Lesson for unjust G-20

Diwali Bonanza

By Shivaji Sarkar

The Indian economy is now moving up after certain unsavoury scenarios of note-ban and pandemic closures of activities. Gold sales are up, event bookings are rising, the market has been upbeat during Diwali despite cumulative inflation and less intervention by the State apparatuses.
The G 20-led state controls created panic, made people dependent on government and stymied growth globally. A free flow Diwali is changing that. Sales rise 10 per cent and gold demand rises to 96.2 tonnes almost September 2019’s 101.1 tonnes in India, says the World Gold Council.
According to the Confederation of All India Traders (CAIT) sales of its 70 million members increased over Rs 72000 crore in at least 20 cities from where it could collect the data. Some other data claim $1.25 trillion sale. Secretary General of CAIT Praveen Khandelwal says that for a long time people had subdued their needs because of closure of activities and the shock of demonetisation. Now with free movement people are making their purchases without hesitation.
Many retailers say they were apprehensive before the festival but to their surprise despite severe rise in prices purchases are increasing. In demand were items such as earthen lamps, candles and paper mâché lamps, which helped small potters, craftsmen, and handicraftsmen rake in substantial profits. Sweets, dry fruits, footwear, watches, toys, home décor, and fashion clothing also saw huge demand.
The World Gold Council expected gold sales would recover from 35 per cent below the pre-pandemic level. The demand has been more than expected. But the economy may not be as euphoric as Minister Piyush Goyal is saying or as the Rs 1.3 lakh crore GST collections indicate. The CAIT says this year sales exceeded that of 2019 – Rs 60,000 crore; Rs 50,000 crore in 2018 and Rs 43,000 crore in 2017. The confederation says the upswing shows a rising demand trend. By March 2022, there could be another Rs 2 lakh crore sales.
The wedding season beginning mid-November is to continue the boom. The weddings this year are expected to happen with the usual pomp and show. Countrywide the demand for gold sales surged. Weddings are one of the biggest drivers of gold purchases in India as bullion in the form of jewellery is an essential part of a bride’s dowry and also a popular gift from family and guests. In fact, gold remains the biggest financial security instrument for rural and other families. The investment is considered secure and continuously appreciating. After two years of pandemic and a severe hit to the economy due to note-ban a semblance of restoration is being noticed.
At the same time, weddings also create wealth distribution at various levels. Till November-end about 25 lakh marriage celebrations are on the cards. A wedding in India involves banquet halls, caterers, various kinds of pipe bands, music system, hiring of musicians, decorations lights, ponies, priests, ornaments, garments and gifts. At the social level different artisans and craftsmen are involved generating income for many.
Importantly, it’s not the Indian businesses alone that are gaining but many foreign houses and retailers are making robust sales. As per estimates, till Diwali about Rs 9,000 crore was spent on gold jewellery and silverware, while traders selling packaging items marked good sales. Online players too had seen encouraging sales. In October, e-commerce firms saw 23 per cent year-on-year sales growth in 2021. It claimed that Flipkart Group emerged as the leader, with a 64 per cent market share.
The Reserve Bank of India in its last Monetary Policy Committee meet hoped that with a better kharif production, manufacturing and services sectors hit by pandemic and note-ban would recover at a better pace. But it sees challenges because of global uncertainties, rising inflation, high taxes on fuel prices and uneven growth pattern of the informal sector.
The GST collections at Rs 1.3 lakh crore may not be the actual indicator because it is collected over high inflationary prices. Overall sectoral growth is uneven. Some sections are doing well, but India slips down on the hunger index to 101 position from 87. As there are proposals to stop the free foodgrain dole from December, it needs to be observed how it shall impact the economy. Much of the boost now is attributed to the free dole as people can spare some cash.
Rising energy prices, possible power crisis, semi-conductor shortage and continued restrictions on shipping activities in many countries are other risks. An unsaid is that the G-20 governments everywhere are out to intervene and control free-flowing activities as well as increasing taxes or various charges on the sly.
Despite the chances of a progressive recovery, the RBI holding on to the repo rate at 4 per cent unchanged for the eighth time in a row is raising eyebrows as savings are becoming non-remunerative. In reality, the rising inflation is eroding the basic value of savings. This is being viewed by experts as a risk to the economy. Traditionally, the Indian economy has been growing on small savings that are now being disincentivised.
The prolonged lockdown and prior to that closure of the markets during demonetisation has destabilised the individual and social economy. Festivities were hit and the 18 crore migrant workers suffered the most. They crisscrossed on foot several thousands of kilometers, to reach their homes from work places in States such as Kerala, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Punjab and elsewhere.
A view emerging globally is that States’ control on people’s lives is playing havoc. It has reduced the quality of life and caused untold sufferings. The average growth before note-ban was at 8.26 per cent. It went on falling to -23.9 per cent and even now despite the RBI claiming 9.5 per cent growth, the actual remains at minus 10.5 per cent. This raises another question whether those in governments should take whimsical unilateral decisions without consulting stakeholders. This has become the norm of G20 group of countries. Should not that change?
The note-ban that had shaken the poor could not unearth black money nor contain fake currency from Pakistan. After five years, the Directorate of Revenue Intelligence says that fake currency seizures reached an unprecedented high in 2020. Strong controls and harsh steps have not helped countries. The nation must discuss how to ensure a free-flow growth instead of oppressive imposition of measures that cause scare. —INFA