India Uninc has and will adapt to formalisation and dematerialization
I have in two published posts on my blog prior to 8 November 2016, critiqued the Arthakranti proposal and debunked the demand for abolition of so called high denomination currency notes. I also believed, like many others in an imminent economic slowdown post demonetization but was wrong on the timeline – it has happened albeit with a lag of two quarters.
I believe the doom scenarios such as loss of world’s fastest growing economy tag now being predicted for the Indian economy are exaggerated
Except for the evident political success in subsequent State elections (principally Uttar Pradesh), there is not much for the Narendra Modi government to boast of massive gains on the economic front. The targeted revenues from suspicious deposits (“black money”) are yet to be realised and would in all likelihood be subject to prolonged litigation but the costs such as GDP slowdown and reduced profits & consequent dividend from RBI are incurred.
It is absolutely true that demonetization and thereafter GST have created large scale disruptions in the Indian economy. It has also exposed the fragility of the centralisation of Government institutions, personality cults, policies and laws – for these to succeed, everyone and everything must act according to their plan and programme – the law. This is unlikely to happen in a country of vast expanse, populace and distinct cultures like India as the stories post Demonetization prove. Nor can centralised planning take into account every eventuality as Government policy flip-flops during the early day’s post Demonetization reveal.
Nevertheless, I believe the doom scenarios such as loss of world’s fastest growing economy tag now being predicted for the Indian economy are exaggerated.
“एतदपि गमिष्यति This too shall pass” attitude embedded in our soul
Just like the fragility of Government planning, Demonetization also exposed the robustness, resilience and to an extent, the antifragility of the Indian private sector, especially the informal sector ~ India Uninc and the Indian public. “ एतदपि गमिष्यति This too shall pass” attitude embedded in our soul.
GST has and will, in all likelihood, demonstrate the ability of the Bureaucracy to weave a set of complex rules and regulations out of what was supposed to be a simplified tax and the ability of the private sector including India Uninc to adapt to changing times and follow new systems.
Peter Diamandis and Steven Kotler in their book “Abundance: The future is better than you think” discuss “the long term payoff of the painful process of dematerialization and demonetization: goods and services once reserved for the wealthy few are now available to anyone equipped with a smart phone.” Extrapolated to the informal sector of the Indian economy, benefits of E-governance, infrastructure created from augmentation of Government revenues, reduced corruption and transparency from formalisation of the economy will also accrue to them – India Uninc, something which previously was exploited by political cronies. An example in this regard is the possibility of availability of formal credit post GST consequent documentation of their business activities.
Nassim Nicholas Taleb in his book “Antifragile: Things that gain from disorder” discusses a phenomenon called post-traumatic growth, the opposite of post-traumatic stress syndrome, by which people harmed by past events surpass themselves. We tend to focus on / discuss the negative responses from randomness (fragility) rather than the positive ones (antifragility).
Both Demonetization and GST are sublethal doses of poison thrust down the throat of India Uninc with obvious reluctance at their end. And yet it is like Hormesis, a word coined by pharmacologists, to mean a situation where a small dose of the harmful substance is actually beneficial for the organism, acting as medicine.
Demonetisation is a passé, and GST too will pass. In my contrarian opinion, India’s informal private sector – India Uninc has and will adapt to formalisation and dematerialization and is set for a giant leap.
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.