Demonetization, GST and AADHAR

Demonetization, GST and AADHARIndia is undergoing through tough reality checks which could have happened earlier but didn't. You may agree, you may not but the truth is that economy is witnessing structural changes (better tectonic shift) which were due for some time. Those who have issues with GST, demonetization and AADHAR must understand that India has opted for an economic structure in 1992 which requires formalization of economy. 

The informal sector is often very helpful in early stages of economic growth but as the wagon moves forward, formalization becomes the need of hour and demonetization, GST and AADHAR are the moves in that direction. When money pouring in the economic system, regulatory authorities must have enough data to check and balance else you will have other lords controlling whole economy. And the way Indian economy was moving along with unimaginable amount counterfeit currency in the system, was undermining all the efforts put forth by respective governments.


NREGA is one of the finest initiatives for social inclusion in the world (but ill planned) but the system failed it. There was no authentic data to the government with which government could have taken corrective measures. It was the point along with other social inclusion and security schemes when government realized that it needed some kind of universal identification number to track the effectiveness of various schemes. So was AADHAR born. 

Free flow of money without any checks in the system forced the government to take action against it. Previous government also contemplated the idea but couldn't implement as it was a collation government. So did the present government took this decision of demonetization. 
Same is the case with GST. There was need to integrate the whole economy into a closely knit economy rather than just a loose union that India had been as an economy. GST will integrate the whole economy. Though, the fate will depend on the logistic support such as efficient professional services and tax rates for different goods and services. There is need to review the taxes imposed on many categories of goods and services as the government has to realize that high rates in many categories would not be inclusive. And the way government is revising rates, I personally feel that it is evaluating the situation on regular basis supported by inflationary data. 

But at the same time there is another narrative to this story as well. The way economy is moving (natural slowdown after shock-waves of demonetization and GST) a recession looms large but a manageable one and world have faith in Indian government that is why hardly any agency is questioning these decisions as they know it well that India will earn long term dividends. India can manage it if it ignores all the warnings about fiscal deficits. It has to increase public spending while linking NREGA to assets rather than just a mechanism to distribute income to bottom of the pyramid.

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