The Niti Ayog second in command, Rajiv Kumar, allegedly said India is facing its worst economic crisis in 70 years.
A day later, a member of the Prime Ministers economic council, Shamika Ravi said we are facing a structural slowdown.
She didn’t say it, but no prizes for guessing what that structural slowdown is, well demonetization of course. It was clear to a fifth grader what a disaster demonetization was going to be, yet at that time everybody cheered. Everybody except few like me. I wrote a column back calling demonetization as the carpet bombing of the economic growth and that ‘greater good’ is an unicorn. And another where I said cost benefit analysis of demonetization was life death analysis.
Prior to Rajiv Kumar and Shamika Ravi, on July 23, 2019 another member of the Economic Advisory Council to the Prime Minister, Rathin Roy said that ‘India is staring at silent fiscal crisis.’
Another recent headline, “Auto Sales Hit Rock Bottom: July 2019 Sees 31 Per Cent Decline.”
Auto sales in India have been spiraling down since the last nine months and it is perhaps the worst downturn the industry has witnessed in almost two decades, where each and every segment in the auto industry is seeing a slump.Shubham Parashar, Aug 13, 2019, NDTV https://auto.ndtv.com/news/auto-sales-hit-rock-bottom-july-2019-sees-31-per-cent-decline-2084347
Damning statements and situations like these should ring alarm bells all over the place but mainstream media and government is trying to distract us. Finance minister is giving bizarre arguments. Government will buy some cars, with tax payer’s money of course, to help the auto industry. I mean, is that the solution? Car sales is at rock bottom, and govt would use our money to buy some cars?
Meanwhile, Rahul Gandhi has reminded the caution and the solution the Congress party had already been giving for a while. In a tweet he said, ‘Accept our solution, and re-monetize the economy.”
What is remonetisation?
During the election campaign Rahul Gandhi would go to rally after rally and talk about Nyuntam Aya Yojna or NyAY scheme, that it will put money in poor people’s pocket with which they will go to local market or shops and buy this and that, soap, tooth paste, camera, cream etc. It sounded odd and both sanghis and liberals laughed at him. Nobody had the mental capacity to understand what he was saying, he was talking about Re-monetising and give the economy a jump start as it has been in coma since demonetization.
Today, it is clear that biggest threat Indian economy is facing is lack of demand for consumer goods because demonetisation sucked the money from the system. We need to put money back in the churning so that consumption increases.
Increase consumption -> Create demand -> increase manufacturing -> Jobs and repeat.
He said it particularly in rural areas, because consumption has gone down in rural areas severely, owing to demonetisation. His idea was so simple that it sounded silly. Now 3 years later, op-eds are being written on same line. See this on Live Mint which says, “FMCG no longer fast moving as rural demand fizzles out.” The article says,
India’s FMCG in 2019 will grow at least two percentage points slower than in the last quarter of 2018, says Nielsen
The projected growth of 11-12% for 2019 is a downward revision from Nielsen’s previous forecast of 13-14%Prasannata Patwa , Amit Panday & Amrit Raj, Apr 18, 2019, Live Mint https://www.livemint.com/industry/retail/fmcg-no-longer-fast-moving-as-rural-demand-fizzles-out-1555545316308.html
Another Op-ed on Hindu Business Line titled says, ‘Reviving demand is the need of the hour‘
“Growth story in the US and West was based on consumerism which is self-reinforcing as it creates a virtuous backward linkage with other sectors. Slowdown witnessed in consumption in India is a matter of deep concern.”Madan Sabnavis, May 13, 2019, The Hindu Business Line. https://www.thehindubusinessline.com/opinion/the-consumption-conundrum/article27118695.ece
You can create demand by putting money into the hands of people, cash benefit has been proven to be successful in several nations. It is not a dent on the economy and questions like where would the money come from is redundant. As Rahul Gandhi said many times, “there is money, we just don’t put it in the right place.” But the NyAY scheme was discredited. The message didn’t reach the rural people.