How Demonetisation and GST Impacted MSMEs, Agriculture & Growth | Santosh Mehrotra Explains

[00:00:00]Post 2016, when the economy was induced a shock, a policy induced shock on November the 8th, the demonetization, which had never happened in the history of the world, where a country and a government decides at 4 hours notice to de-legalize 86% of its currency.

[00:00:22]Please understand that in a highly informalized economy, a subject we will come back to, when you de-legalize 86% of the available currency, it throws agriculture, which is mostly in the unorganized sector and depends on cash, and the entire MSME sector and the unorganized sector into a tizzy. And that's exactly what happened, and that began the downward spiral.

[00:00:48]The downward spiral was unfortunately furthered by another policy induced shock. What was that? 6 months later, the government decided that at very short notice, without adequate planning, a poorly designed GST was introduced. We needed the GST. We'd been making an argument for it for for 10 years, as had the previous government. The The current government had actually opposed it then. The fact of the matter is that the way they suddenly introduced it, it had five uh tax rates. There was no need for that.

[00:01:22]No No country in the world which introduces GST has five. In addition, in a In a country of 1.4 billion people, you don't introduce a tax which is going to cover practically all the goods and all the services that are going to be that are available in the economy at a short notice where the computer systems have not been pilot tested. They were not pilot tested. Can you believe that? And that shock was then further furthered uh at the beginning of COVID.