Economic slowdown is a situation where GDP rates slow down but does not
decline. The Indian economy recorded highest growth rates of the world at 8.2%
in FY16-17 & 7.2% in FY17-18.
Then in FY18-19, it was recorded at 6.8% After
being celebrated as the fasting growing economy in the world for two years, the
news of economic slowdown surprised many and was not admitted by the majority.
With the growth rate falling to 4.5% in second quarter of FY20, the lowest since
2012, no one could deny the economic slowdown that the Indian economy is
After much dogging the word the Chief Economic Advisor Krishnamurthy Subramanian
admitted that the country is facing economic slowdown. The lady in charge,
Nirmala Sitharaman, expressing relief it is not recession yet. The officials
of the Finance ministry acknowledged the lag effects of GST.
GST, which finds its roots in the Vijay Kelkar Committee recommendations of
2003, is an indirect tax, came into effect on 1st July 2017 is a multi-slab pan
India tax. The main advantage of the tax as promoted was its pan India nature.
It resulted in unprecedented tax collections by the central government. But this
benefit just proved to be a incapable veil which could not cover the
disadvantages of GST.
The advice given by Raghuram Rajan to the then Finance Minister, Arun Jaitley
that GST will have long-term benefits would be tremendous, if frequent changes
are not made. But they were made and the GST was not allowed to stabilise. A
policy which could have pioneered the growth of India became one of the main
reasons for the slowdown of economy because of mismanagement and witless
The first step toward doomsday was sown with the ill-timed implementation of the
policy. The inflation rate increased from 1.79% to 5.11% during the period July
2017 to January 2018.The implementation of the policy in the middle of an
economic year led to confusion among the business men.
t resulted in a higher unemployment rate in the period of its implementation.
There was chaos as people did not know which rules to follow. The structure of
GST did not help either. In the words of World Bank, The Indian Good Services
Tax isamong the most complex in the world.It has one of the highest tax rates
and one of the largest numbers of tax slabs.the World Bank's biannual India
Development Update report mentioned 49 countries use a single rate, 28 use two
rates and only five countries including India use four ratesIt has four non
zero slabs- 5%, 12%, 18% & 28%.
The complex structure and its even complicated application is a difficult task
to be understood by common man. The changes made going against the advice of
Raghuram Rajan, would have been worth it if, it was to make the scheme easy but
no such prominent changes were made. The tax being indirect in nature is
applicable on goods and services and on businessmen directly. This means that a
retailer or producer collects the tax directly from people on the goods sold.
The people pay the tax by just paying more on the cost price. The number of
people which comes under the purview of GST is also one of the highest figures
in the world. There is a need for a well-planned drive or a specific channel
which can educate people as to which tax and more importantly how applies to
them. The need is still present. Even after more than two years of its
enactment, a proper authorised channel to educate people is required.
India is a country with glaring economic differences. According to the Oxfam
International latest reports, the top 10% of the Indian population holds 77% of
the total national wealth.73% of the wealth generated in 2017 went to the
richest 1%, while 67 million Indians who comprise the poorest half of the
population saw only a 1% increase in their wealth.
The question which these numbers and facts bring forward is whether a tax whose
applicability is based not on basis on capacity on an all India level is even
justified on grounds of common sense? Is it just to charge the top 10% the same
as the no where near in standing 90%? By a look at the statistics one can say
no. The base of economic slowdown is the fact that the overall economic activity
in the country has decreased. Even if it comes back on tract according to the
predictions in the fourth quarter of FY20, will these fallacies of the GST not
affect the economic classes in a long period.
This unjust feature of the GST can lead to widening the gap between the classes
which will not be good for the economy.
In the presence of such disadvantages, the advantages of the scheme seem less.
The benefit that the scheme brings a uniform tax system in India seems just an
excuse after its features and implementation process is seen. The ill-timed
implementation, mismanagement and witless planning has caused rise in inflation
rate, rise in unemployment rate and fall in growth rate.
The GST collection dropped to Rs.91,916 which served as an indicator of economic
slowdown. The economic slowdown is a direct effect of GST. That level of
ill-management on a national scale has costed the nation a fortune. The point to
be noted is that, it has taken place in regime of a government with an
overwhelming majority mandate. The question which these facts force us to face
is whether this economic slowdown is a self-inflicted would?
- GDP growth rate for 2017-18 revised upwards to 7.2 %, THE ECONOMIC
TIMES, 31 Jan, 2019
- GDP growth plunges to 4.5% lowest since 2012, THE HINDU,22:08 IST 29
- Sobhana K. Nair, Chief Economic Advisor admits to economic slowdown, THE
HINDU, 09 NOVEMBER 2019
- GST: Indian system among the most complex globally, says World Bank
report, Business Standard, 16 March, 2018
- India: extreme inequality in numbers, Oxfam International,https://www.oxfam.org/en/india-extreme-inequality-numbers
- Fall in GST collection indicates economic slowdown: Congress,THE
ECONOMIC TIMES, economictimes.indiatimes.com/articleshow/71863615.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst