The Daily Fix

The Daily Fix: Hyundai’s complaint against GST is a red flag about India’s economic management

Everything you need to know for the day (and a little more).

The Big Story: Urgent rethink is essential

The Indian economy is in slowdown mode. The rate of growth of the Gross Domestic Product has fallen for six consecutive quarters. Close on the heels of the Union government’s seemingly whimsical decision in November to demonetise 86% of currency in circulation, the shaky roll-out of the Goods and Services Tax launched in July has proved to be another drag on growth.

GST was intended to be a one-rate tax helping to facilitate inter-state business. Instead, a tax with multiple slabs has been introduced. Like demonetisation, GST seems like a lot of pain for little gain: the old complexities remain.

Among the biggest beneficiaries of the GST were supposed to be large corporations that conducted business in multiple states and would benefit from the centralised tax structure of the new regime. Yet, on September 13, Hyundai, India’s second-largest passenger car manufacturer, criticised GST in a public statement. GST “has come as a setback to industry shaking the confidence of Auto manufacturers”, the company said. It also said that the GST will lead to low sales during the coming festive season, usually a bonanza for Indian corporations.

This sort of a statement is extremely rare in the Indian corporate world. India’s big businesses rarely make public political critiques, preferring to hide behind banalities. That Hyundai decided to release a press statement should be a red flag about just how bad the economic climate is.

India faces many challenges. Bad debts are clogging the financial system. The agricultural sector is reeling, with costs outstripping prices, making it increasingly unviable. Yet, there is no talk of structural reforms in the sector that employs half of India. In addition, India’s labour laws remain mired in red tape, dissuading firms from scaling up. Excluding government spending, GDP growth in the past quarter was barely 4%. Clearly, an urgent revision of India’s current approach to economic management is called for.

The Big Scroll

Fact Check: India’s growth did slump to 5.7%, but not due to ‘technical reasons’ as Amit Shah claims, writes Mayank Jain.

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Punditry

  • A fairer test: Alternative to NEET must be sensitive to concerns of inequality and exclusion, writes K Sujatha Rao in the Indian Express.
  • India’s handling of Dokalam shows us the way to tackle tough issues with China, writes Pranab Dhal Sharma in the Economic Times.
  • Durga, didi and the new-age puja: in the Hindu, Tapati Guha-Thakurta writes about how Durga Pujo in West Bengal now faces a complete cultural and political assimilation.

Giggle

Don’t Miss

No, Swaminathan Aiyar, Adivasis ousted by the Narmada project aren’t lovin’ it. They are desperate, write Shripad Dharmadhikary and Nandini Oza.

“Aiyar also talks about how, generally in India, some Adivasis have become affluent and foreign-educated, and how their kin left behind in forests ‘can catch up, given empowerment and access to modern facilities’. There is no disputing this. But what ‘catching up’ means should be defined by the Adivasis themselves, not by others for them. And certainly, it should not require them to be forcibly uprooted from their lands, cultures and communities. Aiyar himself notes: ‘Tribals in hill states earn well above the national average. Education and infrastructure have enabled hill tribals…to leapfrog into modernity with minimal trauma.’ But he conveniently ignores that all this hasn’t required displacement by a mega project. Maybe displacement is not a necessary condition for modernisation and development?”

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