PEOPLE OF INDIA HAS NOT YET OVERCOME THE EFFECTS OF DEMONETISATION, AND NOW THE NEWS OF DEPRESSING ECONOMY IS COMING IN THE MAINSTREAM MEDIA. ONE OF THE LEADERS OF RULING GOVERNMENT HAD CLAIMED THAT THE INDIAN ECONOMY IS ON THE VERGE OF COLLAPSING, IF NOT REVIVED IN TIME. WHAT DOES HE MEAN BY THAT AND HOW YOU AND ME WILL GET AFFECTED WITH THIS?TAKE A LOOK HERE…
According to the reports published in the Financial Express, the Indian economist and mathematician has quoted that the Indian Economy is on the verge of collapse and it needs a serious revival. Mr. Subramanian Swamy is an Indian economist, mathematician and politician who serves as a Member of Parliament in Rajya Sabha, the upper house of the Indian Parliament. (source)
According to Mr. Swami, The Indian economy is heading for a “major depression” and it can “crash” soon if efforts are not put to revive it. The Rajya Sabha MP claimed that a year and half ago, he had written a 16-page letter to Prime Minister Narendra Modi warning him about the economy which is in a “tailspin”.
“Today, the economy is in a tailspin. Yes, it can crash. We need to do a lot of good things to revive the economy. Even a tailspin can be made to steady. But, if nothing is done, we are surely heading for a major depression. There will be mass scale and the banks might collapse and the factories might start closing down,” he said in an interview to CNN-News18 recently.
His warnings, which came almost a year back, does not seems to have been reached to the ears of our honourable prime minister, and hence not much improvements in the restructuring of the dying economy has been done yet. “Last May, I wrote to the Prime Minister a 16-page letter with stats from his own departments to show that there are five storm signals,” he said.
According to the another Indian economist and a former PM of India Mr. Manmohan Singh, the demonetisation has played a major role in bringing the country’s GDP down. “hasty implementation of the GST and the withdrawal of 86 per cent of currency during the demonetisation exercise had further affected the GDP numbers,” he quoted. To support his statement take a look at this statement “The GDP for the first quarter (April-June) of financial year 2017-18 slumped to a three-year low at 5.7 per cent, far lower than 7.9 per cent recorded in the same quarter last year.”
The story does not stop here. According to Mr. Subramanian Swami, The India’s growth rate has been hampered very badly, and still it is being presented wrongly in the media showing that the economy is growing while in the reality it is not. “It is much lower than what is being told to you, and it is going to decline further, according to what I call Samuelson-Swamy theory of index numbers, which tells you how to calculate the correct index numbers,” he said.
According to Mr. Swami, the time is still there in the hands of the rule makers, and if they want, the economy can be still revived. It may need few changes here and there and the things would start falling in the place. Subramanian Swamy suggested that to support the revival of the economy, it is important to enthuse the public with immediate change, which would be possible by abolishing the income tax. “Whatever you do, the public must see immediate change. I think first thing we should do is abolish the income tax. It’s such an easy thing to do, but they haven’t done it,” he said.
The surprising thing here is, if the abolition of the Incomes Tax can really make the changes in economy, then why the ruling government is not taking any action on his suggestions? Does that mean that the government does not have the value for the suggestions of one of the top Indian Economist and Mathematician? According to Subramanian Swamy, the implementation to his suggestions would give a huge boost to the savings rate; and that would mean the investment cycle would start.
According to him, even bringing down the interest rates will help the small and medium enterprises to start moving ahead. Only reducing the interest rates in the lending would not help but, the government will also have to increase the rate of interest in the Fixed Deposits which will help in getting more funds into the Banks from the people. “You must bring down the interest rates to 9%, and raise the fixed deposit interest rate also to 9% to encourage savings. The rate of interest is an instrument that affects the small and medium industries,” he Subramanian Swamy said.
According to him, the bigger industries can afford to borrow the money from abroad also but medium and small units cannot do the same. “In the United States, you can borrow for 2%. While here, it being at 12%-18% is very cruel, and much of the damage from it has been to the small and medium industry, which produce bulk of the employment. The employment cycle must start, which can happen only if you get these small and medium industries moving, for which the cost of capital must come down,” he added.
What do you think about this? Do you feel that the financial condition will improve soon? Please share your valuable comments and suggestions on this very serious issue.