If any single event turned the Indian Economy it was the historic DM decision on 8.10.2019. It was as courageous a decision as the 1998 pokharan atom blast. The DM decision was financial pokharan blast. Unbiased history will record how this single measure made turned the economy
The implementation of GST would have been a non starter without DM. With High Denomination Notes dominating trade, the GST in Cashland would have destroyed the economy. Most commentators failed to understand how DM cleaned the ground for GST
The informal economy which accounted for 50% of total economy could never have been brought into formalisation largely without DM. It had had 3 major and positive impacts unthinkable otherwise.
The first is the rise in the no of tax payers. The direct tax returns rose from 40m in 14/15 to 67m in 17/18, by 25% And tax collections from 7lac cr to 10lac cr net. New returns filed rose to more than 1cr. By 25%. Corporate returns by 17%. In 2018-19 it it rose by 11m again
Had notes in Circulation grown how they were growing before DM the notes in Circulation now would have been 25 lac cr. It is now only 22.4lac cr. There has been huge increase in digital Economy. DM changed the psychology of the nation
It was not without pain. But nothing big happens without pain. There were two errors in scheduling DM. The Mudra should have been implemented before DM, and the tax immunity schedule which preceded DM should have coincided with it. This would have reduced the pain.
DM prevented the collapse of the Economy which was sitting on asset inflation of stocks, gold and Real estate by over 30% per annum in six years to 2010, unable to shed it even now, particularly in real estate & housing. Stocks are over valued even now, artificially by FII inflow
The pain of the pleasure of asset inflation led growth of 2000-2011 found in the NPAs that was the outcome of the needless & unabsorbable inflow of over 170 billion dollars to 2008, which YV Reddy wanted stopped, but PC and Dr Singh wanted him not to stop
The unwanted money flowed into the banking system and became unlendable, forcing the govt to zero rate tariffs to allow cap goods imports that turned into CAD on the one hand and into NPA on the other. See my article on A decade of Economic destruction.
I have written about it in New Indian Express and spoken about it. And also tweeted it.
