Coronavirus lockdown not only affected common men, more than that it has also affected the Indian economy. Factories, Retail, Wholesale Shops, Dhabas, Restaurants and Salons were all closed. Millions of people have lost their jobs. There is no work in urban areas of the country, so the migrant workers are forced to leave the cities and go to their villages.
To counter this situation Modi Govt has taken a few steps, which they call it Modinomics. Will this Modinomics help the economy of the country?
What are the steps taken by Modi Govt under Modinomics?
The first step is to provide something to poor’s below the poverty line or the very poor countrymen and the second step is a loan fair for large industrialists and businessmen.
Will these steps improve the derailing Indian economy?
We all know during lockdown all the sales purchase transitions in the country was stalled. One can gauge the decline in the commercial transaction from the GST collection data. Last year, there was an average GST collection of ₹ 1.02 lakh crore every month.
In April 2020, the GST collection was only ₹ 32294 crore, which was 72 per cent less than April 2019. GST collection situation little improved in May 2020 with ₹ 62009 crores, but it was again 38 per cent less from May 2019. Another reason for such low GST collection is due to submission extension given by the Govt. It was believed by govt that April and May GST arrears would come along with the GST of June.
But even in June, the GST collection remained only at ₹ 90917 crore, which is almost 9 per cent lower in comparison with June 2019. Overall, the GST collection during the first quarter of FY 21 has been just ₹ 1.85 lakh crore which is 41 per cent less than the first quarter of FY 20. This clearly indicates that the country’s economy has derailed. This can also be understood from the figures of industrial production, according to the PMI data, the average industrial production in the first quarter has been at the lowest level of 15 years. In April it is only 27.4, May 30. 8 and in June also 47. 2. It is believed that if the PMI is below 50, then industrial production has dropped.
Another thing has come up in this PMI survey, the cost of raw materials, as well as finished goods, has come down, it is clear that there has been a huge decline in both supply and demand. There is a big reason for this, people do not have much money in their pocket, the salaried middle class which are the key contributor in countries overall spends are afraid of losing jobs and salary cut. Another reason is common people do not trust Modinomics.
How Modinomics is working?
5 kg of food grains and MNREGA wages to the poorest’s of the country, with such low income and support of govt they can only fulfil their essential needs.
The loans to entrepreneurs for investing in new business and sustaining their current business but why one will take loan during such a low demand time in the country. No industrialist will invest in new business during such period but some of them need a loan to meet their sustainability expenses and for paying salaries to their employee’s. With limited income and low profits, they might not be able to repay the loan and NPA will further increase which is already very high.
Indian banking and financial sector is already under tremendous pressure due to high NPA and a further increase in NPA will destroy the financial structure of the country and this will also impact the common Indian. To recover this NPA Govt will impose more tax on people which means that we will have to be ready to pay more in terms of direct/indirect tax. This is the reality of failed Modinomics.