James P. Cutler to Brieanna McKinnon, Joseph F. McKinnon and Joseph R. McKinnon. 421 Beldingville Road. $475,000. John B. Hall Family Trust and Helen I.

How is the Modi government responsible for degradation in the economy?

Someone has to take the responsibility. Every time you can not play the blame game “Blame it on Rio” Passing the blame doesn’t help Modi Government at least it doesn’t help solve the problem.The need of the hour is to take action. Its not that Modi Government is afraid to bold action. It has already taken so many bold action – Surgical Strike, Balakot attack, ban on triple talaq, removal of Article 370. Why ? Because Government understand that blaming Pandit Nehru doesn’t solve the Kashmir problem, it has to take the action and it has taken. Credit goes to Modi Government

Here Modi Government has opted to take action rather than only blaming the Congress Government..

The Modi government has done really well on political and social fronts. But while it comes to the economic front we can not say the same thing. The depression or recession we see in the economy is the effect of some cause. And these effect could cause further slowdown in the economy. How to resolve this ? Mr. Prakash Javadekar, minister of Information & Broadcasting tried to sidestep questions on the economy, calling the slow down a ‘cyclic process’ “Sometimes slow down is a cyclic process; fundamentals of Indian economy are so strong, it’s not being disturbed. Our domestic economy on strong foot, expecting more foreign investment and more domestic demand,” If this be the casual attitude of the Government then something seriously wrong.

The problem is that unless the Government accept or acknowledge that there is slowdown in economy, its not going to find a solution. Without having an problem you can not look for solution.

The problems are golden opportunity for action. Leadership skills are measured through their action in difficult times and rough weather. Even an ordinary leader would sail through in favorable condition.

Modi Government has roughly about 4 and half years left in his 2nd term. This is still sufficient time to bring back the economy from slow down. This is not the time to silent the critics or divert attention. Ten years down the line he would not be there in PM potion to explain things, 50 years down the line he would not be there to defend his action or no action. Lot of people today criticize Nehru for division of this country, Kashmir problem, giving the UNSC seat to China. But he is not there to defend his action. History is very ruthless. People will forget 10 good things done by you. But people and opposition will highlight that one failure. Even today Indira Gandhi is criticised for imposing emergency.

India lost 11 million jobs in 2018, rural areas worst hit: CMIE Job scenario turned bleak in the past year, as almost 11 million Indians lost their jobs during 2018, a report by the Centre for Monitoring Indian Economy (CMIE) said. The analysis report showed individuals belonging to vulnerable groups being the worst hit by job losses in 2018.

The CMIE report showed that the number of unemployed has been steadily increasing in the country. The number of employed recorded in December 2018 was at 397 million, which is 10.9 million less than the figure of 407.9 million seen a year ago at the end of December 2017. An estimated 9.1 million jobs were lost in rural India while the loss in urban India was 1.8 million jobs

Auto sector crisis deepens: Around two lakh jobs cut in last 3 months.

Parle may cut up to 10,000 jobs as slowdown bites

The Indian economy has been the worst sufferer in recent times. The GDP growth in the first quarter of financial year 2019-20 slipped to the six-year low of five per cent. Meanwhile, the Indian rupee again became one of the worst-performing Asian currencies after depreciating 3.65 per cent against the dollar in August. This, too, is the steepest decline in the Indian currency in the last six years. The commercial Banks are reeling under massive increase in NPA for last three years. The Automobile sector facing unprecedented crisis and even the FMCG sector is also facing hit.

A large number of public-sector banks, 14 out of 19, posted a consecutive losses in 2018-19 –The 14 public-sector lenders, which included five banks, still within the promp corrective action framework, posted an aggregate loss of Rs 74,277.77 crore for FY19 against Rs 65,723.52 crore in FY18, based on figures available on the CapitaLine Database.

Five out of the 11 payments banks have shut shop –The initial hype around payments banks have quickly fizzled out. With Aditya Birla Payments Bank, announcing its decision to shut operations in July, the tally is down to six.

First 100 days of Modi 2.0 wipes off Rs 14 lakh crore stock investor wealth.2,290 of the 2,664 actively-traded stocks on BSE lost up to 96 per cent of their value. Among them, 422 have tumbled over 40 per cent, 1,371 tanked over 20 per cent while 1,872 declined over 10 per cent. The combined market value of the BSE-listed stocks has fallen by Rs 14.15 lakh crore to Rs 140 lakh crore during this period.

‘Watch’ out! GDP slowdown has Jhunjhunwala among its victims

Into Tuesday’s ( 3rd Sept, 2019) trading, the value of ace investor Rakesh Jhunjhunwala’s portfolio was down by Rs 200 crore. Titan NSE -3.27 %, the crown jewel of Big Bull’s portfolio, tanked 3 per cent after the Tata Group firm trimmed its FY20 guidance for revenue growth in its ‘watches’ division, citing a demand slowdown. Among Jhunjhunwala’s portfolio stocks DHFL is down 81 per cent year to date.

For Escorts, another Jhunjhunwala investment, the management insists that tractor financing was never an issue as tractor is treated as a priority segment, but the overall demand for tractors has been hit due to delayed monsoon and dampened sentiment. Besides, the company says its construction equipment business has been hit due to an industrywide slowdown on account of financing issues and delayed payments for ongoing infrastructure projects.

Escorts, which reported a 19 per cent drop in August tractor sales, is down 27 per cent year-to-date. “There is no one thing that can revive sentiment. We need a series of measures to improve sentiment,” Jhunjhunwala recently told ETNOW

Harsha Upadhyaya, head of equities, Kotak Mutual Fund – The stock market may remain volatile in the short term. The anecdotal evidence and the data that is coming from every corner are negative. First quarter earnings were below the mark and even expectations are that downgrades would continue at least for the next couple of quarters.

The fall-out of the slowdown can be gauged form the fact that the auto industry contributes around half of manufacturing GDP and 11% of the total GST revenue. It is estimated that the sector also supports almost 37 million direct and indirect jobs.

Passenger vehicle sales: Continue to slide for 8th straight month. Commercial Vehicle drives in the slow lane too. The story so far: In July, the sale of vehicles across categories in the country slumped 18.71% to about 18.25 lakh units, down from about 22.45 lakh units, a year ago in the same month. This has been the steepest fall in nearly 19 years.

When you take action. There are only two outcome either things will go wrong or things will go right. If things go right government get all the credit like surgical strike, Balakot attack. But if the things go wrong the blame will go to the Government only. Why the steps taken by Modi Government considered bold ? Because the risk associated are very big. Now that Demonetization has back fired, Government should take the ownership the same way it has taken the credit of success. This is what is called the boldness – to be ready to face the consequence particularly when things go wrong and to be prepared to overcome the challenge. Market forces are not afraid of any one nor Modi nor Trump. In that way it is very impartial

You can refer my article on “ What is the reason for slowing economy of India”

What is the reason for slowing economy of India

I see a kind of hurry in Modi Governments actions. They want to do all the big things , take bold step in quick succession. Nothing wrong in the intention, but please appreciate that the risk associated are also equally big or rather much bigger.

  1. Creation 18 New Banks ( 2 Universal Banking, 6 Payment Bank and 10 Small Finance Bank ) Since April 2014, the Reserve Bank of India (RBI) has granted 23 banking licences to new players – two were given universal banking licences (April 2, 2014), 11 were issued payments banks licences (August 19, 2015) and 10 were given licences for small finance banks (September 16, 2015).
  2. Demonetization
  3. GST
  4. Surgical Strike
  5. Balakot attack
  6. Triple Talaq Ban
  7. Removal of Article 370 and 35A
  8. Mega merger of 27 Commercial Banks

Now on one hand Government has given go ahead for creation of 18 new bank ( mostly under private sector ) on the other hand it is going for merger of PSU bank. Its a little difficult to understand the contrast action. The today’s condition of PSU bank is absolutely predictable. They are working within a sandwiched layer. At bottom there are the Payment Bank, Small Finance Bank & NBFCs, in the middle the PSU Bank and on top the Private & Foreign Banks. With very little liberty for policy making, constant government interference and additional burden of non productive work load like Demonitisation, Jan Dhan Yojna etc, gradual loss of customer segment to completion both bottom and top end, the Commercial Banks are left with very very little breathing space. I would not be surprised if they face the similar fate of other dying PSUs.

Demonetization has been biggest blunder by Modi Government. Why ? Because it was a economic decision taken by political leadership which is not their domain expertise. Such a suggestion or recommendation of this magnitude didn’t come from any economic circle, subject matter matter expert nor even by RBI. Since this action had to completed in utmost secrecy ( for ensuring effectiveness ) Government could not afford to have consultation with wider panel of economist. You can not expect political leadership to be subject matter expert in economics.

Modi Government doesn’t have a economist of Manmohan Singh’s caliber in the cabinet. Possibly Government was ill advised or it was purely a political decision. The bigger blunder is that the Government didn’t have a proper follow up plan and contingency plan to back up the action of this magnitude. And the result is economy started slipping out of growth path after demonetization. Unfortunately the Government could not read the symptom of slowdown and even today we are getting casual comments for some of cabinet ministers.

The minutes of meeting which had approved the demonetisation of Rs 500 and Rs 1000 currency notes has been revealed through RTI. The government had contested that demonetisation would help curb black money and a steep rise in Rs 500 and Rs 1,000 notes; check the circulation of fake currency and promote e-payments and financial inclusion.

Observations made by RBI

RBI Directors had contested the government’s claim about curbing black money by highlighting that most of the black money is held not in cash but in the form of real sector assets such as gold or real estate and this move would not have a material impact on the assets.

BI Directors refuted the government’s argument about the growth in high denomination notes being much faster than the pace of economic expansion, by reasoning that when adjusted for inflation, the difference may not be so stark.

RBI has stated that even though the incidence of counterfeiting is a concern, Rs 400 crore as a percentage of the total quantum of currency in circulation is not very significant.

Despite these reservations and disagreements, the RBI board had approved the demonetisation in larger public interest as it provided an opportunity to contain the use of cash and promote financial inclusion and electronic modes of payment

One of the very dangerous logic provided by Government in support of demonetization was that of counterfeit currency. If we go by that logic it would great advantage for Pakistan. All they have to do is to print 2–3 truck load of counterfeit currency time to time and India Government would go demonetization after demonetization. Pakistan doesn’t have to fight any proxy war with India.One demonetization is enough to doom the Indian economy, which Pakistan can not do with 100 proxy war.

Secondly demonetization as a tool for expanding financial inclusion must be the most ridiculous and ill advised idea for achievement of financial inclusion target.

Yes demonetization has played a role in increasing e-payment mode. However Currency in circulation rises 22% in May over pre-demonetisation level. As per a written reply given by Finance Minister Nirmala Sitharaman in the Rajya Sabha, the notes in circulation as on November 4, 2016 were ₹17,74,187 crore, which have now increased to ₹21,71,385 crore as on May 31, 2019.

Demonetisation led to highest fake currency, suspicious transactions: Report –During 2015-16, while a total of 1.05 lakh STRs ( Suspicious Transaction Report ) were generated out of which 61,361 were sent by banks it jumped to 3,61,215 post DeMo and 40,033 such reports were sent was by financial intermediaries that shot up to 94,837 post DeMo, the report said

More Rs 500, Rs 2000 fake notes since demonetisation; counterfeit instances shot up 43 folds -Fake notes among the new design notes of Rs 500 more than doubled with an increase of 121 per cent whereas those of Rs 2000 increased by 21.9 than the previous year during 2018-19. The counterfeit instances among substituted notes of Rs 500 and Rs 2000 have also skyrocketed since their inception, says the latest RBI annual report. Compared to the year of demonetisation, 2016-17, fake notes of Rs 500 and Rs 2000 has shot up by 43 and 34 folds respectively in 2018-19.

This is exactly what I feared that we have made a policy blunder and given a potent weapon to our enemy. They will try and push more counterfeit notes so as to force us for one more demonetization. After removal of Article 370 the risk is further higher.

Now lets come to the question of curbing Black Money – Again demonetization failed in its objective. 99.30% of demonetised money back in the system, says RBI report. Of the Rs 15.41 lakh crore worth Rs 500 and Rs 1,000 notes in circulation on November 8, 2016, when the note ban was announced, notes worth Rs 15.31 lakh crore have been returned. This meant just Rs 10,720 crore of the junked currency did not return to the banking system. To a certain extent this gap also could be attributed to currency maintained in foreign nation which could not be converted. Indian currencies are accepted in bordering countries like Nepal and Bhutan for business transaction

Post-demonetisation, RBI spent Rs 7,965 crore in 2016-17 on printing new Rs 500 and Rs 2,000 and other denomination notes, more than double the Rs 3,421 crore spent in the previous year. And ₹4,912 crore in 2017-18.

Cost to banks-This resulted in a decline in the dividend paid to the government from ₹65,876 crore in 2015-16 to ₹30,659 crore in 2016-17 and ₹50,000 crore in 2017-18.

It was estimated that this decrease in income for the government could cause the fiscal deficit for the financial year 2016-17 to increase from the targeted 3.2% to 3.4%. The Indian Air Force was paid ₹29.41 crore to move new banknotes after demonetisation. The secondary transportation cost is extra. The banks incurred huge cost in collection, storage and movement of banknotes across the country as well as in re-calibrating the ATM

One of the objective of Demonetization was to curb terror funding. However here also we do not see any success.

Number of terrorist attacks in J&K 2014–2018

This information was released in the Lok Sabha in a written reply by the Minister of State for Home Affairs Hansraj Gangaram Ahir.

Deaths – Political opposition leaders claimed that over 100 people had died due to demonetisation. The government stated that they received no official report on deaths connected to demonetisation. Later in December 2018, the then Finance Minister Arun Jaitley reported in parliament that four people, three bank personnel and one customer of the State Bank of India, died during the demonetisation.

Yes Government is showing are GDP growth numbers which looked very attractive till recently but the ground reality is speaking something else. As per Government record GDP is still growing at 5% which is supposed to be very Good in isolation as well in comparison with other countries.

Following are the GDP growth of India in last three years.

On one hand we have data of GDP growth. Even though at lower pace but it is growing, on the other hand the other indicators of economy are going in totally reverse direction.

My question is that if the GDP is still growing why the other indicators are showing a negative trend. How can both be true at the same time . Why are we loosing employment in millions, abrupt rise if Bank’s NPA, Rupee depreciating, Automobile sector in unprecedented slump, Share market crashing, Drop in Government revenue in such a way that it had take RBI surplus to the tune of 1.76 Lakh Cr in an unprecedented move.

If we compare with the growth US GDP in last three years our GDP growth rate of 5% is very good. But then why there is slacking demand,why the MSME are closing down.

More than 18% MSMEs shut shop in Tamil Nadu in 2017-18, employees down by over 5 lakh: Report -Four factors that have led to MSMEs wind up their operations include 2015 floods, Cyclone Vardah, demonetisation and GST.

Ref:

  1. RBI replies to RTI regarding Demonetisation; …….. currentaffairs.gktoday.in/rbi-replies-rti-demonetisation-03201966935.html © GKToday
  2. ‘Watch’ out! GDP slowdown has Jhunjhunwala among its victims

3 . Mutual fund managers say tough times ahead, but ask investors to stay the course

4. First 100 days of Modi 2.0 wipes off Rs 14 lakh crore stock investor wealth

5. https://www.news18.com/news/indi…

6. India lost 11 million jobs in 2018, rural areas worst hit: CMIE

7. Auto sector crisis deepens: Around two lakh jobs cut in last 3 months

8. 14 PSU banks post losses for 2 consecutive years

9. United States GDP Growth Rate

10. 23 new banking licences granted under Raghuram Rajan

11. More than 18% MSMEs shut shop in Tamil Nadu in 2017-18, employees down by over 5 lakh: Report

12. Currency in circulation rises 22% in May over pre-demonetisation level

13. Demonetisation led to highest fake currency, suspicious transactions: Report

14. More Rs 500, Rs 2000 fake notes since demonetisation; counterfeit instances shot up 43 folds .

15. 99.30% of demonetised money back in the system, says RBI report.

16. 2016 Indian banknote demonetisation – Wikipedia

17. Pulwama terror attack: In last 5 years, J&K saw 93% rise in death of security personnel in terror attacks