Economic Highlight
New Delhi, 15
November 2021
Diwali Bonanza
LESSON FOR UNJUST
G-20
By Shivaji Sarkar
The Indian economy is now moving up after certain unsavoury scenarios of
note-ban and pandemic closures of activities. Gold sales are up, event bookings
are rising, the market has been upbeat during Diwali despite cumulative
inflation and less intervention by the State apparatuses.
The G 20-led state controls created panic, made people dependent on
government and stymied growth globally. A free flow Diwali is changing that.
Sales rise 10 per cent and gold demand rises to 96.2 tonnes almost September
2019’s 101.1 tonnes in India, says the World Gold Council.
According to the Confederation of All India Traders (CAIT) sales of its 70
million members increased over Rs 72000 crore in at least 20 cities from where
it could collect the data. Some other data claim $1.25 trillion sale. Secretary
General of CAIT Praveen Khandelwal says that for a long time people had subdued
their needs because of closure of activities and the shock of demonetisation.
Now with free movement people are making their purchases without hesitation.
Many retailers say they were apprehensive before the festival but to their
surprise despite severe rise in prices purchases are increasing. In demand were items
such as earthen lamps, candles and paper mâché lamps, which helped small
potters, craftsmen, and handicraftsmen rake in substantial profits. Sweets, dry
fruits, footwear, watches, toys, home décor, and fashion clothing also saw huge
demand.
The World Gold Council expected gold sales would recover from 35 per cent
below the pre-pandemic level. The demand has been more than expected. But the
economy may not be as euphoric as Minister Piyush Goyal is saying or as the Rs
1.3 lakh crore GST collections indicate. The CAIT says this year sales exceeded
that of 2019 – Rs 60,000 crore;
Rs 50,000 crore in 2018 and Rs 43,000 crore in 2017. The confederation says the
upswing shows a rising demand trend. By March 2022, there
could be another Rs 2 lakh crore sales.
The wedding season beginning mid-November is to continue the boom. The
weddings this year are expected to happen with the usual pomp and show.
Countrywide the demand for gold sales surged. Weddings are one of the biggest
drivers of gold purchases in India as bullion in the form of jewellery is an
essential part of a bride's dowry and also a popular gift from family and
guests. In fact, gold remains the biggest financial security instrument for
rural and other families. The investment is considered secure and continuously
appreciating. After two years of pandemic and a severe hit to the economy due
to note-ban a semblance of restoration is being noticed.
At the same time, weddings
also create wealth distribution at various levels. Till November-end about 25
lakh marriage celebrations are on the cards. A wedding in India involves
banquet halls, caterers, various kinds of pipe bands, music system, hiring of
musicians, decorations lights, ponies, priests, ornaments, garments and gifts.
At the social level different artisans and craftsmen are involved generating
income for many.
Importantly, it’s not
the Indian businesses alone that are gaining but many foreign houses and
retailers are making robust sales. As per estimates, till Diwali about Rs 9,000
crore was spent on gold jewellery and silverware, while traders selling
packaging items marked good sales. Online players too had seen encouraging
sales. In October, e-commerce firms saw 23 per cent year-on-year sales growth
in 2021. It claimed that Flipkart Group emerged as the leader, with a 64 per
cent market share.
The Reserve Bank of India
in its last Monetary Policy Committee meet hoped that with a better kharif
production, manufacturing and services
sectors hit by pandemic and note-ban would recover at a better pace. But it
sees challenges because of global uncertainties, rising inflation, high taxes
on fuel prices and uneven growth pattern of the informal sector.
The GST collections at Rs 1.3 lakh crore may not be the actual indicator
because it is collected over high inflationary prices. Overall sectoral growth
is uneven. Some sections are doing well, but India slips down on the hunger
index to 101 position from 87. As there are proposals to stop the free
foodgrain dole from December, it needs
to be observed how it shall impact the economy. Much of the boost now is
attributed to the free dole as people can spare some cash.
Rising energy prices,
possible power crisis, semi-conductor shortage and continued restrictions on
shipping activities in many countries are other risks. An unsaid is that the
G-20 governments everywhere are out to intervene and control free-flowing
activities as well as increasing taxes or various charges on the sly.
Despite the chances
of a progressive recovery, the RBI holding on to the repo rate at 4 per cent
unchanged for the eighth time in a row is raising eyebrows as savings are becoming
non-remunerative. In reality, the rising inflation is eroding the basic value of
savings. This is being viewed by experts as a risk to the economy. Traditionally,
the Indian economy has been growing on small savings that are now being
disincentivised.
The prolonged
lockdown and prior to that closure of the markets during demonetisation has
destabilised the individual and social economy. Festivities were hit and the 18
crore migrant workers suffered the most. They crisscrossed on foot several
thousands of kilometers, to reach their homes from work places in States such
as Kerala, Andhra Pradesh, Karnataka, Maharashtra, Gujarat, Rajasthan, Punjab
and elsewhere.
A view emerging
globally is that States’ control on people’s lives is playing havoc. It has
reduced the quality of life and caused untold sufferings. The average growth
before note-ban was at 8.26 per cent. It went on falling to -23.9 per cent and
even now despite the RBI claiming 9.5 per cent growth, the actual remains at
minus 10.5 per cent. This raises another question whether those in governments
should take whimsical unilateral decisions without consulting stakeholders. This
has become the norm of G20 group of countries. Should not that change?
The note-ban that had
shaken the poor could not unearth black money nor contain fake currency from
Pakistan. After five years, the Directorate of Revenue Intelligence says that
fake currency seizures reached an unprecedented high in 2020. Strong controls
and harsh steps have not helped countries. The nation must discuss how to
ensure a free-flow growth instead of oppressive imposition of measures that
cause scare. ---INFA
(Copyright, India News & Feature
Alliance)
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