India's GDP growth figures are out. Just when everyone was expecting demonetization to hit the GDP, the 7 percent growth figure released by the Central Statistical Organisation (CSO) under the Narendra Modi government has taken everyone by surprise. Many have raised eyebrows at the numbers. However, even if it were true (let’s assume for a moment), let's see why a paints a dismal picture of the economy.
Everybody knows how demonetization affected everyone. Almost everyone was affected. But who bore the maximum brunt of the exercise? Small traders, daily-wage laborers, street vendors, rickshaw-wallahs—everyone who dealt in hard cash for their daily earnings.
However, this doesn't seem to have impacted the GDP figures at all. It means that the huge sea of Indian population that was affected has the least contribution to the GDP. What it essentially shows is the lopsided nature of the economy.
Everybody knows that disparities exist in India's economy but that the gap would be so huge has become apparent only now. It in effect means only 10 percent of India’s population controls all resources. So much for Sabka Saath Sabka Vikas.
And since the poorest of the poor were affected, they in turn, could affect the only industrial sector that they completely rely on: the FMCG sector which was the worst impacted. The industry reported around 1–2% reduction in volumes. Hindustan Unilever Ltd (HUL) and Nestle, two of the biggest names in the industry, have reported profits and revenues falling drastically.
Almost all companies took a heavy toll in the December quarter. According to a Business Standard report, FMCG sales growth declined to 5.3% in the December quarter. FMCG major Nestle’s India Chairman Suresh Narayanan in an interview has admitted that the company took a hit of Rs 100 crore the past quarter and that the sector will need at least six months to get steady. Hindustan Unilever Ltd also experienced a decline of 4% in volumes.
This brings us to the basic argument that India’s wealth is atrociously distributed. There is very little economic resource with around 60% of India’s poorest households. Therefore, their capability to drastically affect the fate of India’s economy is minimal. It is India's middle classes and businesses that have accumulated all the wealth and have access to banking and allied services.
Therefore, once the cash liquidity dried up post demonetization, the urban mobile (social media savvy tinkering with Facebook and Twitter), quickly resorted to other substitutes such as mobile wallets, cheques, internet banking, phone banking, etc. The numbers say that: Q3 2016–17 figures for big categories such as automobiles saw no significant impact (around 2% growth). Another example is India's aviation Industry that witnessed a huge growth of 22% during that period. Hardly anyone books flight tickets through hard cash.
However, the biggest irony is that the poorest who bore the maximum brunt are the ones standing most steadfastly with the government.
Columnist
Muqbil Ahmar writes on culture and poetry. He is a writer and theater activist, who wants to bring about harmony and amicability in the present day society. Music, poetry and good food are his passions.
