Kolkata: Accusing the NDA government of “throwing the economy to the wolves,” West Bengal Finance Minister Amit Mitra Monday said “surgical strikes” in the form of demonetisation and rolling out of an ‘unprepared’ GST regime as also liquidity crunch of NBFCs were responsible for the present downturn.
“In November, 2016, there was the first surgical strike on the economy — the demonetisation. Demonetisation was a structural change where both structure and function of the economy had been hit,” said Mitra, addressing the Annual General Meeting of the Bengal Chamber.
Following an announcement November 8, 2016, by Prime Minister Narendra Modi, the central government demonetised the higher denomination currency notes of Rs 1,000 and Rs 500
“This was perhaps the biggest demonetisation exercise in the world other than in Libya or the USSR. In no democracy have we seen withdrawal of 86 per cent of currency of two denominations. And then the growth rate of 8.15 per cent which we had seen in 2015-16 declined to 7.17 a year later.
“Then July 1, 2017, came another massive structural change, another surgical strike on the economy, the GST was introduced. But the system was not yet ready. It was an unprepared GST that was rolled out, despite objections from us.
“It was a manmade or person-made singular decision… You have thrown economy to the wolves,” said Mitra, who earlier headed the Empowered Committee of State Finance Ministers on GST.
He said the crisis in the Rs one lakh core entity infrastructure financing major IL&FS was another major factor. “The NBFCs now face a liquidity crunch.”
Turning to direct taxes, Mitra said in the first six month of 2019-20 fiscal, the corporate tax collection has been only 4.7 percent. The budgetary target for the fiscal is 17.5 per cent. “To make it to the target, you need 27 per cent growth in tax collection at a time when economic growth rate is tanking.”
He alleged that the government-made structural destabilisation Government of the economy has resulted in the present miserable situation, with the country now having the highest unemployment rate in 45 years.”
“What concerns me is that there is not much fiscal headroom,” he said,
Talking about the states’ financial scenario, Mitra said “GST is not hitting its target, while the states’ development expenditure has shot up from 40 per cent to 60 percent, with the centre cutting of its share since the last three years and increasing our share in 18 central projects.”
Disagreeing that companies did not have money to investment, the economist said eight top-50 companies are holding Rs 8 lakh crores in their books. “They are sitting on it because of a demand shortfall.
“Why is the automobile industry passing through difficult times? Because people are not buying cars. So there is a lack of demand. The structural harakiris we have done are trickling down,” Mitra added.