The following video was uploaded by stand-up comic Kunal Kamra:
The place was Maharajganj in Eastern UP. The date was March 1, 2017. The GDP numbers had just been released and it showed that the economy was growing at 7.1%. Prime Minister Narendra Modi, also the Chief Economist in his government, was going all guns blazing. This is where the Prime Minister took at ‘Hardwork vs Harvard’ jibe.
On November 24, 2016 former Prime Minister Dr Manmohan Singh was speaking in the Rajya Sabha on the post Demonetisation debate where he made three basic points. One, the demonetisation drive was a monumental mismanagement. Two, GDP growth can fall by 2 per cent and that is an underestimate and three, this will hurt agriculture, small industry and everyone in the unorganised sector.
Almost three years after Dr Singh’s speech and two and a half years after the Prime Minister’s jibe, Dr Singh stands vindicated.
The GDP is down, agriculture has taken a massive hit and the unorganised sector is in acute stress. About 50 lakh jobs have been lost. The impact is now visible on manufacturing and slowdown is looking more and more like a full-blown recession.
But Dr Singh is not celebrating. He is deeply worried about what lies ahead.
Few political leaders understand the fundamentals of the Indian economy like Former Prime Minister Dr Manmohan Singh. His brief comments on the state of the Indian economy tells us what is wrong but more importantly, tells us what we could do as a nation to get back to the road to prosperity and growth. The question is, will the government act?
The good doctor, in his wisdom, tells us that we have landed in the present economic mess because the government has made basic policy errors by killing two sectors that have kept the economy together: the informal and agriculture sectors. Both sectors have been destroyed by the ignorance and arrogance of Modi government.
While a lot of has been said and written about the agriculture sector, we need to take a closer look at the informal sector and understand how much the sector means to the Indian economy and how reviving the Indian economy is not possible without reviving the informal sector. While retrenchments and lay-offs in the formal sector makes news, the informal sector has been suffering in silence since the day demonetisation was announced.
The size and importance of the informal sector to the Indian economy has never really been understood and appreciated. According to 2008 figures, this sector contributed 46.3% of the GVA in the economy and according to the 2018 data of ILO, it makes for 81% of the total employment in the country.
The ILO data says the formal sector provides only 6.5% of total employment while 0.8% are employed in the household sector. Mainly cash driven, these informal businesses run from day to day and have very limited financial buffers to withstand adverse conditions.
Conventional wisdom in economic planning has been to let the informal sector be. Considering it made for bulk of our economic activity and was the biggest provider of employment, the idea was to give them the time and space to grow, help them mature into an organised sector over a period of time. That is how small businesses mushroomed all over the country and over time, a large number of them grew into medium and large businesses. That was until November 8, 2016.
Making his first budget speech after demonetisation on February 1, 2017, late Arun Jaitley had clearly stated that the objective of government’s economic policy was to shift from informal economy to formal economy. “As against 5.6 crore informal sector individual enterprises and firms doing small business in India, the number of returns filed by this category are only 1.81 crore,” the former FM had stated.
Then, in July 2017, a few months after the ‘success’ of demonetisation, the government brought in the Goods and Services tax. In a space of nine months, the government had brought in two legislations that had changed the trajectory of Indian economy. From a consumption driven economy which waited for informal businesses to bloom into formal companies, we turned into an economy which recognised only the formal economy and left the informal sector out in the rain.
Almost three years after demonetisation and two years after GST was introduced, the impact is visible for all to see. State of Working India 2019 (SWI 2019) by Bengaluru-based Azim Premji University researchers says that 50 lakh lost their jobs between 2016 and 2018. After being in denial for months, the government was forced to admit that unemployment is indeed at a 45-year high.
Dr Singh is not gloating about the accuracy of his prediction. The man who had given India 9% plus growth for three years, is a worried man. He knows that there is more pain ahead and it would take years for consumption driven demand to revive.
His advice to the government is very clear. “Our youth, farmers and farm workers, entrepreneurs and the marginalised sections deserve better. India cannot afford to continue down this path. Therefore, I urge the government to put aside vendetta politics, and reach out to all sane voices and thinking minds, to steer our economy out of this man-made crisis,” he said.
The question, however, is if the government will come out of its denial and reach out to make our national mission to bring the economy back on track?