Telangana CM KCR may well have to pay for backing demonetisation and GST

True, demonetisation and GST -- the two much-touted economic game changers from the Modi government -- have had their crippling effect on the small and medium scale industries, the informal sector encompassing several sectors, petty traders and the man on the street.

For sure there will be resonance of these two in the general elections to Telangana assembly, now currently on along with those in Madhya Pradesh, Chhattisgarh, Rajasthan and Mizoram. It is now more or less clear that the demonetisation did not achieve the desired stated objectives when Prime Minister Narendra Modi announced withdrawal of ₹500 and ₹1000 currency notes as legal tender on November 8, 2016.

Data released by the Reserve Bank of India indicates that, contrary to the expectations in some quarters of the government, almost the entire cash withdrawn came back into the banking system. In itself not that it is entirely white money, but the process to identify the black money owners and punishing them, as part of achieving the stated objective, is a long drawn and time consuming one.

For the present, many are wondering as to why they were made to undergo the hardship that stretched for nearly two months, to withdraw their own money from the banks. Demonetisation broke the back of the Indian economy and crippled the informal sector and shaved off 1.5 percentage points from GDP.

The man on the street does not understand the numbers and the complex economic jargon and explanations thrown at him from the powers that be. All that he or she knows is that their hard work has increased, earnings have gone down after different sectors have experienced a slowdown, resulting in loss of jobs and shrinkage of livelihood opportunities.

After demonetisation came the GST, which was supposed to be a simple tax regime, but turned out to be a chaotic and complex mess. Even now, traders and businessmen and manufacturers are suffering from the after effects, though the government would have people believe the opposite.

The man on the street – D Lakshman Yadav, president of Hyderabad Street Vendors Association – is convinced that people like him were very angry and were only waiting for their turn to teach the ‘government’ a lesson. For him, it does not matter who has taken the decision, the centre or the state government, headed by K Chandrasekhar Rao.

“Both are responsible for our plight. We are still reeling under the impact of GST and demonetisation. Many of us lost money, as we did not have accounts to exchange our notes. And just when we were picking up the pieces, came the GST. Business is down by at least 40%,” Yadav said adding that “guranteega gurthu pettukuntam (we will definitely remember these when voting)”, when asked if these issues mattered at all during elections.

AICC president Rahul Gandhi had described GST as Gabbar Singh Tax, to drive home the message that the government had levied high taxes on all goods and services. Film buffs would recall Gabbar Singh, the hugely popular character of dacoit villain from a 1970s blockbuster of all times, Sholay.

Dr Monami Sinha, economics professor at Kamla Nehru College of Delhi, had recently studied the impact of GST in Andhra Pradesh and Telangana and has found that weavers, handlooms, handicrafts, agriculture and all allied activities that 80% of the people are associated with in villages and small towns in these two states were adversely affected by the new tax regime.

Over 90% of the respondents in her study admitted that they were outwitted by the complex taxation procedure and said their taxes had gone up. Despite representations from several organisations, the government has given no relief to the handicrafts and handlooms, Dr Sinha said. Contraction of earnings and increase in costs is a general complaint from those engaged in the informal sector that was entirely run on cash prior to demonetisation.

But she said she was not in a position to make a definitive comment whether the despondency, dejection and even anger over the implementation of GST and its impact will actually play out as a factor in polls.

In Telangana, the state government is seen as siding with the central government and endorsing all its decisions, including demonetisation and for this reason could find itself on the receiving end of the people’s ire in the elections.

Said trade union activist Mohan Rao, “GST has really affected the weaver’s community badly. In fact, the handlooms and handicrafts sector find itself in a bind due to changes in the tax regime.” Citing an example, he said weavers of Uppada, a coastal hamlet near Kakinada town in East Godavari district of Andhra Pradesh, were experiencing a shortfall in earnings and are paying higher taxes now in the new regime.

When pointed out that Telangana chief minister was not the one who took both the decisions and why should the voters hold him responsible, the trade union activist said the suffering people on the ground do not differentiate like this. In their eyes, KCR as the CM is popularly known, is the one who supported both the decisions and was part of the midnight GST celebrations. “So far, the CM has not sent a plea to the centre for rebate in GST on handlooms and handicrafts,” Mohan Rao said adding that these sections of the society, the petty trader and small businessman was waiting for the elections to show what they think of these two economic ‘game-changing’ decisions.

Social scientist Prof C Ramachandraiah of Hyderabad-based Centre for Economic and Social Research was sceptical if demonetisation and GST would give sleepless nights to either the Telangana Chief Minister K Chandrasekhar Rao or the BJP as the opposition had failed to mount a proper, catchy and effective campaign surrounding these two issues. “No doubt there has been lot of distress stemming out of the implementation of these two economic decisions, but the opposition has not been able to make a political capital out of it,” he told National Herald.

In fact, it is the Prime Minister Narendra Modi campaigning in Madhya Pradesh aggressively defended demonetisation and asserted that he had to use a strong medicine to restore the health of the economy that had eroded due to the ills injected by the years and years of Congress rule in the country.

If the Congress-led grand alliance can mount a campaign on GST and demonetisation, in this order, it can perhaps tap into this anger on the ground. But can the Congress and its alliance partners do it the doubt that Prof Ramachandraiah and trade union activist Mohan Rao entertain.

“As of now, it is a 50-50 battle in Telangana,” Rao said indicating the tough battle up ahead. It is anybody’s game as of now but much would depend on candidates and campaigning. “Already, KCR and his party have been a campaign overdrive when the Congress-led grand alliance is still settling the seat sharing arrangements,” he said.