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Narendra Modi turns “THREE”

The first head of government to be born in post-independent India, Prime Minister Narendra Modi turned three years recently. Despite flip-flops, data-gymnastics and a well-oiled propaganda machinery, he has meant good for India. That is saying a lot for someone who came to 7RCR with baggage. 

Modi’s biggest achievement has been the financial carpet-bombing, aka demonetisation, that India’s economy needed. No, it has neither killed fake currency nor terror funding but has helped the country take two giant steps towards a less-cash economy and has brought almost the entire money under circulation into the banking system.  

Surprisingly, the central bank is not giving out the numbers and so let’s glean in the figures from elsewhere to get a perspective of what happened.

Four days before the dramatic announcement, on 4 November the amount of money in circulation was Rs 17.54 trillion. Of this Rs 15.40 trillion was demonetised. According to reports, Rs. 14.97 trillion has returned to the banking system, resulting in a gain of Rs 0.43 trillion to the government. Of the Rs 14.97 trillion received, the government has reissued only Rs 9.20 trillion. The government may choose to issue the balance Rs 5.77 trillion or may let other forms of money like credit cards, e-wallets, etc., cover that sum. It would mean a transition of Rs 5.77 trillion to the digital economy and is a significant achievement. 

According to CMIE, the cost of carrying out the demonetisation exercise, as of  31 December 17 is Rs 1.28 trillion. Looked at in the backdrop of a Rs 0.43 trillion gain, the net loss of demonetisation is Rs 0.83 trillion. This loss does not consider the benefit that may flow in due to change in the climate towards the generation of black money.  The price may be worth the trouble as a one-time cleanup, provided the government moves in its fourth year to strike real estate and gold. India Cash was the low-lying fruit; property will be harder to tackle and foreign black money the hardest. 

Modi’s second significant achievement is the kicking in of the Goods and Services Tax Act. It is India’s most transformational legislation since independence and has been long in the coming. With a slew of concessions in the nature of give and take, this will be finally flagged off.  Electoral victories have helped the cause because while the country may be far more argumentative today, politically the landscape is clearly saffron.

Of course, the jury is still out on how GST will pan out. If the government can listen to the star legal voices who have a thorough understanding of the way things work on the ground and iron out those concerns, instead of calling them names, we would move forward significantly and in the right direction. The view, “Hey, let’s get going, these guys will fall in line,” is sad. 

Importantly, the Bankruptcy Code and the Real Estate Regulation Act are game changers and the government needs to be complimented for pushing it through. They would change the way we do business in India. 

Modi’s other big achievement (if you could call it that) is his voice alone is heard’ others’ count for little. We hadn’t had such a situation since the early 1980s when Mrs. Gandhi ruled the country with an authoritarian streak.  Successive prime ministers, whether by nature or by compulsion, were accommodative and to that extent appeared to be losing in power. This is not true of Modi. 

Personally, I would like to see a few things happen in the final two years of his current term. The establishment of a Lok Pal, the granting of complete independence to the CVC and the CBI like it is given to the election commission and a drastic reduction in taxes are a few. Let’s look at the tax numbers. If I earn Rs 100, I pay about Rs 34 as taxes. If I spend the balance Rs 66, even assuming GST at an average of 16 per cent, I end spending only Rs 58 on goods and services. So close to Rs 42 goes to the government and that’s a lot of money.  

And finally, the political class must give up its myriad perquisites and its sickening Z category security that gets paid out of our Rs 42. I can understand it for Modi; but why should a simple bloke like the King of alliteration, Venkaiah Naidu, need security cover?

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