[The downturn is especially bitter because of the promises Prime Minister Narendra Modi made when he came to power in 2014. Chiding his predecessor Manmohan Singh, an Oxford-educated economist who oversaw the economic liberalization of India in the 1990s, Modi presented himself as a financial genius who presided over the state of Gujarat throughout years of boom. He spoke of his own rise from a streetside tea seller as a personal economic miracle, promising jobs for the young and a new focus on manufacturing to take on neighboring China .]
By
Vidhi Doshi
Kanwarji Bhagirathmal usually
has a rush of customers during Diwali, but this year,
people are spending less. (Vidhi
Doshi/The
|
Famed
in Delhi ’s Chandni Chowk market, Kanwarji
Bhagirathmal is one of many small businesses in Delhi where sales have slowed. “This time last
year, there was a rush of people standing in front of the shop,” said Rachit
Gupta, who runs the sweets store. “People who were spending 1,000 rupees [$15] last
year are spending 600-700 now [$9-$11].”
In
the past year, India ’s economic performance has fallen short of
expectations. The shock of major economic changes has caused panic and
confusion, leaving some small businesses like Gupta’s with slower sales than in
past years.
“If
food is something people are willing to forgo, then I’m not sure what’s
happening to others,” he said.
The
downturn is especially bitter because of the promises Prime Minister Narendra
Modi made when he came to power in 2014. Chiding his predecessor Manmohan Singh,
an Oxford-educated economist who oversaw the economic liberalization of India in the 1990s, Modi presented himself as a
financial genius who presided over the state of Gujarat throughout years of boom. He spoke of his
own rise from a streetside tea seller as a personal economic miracle, promising
jobs for the young and a new focus on manufacturing to take on neighboring China .
But
Modi’s promises have gone unfulfilled. Growth slumped to a three-year low from
April to June, just 5.7 percent. Job creation has stagnated, leaving millions
without work.
In
November 2016, Modi made a surprise announcement declaring 86 percent of
India’s cash defunct, saying the process of replacing the country’s paper money,
also known as demonetization, would do away with untaxed stacks of “black money.”
Just afterward, the lines outside Gupta’s shop vanished entirely. “I didn’t see
people coming for days,” he said.
In
July, a new goods-and-services tax was introduced, but there has been confusion
over its implementation. The tax replaced varied state taxes and consolidates India ’s economy into a single market for the first
time, and it resulted in a price increase for items and services. Gupta, like
many traders in Chandni Chowk, still doesn’t know how much tax to charge. He
said even his accountant didn’t know. “If the people at the top don’t know
what’s happening,” he said, “then how will people lower down the ladder know
what to do?”
“Everything
was fine” until Modi’s economic changes kicked in, said Jayshree Sengupta, a
senior fellow at the Observer Research Foundation. She said demonetization hurt
India ’s vast informal sector, which dealt
primarily in cash, and was unmonitored and untaxed by the government. “Suddenly
they lost cash flow, they had to wind up micro-businesses and go back to their
villages,” she said. “They haven’t come back.”
For
small and medium firms, Sengupta said, the tax overhaul created a huge amount
of paperwork. “Many people are not computer-literate, they don’t know how to do
online filing,” she said. “People are not selling in fear of having to do all
this work.”
Sengupta
said that Modi’s weakness was an unwillingness to take advice from trained
economists. “He doesn’t consult,” she said.
Modi’s
government has made efforts to lessen the negative effects of his overhaul on
small businesses: A defunct economic advisory council was reconstituted, and
the goods-and-services tax was lowered on some items including dried mango and
yarn. In a speech in early October, Modi dismissed his critics.
“Do
you think this is the first time that GDP growth rate has hit 5.7 percent?” he asked, addressing
an audience from the Institute
of Company
Secretaries .
“There are some people who enjoy spreading pessimism. It helps them sleep
better.”
Surjit
Bhalla, a part-time member of Modi’s economic advisory council, said it is too
early to draw conclusions about how small businesses have weathered Modi’s
changes. He said Modi has commissioned a survey that will contain strong
indicators about how companies have fared, and he said it’s likely that the
effects on employment and wages in the sector will be evident next year.
From
Gupta’s perspective, people are not spending because the economic slump has
disturbed them at a spiritual level. “There has been no mental peace this past
year,” he said. “People are not calm in their minds.”
Kanwarji’s,
named after Gupta’s great-great-great-grandfather, Lala Kanwar Sain, has stood
in the same spot since the mid-19th century. To the residents of Chandni Chowk,
the establishment is a landmark in one of the busiest markets in Delhi . Sweets of all shapes and sizes, some
covered with a thin silver foil, some studded with almonds and pistachios, surround
Gupta’s staff. Passersby eye the stacks of sausage-shaped gulab jamuns soaked
in sugar, Gupta’s specialty, as suppliers push past them, carrying boxes of ingredients
on their heads.
But
as the festive season of Diwali approaches, Kanwarji’s is struggling to cope
with the drop in sales. “In the seven years since I’ve started running this
place, I’ve never had a year so bad,” Gupta said.
A
few doors down, a man who sells Indian wedding suits says sales have dropped to
below half of last year’s. Across the street, an electric lights market is set
up for Diwali, with blinking multicolored wires strung up for show. But no one
is buying.
“It’s
a very confused market,” said Vatsal Narula, 23, who was watching over his
father’s lights shop. The new tax regime has increased the cost of their
products. “They’re introducing everything too fast. They hadn’t even completed
one thing properly, and they already started moving on to the next,” he said.
Sengupta
said that India ’s economy is likely to survive the shocks of
the overhaul but that Modi’s once-shining career is starting to tarnish. “India never collapses. Things will move on and
come back to normal in some time,” she said.
But
for the people of Chandni Chowk this year, the economic slump will have a
marked impact on a festival that is India ’s equivalent of Christmas. “People are
saying it doesn’t feel like Diwali this year,” Narula said. “Very few are
putting up lights. They’re spending the bare minimum.”
Read
more