The eager wait of ‘Acche Din’ has made Indians ready for every next attack by the Modi government. After demonetization and the mismanaged GST, the economy from aspiring 10% has reduced to half of that.
Except for the rise in the stock market, everything else is low. The consumers are not buying, household savings are low, Investments by corporate are negligible, gold prices have declined, and real estate has left his consciousness. Surely, something is being cooked inside. When everything is going down, including the employment, consumption, spending, etc., why the market is up and where is the cash?
Possible reasons for economy crisis
One one side, the horrendous moves by the Modi government like demonetization, unmanaged GST along with persistent bank problems and the shadow banking mess are believed to be the reasons for the decline in the economy. On the other side, it is said that it is a result of an attempt to switch the Indian business model towards formalization.
Whatever may be the reason the final sufferer is our economy and the people of India.
Cash Flows
Most Indians do not see the sense of paying taxes. So they look for plenty of other ways like multiple PANs, Benami properties, cash payments for high-value goods like cars, etc. to keep themselves out of this tax net. Also, a huge part of cash flow has been shifted to real estate, which is both a store as well as a generator of non-tax paid cash and leads to more discretionary spend in cash.
The moves by Narendra Modi have although brought transparency in cash circulation but the root cause of cash –corruption has not yet disclosed. This has also increased the violating of rules, an increase in rent-seeking rates and cash components in property deals has also risen. This means cash is still getting generated, but its use is still to be known.
 Spend or invest
People with cash will either spend or invest. The spending over a certain amount requires an identity proof like PAN card or Aadhar card. But existing of multiple PANs makes AADHAR, and Pan linking makes it difficult to use them. Benami properties don’t stop to exist but have become difficult. People with cash either reduce the value of the purchase or simply delay it. Investing is another option if you don’t want to spend it. The investment can be either in gold or real estate. But the gold purchase of above 2 lakhs requires a PAN number. Then you are left with investment in real estate where no ownership is linked to Aadhar card, but this sector also has been scrutinized, especially in case of Benami ones.
For those wanting to rotate money, the slump in real estate has made it not a good option. Also, deals above 10 lakhs require Pan card and again, the Pan- Aadhar linking issue arises. So where is the money going? Is it the stock market?
Stock market
When investors invest more money into the market, then the stock market rises. A part of the money that got tired has started shifting to the market looking for investment opportunities like the oversubscription of the IRCTC issue or other IPOs.
But still, there is enough money, i.e. cash. Will it come to the market or will remain hidden the way it is now. People are tired of waiting for their own money and are dying to see the old circulation of money coming back. Till then, they are sitting and worried about if Rs 2000 note got banned then will they be able to convert that useless note into a fruitful one. Will, the economy of India, ever see ‘Acche Din’ under Modi? Many such questions are eagerly waited to be answered.
It was assumed that the Modi government would improve the economics, but it has left people unemployed, cashless and tired waiting effortlessly for better times.