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Modi’s rivals see India election gain hitting PM on economy
TIRUPPUR, India, April 8, 2019 (BSS/AFP) – More than two years after the
surprise withdrawal of most of India’s currency from circulation, the painful
consequences stalk its architect as he seeks another term at the helm of
Asia’s third-largest economy.
Prime Minister Narendra Modi announced the “demonetisation” in November
2016, justifying the sudden move as a means to flush out cash being hoarded
by wealthy tax cheats.
But ordinary businesses reliant on cash were kneecapped, banks thrown into
chaos and the entire Indian economy recoiled from what one global lender
described as an “acute monetary shock”.
“Work came to a complete standstill… Many people lost their jobs,” said
S. Subbramanian, a cotton spinner at the Tiruppur textile hub in southern
Tamil Nadu state.
For nearly three weeks the looms stopped spinning in the southern Indian
garment factory where he weaved yarn for a living, the business crippled by a
sudden cash shortage.
The impact lingers across the country today — and Modi’s opponents are
tapping into that discontent as voting gets underway this week.
“This one, ill-thought decision destroyed crores (tens of millions) of
jobs and drove lakhs (hundreds of thousands) of small enterprises out of
business,” Rahul Gandhi, the leader of the main opposition Congress party,
told supporters at a recent rally.
It is in industrial hubs across India such as Tiruppur that this message
could strike a chord.
Factories that survived the cash ban were forced to immediately pare back
costs and growth estimates to absorb the shock.
“Many businesses still have not recovered to pre-demonetisation levels,”
said T.R. Vijaya Kumar, the general secretary of Tiruppur Exporters’
Association.
The economy at large took a hit, with growth slowing.
An estimated 11 million jobs were lost in 2018 as a direct result,
according to the Centre for Monitoring Indian Economy.
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Modi insisted the pain was necessary and would modernise the economy,
raise tax revenues and improve the lives of millions living at the margins.
– Double pain –
Demonetisation was a broadside few anticipated.
Many small businesses were still shell-shocked when Modi announced his
second major economic reform — the introduction of a national consumption
tax.
The goods and services tax (GST) was broadly welcomed as a necessary
reform to unify India’s more than $2 trillion economy into a single market,
replacing a patchwork of central and state levies.
But the roll-out was criticised as haphazard and rushed, and for some
businesses the double-tap in the wake of demonetisation was too much.
“Everything changed” in the aftermath of these twin policies, said small
trader Omar Sharif, in a fabric market in Tiruppur.
“I don’t know about the big traders but small ones, like me, have been
badly affected,” he said.
Dhamodharan Ramasamy, the chief executive of garment exporter Season
Clothing Industries, said the tax roll out could have been handled more
carefully.
“One big issue was that people hadn’t even recovered from the first jolt
when they received the second one,” he told AFP.
Congress has sought to exploit this unhappiness within trading communities
in the hope of chipping away at Modi’s support.
Gandhi and the opposition have attacked the prime minister’s economic
record day after day on the campaign trail, accusing Modi of failing to plan
for India’s future and create work for millions of young job seekers.
Critics say the cash crisis disproportionately hit the poor, forcing many
to queue for days at banks to convert their savings into legitimate tender.
“The cash ban robbed people of their most basic property rights in quest
of a pipe dream,” Gandhi said.
Congress ruled India for much of its post-independence history but was
reduced to a rump in the last election by Modi’s Bharatiya Janata Party.
Gandhi is hoping to avoid a repeat of 2014, and analysts say ground could
be made up by painting Modi as a reckless economic steward.
“Citizens may not entire understand the new tax regime but they’ll
remember the cash ban, which directly affected their daily lives,” Sunil
Sinha, principal economist and director with a unit of Fitch Ratings, told
AFP.
But Parsa Venkateshwar Rao, a veteran journalist and political
commentator, said that while demonetisation had been “voodoo economics”, the
economy has since recovered and voters have moved on.
“It is a faded memory now,” he told AFP. “Demonetisation is not the main
issue in this election.”
BSS/AFP/HR/1432