Friday, 22 September 2017

Jaitley's Rs.50K stimulus package. Will it work?

  • Arun Jaitley more or less announced Rs.50,000 economic stimulus package by loosening fiscal deficit from 3.2 to 3.7% to halt economic slow down which slipped from 7.1% to 5.7%. It was actually projected to grow from 7.1% to 8.1% this year but for demonetization, unprepared and hurried roll out of 'mangled' GST etc.
  • History and experience had shown that any where in the world 'stimulus packages' never yielded targeted results except giving some initial confidence boost.
  • Chinese government went on spending trillions of dollars since 2008 to boost its sagging GDP growth rate but ended up in piling up huge national debt and white elephant trophy projects which are even more difficult to maintain & service. GDP remained stagnant below 7%. 
  • This Rs.50,000 comes from printing currency notes which will result in higher 'inflation' which in turn hurts poor & poorest most. It tantamount to taxing the lower classes for the benefit of upper classes who gets the benefits. In other words we are following the economic model aptly described as "Socialize the risks and privatize profits". Ridiculous!
  • The 2009 US $787bn Obama's stimulus package had actully contracted economy by 2.8% and jobs saved were no where nearer to targeted saving of upto 2.3 million. Tax concessions which were expected to increase consumer spending have resulted in individuals saving those tax concessions in view of uncertain future. The Stimulus for small business helped create jobs. The aid helped, but many states were so underwater that their losses outweighed the federal assistance.
  • More than stimulus package which is a 'monetary policy', a 'fiscal policy' would give much better results rather little bit slowly. 

If you haven't done anything for yourselves, your life is not wasted.
In democracy, governments can't be overthrown; they collapse under their own weight.

If stimulus package solves problems, they why limit it to Rs.50,000 crores, make it Rs.5,00,000 crores. The caution indicates their doubts about results. A popular saying says 'if you are not sure of results, then don't do it'. Modi's senseless decisions of demonetization and subsequent unprepared, hurried and mangled GST roll out have hit the economy by several lakhs of crores of rupees etc are such undemocratic decisions that is short off war with common man. Consequences are surfacing incessantly there after. There is no escape from consequences of wrong doings. Stimulus package with a meager amount is another attempt to divert public attention and to claim government is responsive. What is needed is sound thinking, careful planning and meticulous implementation. None of the Modi's team members are good for anything. It doesn't require more than common sense to say that this stimulus package will not succeed and nation will be burdened and people impoverished. At best this will add some more fire to Modi's advertisement and publicity! Within three days of demonetization, it was amply clear that it was heading for colossal failure and arrogant Modi refused to take any corrective steps like restoring status quo ante or allowing old notes also to continue for at least three months. Instead he made impassioned appeal to people to bear the pain for 50 days and thereafter targeted results would be imminent. But what happened is 'all pain and no gain'. Even Supreme Court, the constitution protector, failed in its job by remaining a mute spectator by passing just a remark 'discontinuing of higher denomination notes appears to be carpet bombing and not surgical strike'. Modi is worse than VP Singh of 1990. One more foolish decision by Modi will be enough to see Rahul Gandhi as PM in 2019. 

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