Indian traders chok­ing on Modi eco­nomic medicine

Kuwait Times - - FRONT PAGE -

LUDHIANA, In­dia: Tax over­hauls and black mar­ket clam­p­downs have been touted as rad­i­cal medicine to mod­ern­ize In­dia’s econ­omy, but for small traders like Swarn Singh Dar­era, “Modi­nomics” has been a bit­ter pill to swal­low.

At his fac­tory in the north­ern Pun­jab city of Ludhiana, Sikh busi­ness­man Dar­era is keep­ing staff on for 12-hour shifts but only has enough work com­ing in to jus­tify a third of that time.

He blames one man for his predica­ment: Prime Min­is­ter Naren­dra Modi. “The gov­ern­ment fin­ished us,” he said an­grily. “These peo­ple sit­ting in their air-con­di­tioned of­fices have no idea what’s hap­pen­ing on the ground.” Over the past year Modi has rolled out con­tro­ver­sial, but many ar­gue much-needed, flag­ship re­forms-of­ten dubbed “Modi­nomics” de­signed to stream­line Asia’s third-largest econ­omy and root out cor­rup­tion.

In Novem­ber his gov­ern­ment can­celled more than 80 per­cent of the ru­pee ban­knotes in cir­cu­la­tion in a bid to clam­p­down on the black mar­ket. Eight months later it fol­lowed up with a mas­sive sales tax over­haul-re­plac­ing more than a dozen state and na­tional levies with four dif­fer­ent rates of be­tween five and 28 per cent.

Economists had long ar­gued such steps were vi­tal if the coun­try of 1.3 bil­lion peo­ple is to con­tinue creat­ing jobs for its ever-grow­ing pop­u­la­tion. But small traders-who ac­count for a third of the $2 tril­lion econ­omy-have been hit par­tic­u­larly hard. In Dar­era’s shop, a box of axles worth 500,000 ru­pees ($7,500) spent weeks on the shop floor when the buyer ini­tially balked be­cause the sales tax for the equip­ment leapt from two to 12 per­cent when the July re­forms came in.

“What are these crazy peo­ple do­ing?” Dar­era said of the gov­ern­ment’s tax re­forms. The ru­pee note with­drawal had al­ready wiped out most of his cash re­serves, he said, adding that he was keep­ing staff on be­cause he didn’t want to lose skilled work­ers.

The gov­ern­ment says the ini­tial pain of its eco­nomic re­forms will bear fruit down the line. But an­a­lysts warn it could take months for the ben­e­fits to show, a po­ten­tial headache for Modi, who faces a na­tional elec­tion in less than two years and key state elec­tions sooner. — AFP

LUDHIANA: In this pic­ture taken on Septem­ber 25, 2017, Indian men work at a gar­ment fac­tory in Ludhiana. — AFP

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