 1,000 rupee notes freezing 86% of India’s economy. If this ill-thought decision was an attempt at eradicating unaccounted wealth then it failed miserably. Most cash is either invested in real estate, gold or is stashed abroad. Undisclosed cash in circulation represented only around 5% of unaccounted wealth.
Now that real estate is outside the GST net, cash will continue to be a factor in real estate transactions. What is alarming is that unaccounted cash entered the banking system and is slowly being withdrawn and reconverted into undisclosed cash.
Modi believes in seducing foreign investors in digitizing the economy, little realizing that most of India earns less than Rs 10,000 a month and seldom accesses digital platforms for bank transactions.
Record levels of Sensex, we all know, do not reflect the true state of the economy. With real estate giving no returns and interest rates down, the only option for investors is in equities. This is risky because once the bubble bursts investors will be badly hurt. more> https://goo.gl/PjHNHqby