Resources Research

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Posts Tagged ‘GST

It’s time to rid India of the GDP disease

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A woman in the Aravalli hills of Rajasthan carries home a headload of field straw. India’s National Accounts Statistics is completely ignorant of the biophysical economy.

On 5 January 2017 the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Government of India, issued a note titled “First advance estimates of national income, 2017-18”. The contents of this note immediately caused great consternation among the ranks of those in business and industry, trading, banking anf finance, and government who hold that the growth of India’s gross domestic product is supremely important as it is this growth which describes what India is and should be.

In its usual bland way, the Central Statistics Office said that this was “the First Advance estimates of national income at constant (2011-12) and current prices, for the financial year 2017-18” and then proeeded, after a short boilerplate explanation about the compilation of estimates, delivered the bombshell to the GDP standard-bearers: “The growth in GDP during 2017-18 is estimated at 6.5% as compared to the growth rate of 7.1% in 2016-17.” [pdf file here]

To me, this is good news of a kind not heard in the last several years.

But India’s business and financial press were thrown into a caterwauling discord which within minutes was all over the internet.

An example of one out of the many messages in a daily barrage delivered by the Government of India’s ‘GDP First’ corps. This is from what is called the Make in India ‘initiative’ of the Department of Industrial Policy and Promotion, Ministry of Commerce. “Make in India is much more than an inspiring slogan,” the DIPP says. “It represents a comprehensive and unprecedented overhaul of out-dated processes and policies.” For this childish GDP rah-rah club, environmental protection, natural reserves, watershed conservation, handloom and handicrafts are all outdated practices and ideas.

‘GDP growth seen at four-year low of 6.5% in 2017-18: CSO’ said the Economic Times: “Most private economists have pared the growth forecast to 6.2 to 6.5 percent for this fiscal year, citing the teething troubles faced by businesses during the roll out of a goods and services tax (GST).”

‘7 reasons why FY18 GDP growth forecast should be viewed with caution’ advised Business Standard: “The fact that growth will be 6.5% is significant as it is even lower than the Economic Survey assumption of 6.75-7.5% for the year. Hence, it is not expected to be higher than the base mark which means that it would be lowest in the past three years. The effects of demonetisation and GST have played some role here.”

‘CSO pegs FY18 growth at 6.5%; why forecast is an eye-opener for Narendra Modi govt’ said Firstpost: “The healthy uptick in volumes displayed by many sectors in November 2017, is expected to strengthen in the remainder of FY2018, benefiting from a favourable base effect and a ‘catch up’ following the subdued first half. Accordingly, manufacturing is likely to display healthy expansion in volumes in H2 FY2018, which should result in a substantial improvement in capacity utilisation on a YoY basis.”

‘GST disruptions eat FY18 economic growth; GDP seen growing at 6.5%, lowest under Modi government’ huffed the Financial Express: “For a broad-based recovery the rural economy needs to recover and we can expect the upcoming budget to focus on alleviating some of the stress in the rural economy and concentrating on measures to augment the flow of credit in the economy. Overall growth is likely to improve in the coming year and possibly move up beyond the 7% mark in FY19.”

‘India‚Äôs GDP growth seen decelerating to 6.5% in 2017-18 from 7.1% in 2016-17’ said the Mint: “The nominal GDP, or gross domestic product at market prices, is expected to grow at 9.5% against 11.75% assumed in the 2017-18 budget presented last year. This may make it difficult for the government to achieve the fiscal deficit target of 3.2% of GDP in a fiscally tight year.”

‘India Sees FY18 GDP Growth At 6.5%’ observed Bloomberg Quint: “Growth in gross value added terms, which strips out the impact of indirect taxes and subsidies, is pegged at 6.1 this year, versus a revised 6.6 percent last fiscal. Both GDP and GVA growth were marginally below expectations. A Bloomberg poll had pegged GDP growth at 6.7 percent. The RBI had forecast GVA growth at 6.7 percent at the time of its last policy review in December.”

‘India’s FY18 GDP growth estimated at 6.5%, says CSO data’ said Zee Business: “Real GVA, i.e, GVA at basic constant prices (2011-12) is anticipated to increase from Rs 111.85 lakh crore in 2016-17 to Rs 118.71 lakh crore in 2017-18. Anticipated growth of real GVA at basic prices in 2017-18 is 6.1 percent as against 6.6 percent in 2016-17.”

So great is the power of the School of GDP and of its regents, who are as priests of the Sect of GDP Growth, that the meaninglessness of GDP is a subject practically invisible in India today. Just as it has no meaning at all to the woman in my photograph above, so too GDP has no meaning for all, including the 2.7% (or thereabouts) who pay income tax.

This tweet shows us the scale of the problem. An article by Klaus Schwab of the World Economic Forum (a club of powerful globalists) is posted on the website of Prime Minister Narendra Modi ! The head of the ruling BJP’s information unit broadcasts it.

India’s National Accounts Statistics presents every quarter and annually, estimates of the size of the country’s GDP, of the rate of GDP growth, of the size of ‘gross value added’, to which GDP is bound in ways as complicated as they are misleading. There are wages, interests, salaries, profits, factor costs, net indirect taxes, product taxes, product subsidies, market prices, industry-wise estimates and producer prices to juggle.

For the most part, these are prices and costs alone, upon which various kinds of taxes are levied and whose materials and processes may qualify for subsidies. All these are added and deducted, or deducted and added, and finally totalled show a GVA which then leads to a GDP. The prices are arbitrary and speculative, as all prices are, the arbitrariness and speculative nature being attributed to something called market demand, itself a creation of policy and advertising – policy to choke choices and advertising to spur greed. On this putrid basis does the School of GDP stand.

The GDP and GDP-growth frenzy in India spares not a minute for a questioning of its fundamental ideas, which in certain quarters had begun to shown as hollow and destructive in the early 1970s, when the effects of the material and consumption boom in Europe, North American (USA and Canada) and some of the OECD countries after the end of the Second World War became visible as environmental degradation.

Over 30 years later, sections of those societies inhabit and practice what are called ‘steady state’ economics, ‘transition’ economics (that is, transition to low energy, low consumption, recycling and sharing based ways of collective living) and ‘de-growth’, which is a scaling down of economic production and consumption done equitably and to ensure that a society (or groups of settlement and their industries) strictly observe the bio-physical limits of their environment (pollution and pollutants, land, water, biodiversity, etc).

But the Central Statistics Office of the Ministry of Statistics and Programme Implementation, Government of India, is ignorant of such critical thinking. It is just as ignorant of the many efforts at swadeshi living, production, cultivation (agro-ecological) and education (informal learning environments instead of reformatted syllabi lifted wholsesale from countries whose exploitative economies installed globalisation as the default economics mode) that are visible all over India today. The CSO and MoSPI are not entirely to blame for this abysmal blindness, because the Ministry of Finance (like every other major line ministry of the Government of India, and like every state government) has decided to be even more blind.

To read the insensate paragraphs disgorged every quarter from the CSO (and Ministry of Finance, likewise the Niti Aayog, the chambers of commerce and industry, the many economy and trade think-tanks) is to find evidence to pile upon earlier evidence that here is an administration of a very large, extremely populous country which cares not the slightest about the indubitably strong correlations between ‘GDP growth’ and more forms of environmental damage than have been reckoned.

The GDP-GVA-growth fantasy cares not the slightest about energy over-use and CO2 emissions, about the effects of widespread atmospheric and chemical pollution on the health of the 185 million rural households and 88 million urban households (my estimates for 2018) of India, and about the terrible stresses that the urban households in more than 4,000 towns, district headquarters and metros are subject to as a result of their lives – through mobile phone apps, banks, the food industry, the automobile industry and the building industry – being micro-regulated so that an additional thousandth of a per cent of GDP growth can be squeezed out of them.

The GDP asura has brought ruin to India’s environment, cities, farms, households, forests, rivers, coasts and hills. Let 2018 be the year we burn the monster once and for all.

Taxing knowledge and nature

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The success of GST cannot come at a cultural cost to India. A well-informed tax system must widen the dialogue finance has with handicrafts and hand weaves. [This article has been published by The Pioneer, New Delhi.]

On 15 September, in a notification about the Central Goods and Services Tax (GST) Act 2017, the Central Board of Excise and Customs exempted “casual taxable persons making taxable supplies of handicraft goods” from requiring to be registered under the Act. The previous day, a similar exemption was given for the Integrated GST, and which concerns the inter-state supply of handicraft and handloom goods, a traffic that contributes a substantial livelihood to many crafts households.

There are a few conditions explained in the stilted language such notifications employ, such as value of sales, the need for craftspeople and artisans to obtain a Permanent Account Number (PAN) and fill out an e-way bill.

Yet these corrections to GST, made by the Ministry of Finance, are the first signals that the entreaties made to the Government of India by craftspeople and artisans are at last being heeded and responded to. They were made, and took shape in the form of a representation, titled “A plea for reconsidering GST rates for the crafts sector” and was submitted in July 2017 to the Prime Minister’s Office.

The reason this representation had been discussed, compiled and delivered was the ruinous effect on the handicrafts and handloom sector of the Goods and Services Tax (GST), which came into force on 1 July 2017 under the slogan, “the single biggest tax reform in the history of the nation”. The representation to the PMO pointed out that this single biggest tax reform had been drafted, passed and was being implemented without a single consultation with the largest national number of craftspeople and artisans in the world.

The representation went on to explain that the GST consultations had not included or even recognised “the widespread existence of crafts people, practices and products based on centuries old histories and skills, which give India a unique place in the world and brings economic benefits to dispersed rural artisans”.

Handicrafts and hand weaves provides employment and livelihood which is, in terms of numbers, next only to agriculture (indeed the two are concomitant, being based on nature and the application of knowledge). While many crafts and artisanal products are seasonal, estimates are that over 110 lakh persons are so engaged, with more than 43 lakh in the handloom sector alone.

Click for a pdf file of this article (courtesy The Pioneer).

The GST crisis for handicrafts and hand weaves has shown that this sector is constantly on the defensive. It can only proceed by causing the recognition in economy that this sector (cultivation and its ‘arts and local manufactures’ included) does not produce only food, it also produces feed for animals, fuel (both traditional fuels and biofuels) and fibres and grasses and woods, the minerals and clays, the colours, for artisanal (and industrial) production, and that the maintenance of the bio-economy – that is the service of balancing our ecological habitats upon whose gifts we base our lives, a balancing brought about by the application of uncountable streams of local knowledge – is fundamental to the well being of the country’s peoples.

“One would assume that natural materials, organic cultivation, reduction of plastics and other synthetic materials, and recycling would figure in the Centre’s approach to policies across the board,” Jaya Jaitly has observed. As president of Dastkari Haat Samiti, the conceiver of Dilli Haat and the initiator of several of India’s most innovative programmes to return dignity and viability to craftspeople and artisans, her expectation of policy coherence is well warranted.

Both dignity and viability are important, and for as long as handicrafts and hand weaves were held in high esteem by the ruling administrations of ancient and medieval, colonial and independent India, both were assured. In the 1951 Census, the first of independent India, among the list of industries and occupations according to which the working population was described were herdsmen and shepherds, beekeepers, silkworm rearers, cultivators of lac, charcoal burners, collectors of cow dung, gatherers of sea weeds and water products, gur manufacture, toddy drawers, tailors and darners, potters and makers of earthenware, glass bangles and beads, basket makers.

The liberalisation and ‘market reform’ which swept through the country from the early 1990s brought with them a view of both macro- and local economics that became more distant from ‘arts and local manufactures’. India began to pay more attention to GDP and less to the meanings which handicraft and hand weaves represented. By the middle of the decade of the 2000s, biodiversity, carbon, ecosystem services, and even cultural services had begun to be discussed and considered. Terms and ideas such as ‘externality’ and ‘social costs’ began to be used to describe the changes to society and environment that were under way, visible but never acknowledged, which weakened and sickened both.

Such discussion rarely recalled quiet efforts that had been made in the same direction only a little earlier, such as in the report of the Steering Committee on Handlooms and Handicrafts for the Twelfth Plan, which had observed that “these two sectors constitute the only industry in the country that provide low cost, green livelihood opportunities to millions of families, supplementing incomes in seasons of agrarian distress, checking migration and preserving traditional economic relationships”.

‘Green livelihood’ made a quiet entry into planning vocabulary then. Now, ‘livelihood’ has been replaced with ‘economy’, which is quite a different idea, and the recent loud calls in favour of a ‘green economy’ for India have helped shelter a variety of very ungreen enterprises and practices. Perhaps in the notifications of 14 and 15 September we are seeing the first admission from the central government’s financial and planning authorities, that there is no need for a new ‘green economy’ (especially one based on expensive finance and fickle technologies) when we have had one for all the ages that we can enumerate.

The notifications are a worthy start, and I submit to the Ministry of Finance that these can and should lead it to consider anew how incentives and encouragements in the form of taxation instruments can do much to renew, revive and strengthen a ‘green economy’ that is the only genuinely grassroots activity India has and can have.

Some aspects that still require consultation and an extra-financial view are that crafts and weaves are not commodities and should not therefore be fitted by force into the Acts’ labyrinthine system of HSN codes, that the imposition of taxes higher than 5% on handicrafts and hand weaves discourages both sustainable production and consumption (at a time when such practices are gaining international currency), and that a well-informed system of taxation must include an understanding of the continuum of natural material, habitat, and the knowledge streams that use and transform nature’s materials into craft and fabric.