Manmohan Singh blames banknote ban and flawed GST for economic crisis; he proposes ways to address the slowdown

Former Prime Minister and economist Manmohan Singh he has advocated for structural reforms to address the economic challenges facing the country. In an interview to the Hindu Line of business, which was published on Wednesday, Singh said the government first had to acknowledge the crisis.

“A lot of time has already been wasted,” he said. “Instead of wasting its political capital on a piecemeal approach by sectors, or on monumental mistakes like demonetisation, now is the time for the government to carry out the next generation of structural reforms.”

Singh said the crisis was of a different kind. “…A protracted economic slowdown that is both structural and cyclical,” he added. “The government must instill confidence in the people and send a message to the world. Unfortunately, I still don’t see such a focused approach from the Modi government.”

Singh said that the “mistake of demonetization, followed by faulty implementation of the GST” triggered the slowdown. echoing former chief statistician Pronab Sen, Singh said that demonetization had caused a liquidity crisis. “India has a substantial informal economy that runs on cash,” Singh noted. “A large part of this involves legitimate activities that are below the tax threshold and therefore should not be considered part of the ‘black’ economy.”

In an interview to Dainik BhaskarSingh suggested five corrective measures to reverse the decline in growth. He said it would take a few years to get out of the slowdown if the government acted “sensible” now.

Singh said the two most important things to do were to simplify and streamline the tax regime for goods and services, and find innovative ways to boost rural consumption and revive agriculture.

The former prime minister also called for infusion of liquidity into the system for capital formation. The fourth measure listed by Singh was the revitalization of key labor-intensive sectors such as textiles, automobiles, electronics and affordable housing. “That would require easy loans, especially for micro, small and medium-sized companies,” he said. Dainik Bhaskar.

Singh also called on the government to recognize new export opportunities arising from the US-China trade war. He added that a new export roadmap could be of benefit to India.

In his interview to the hindu business lineSingh questioned the Center’s decision merge several public sector banks. “The need of the hour is to ease the flow of credit and address the challenge of non-performing assets,” he noted. “Instead of focusing their attention on these issues, mergers can divert bankers’ attention to the challenges of integration.” He added that the benefits of the mergers will be seen only after a few years.

“The government is also based on the assumption that merging weaker banks with stronger ones will improve any deficiencies and create bigger and stronger banks,” the former prime minister said. “It’s equally possible that weaker banks will drag stronger ones with them, as they have weaker balance sheets.”

Singh advised the government to deal with the crisis transparently and show a serious intention to handle it. “Prime Minister Modi and the government must drop their headline management habit,” the former prime minister added.

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