Demonetisation hurt the smallest businesses: those of the self-employed. Their incomes are yet to return to pre-demonetisation levels. Many slightly bigger businesses, like small and medium enterprises in industrial clusters like Surat in Gujarat and Tirupur in Tamil Nadu, closed down after the introduction of the Goods and Services Tax in July 2017.
What has received less attention is the government’s ham-handed treatment of the country’s bad loans problem. The government’s insolvency proceedings have created a situation where a handful of companies are buying most of the distressed firms put up for sale by banks. The implications, as Scroll.in reported in October and November, run deep. They include both the possibility of cartelisation in the country’s core sectors and a freeze in fresh investments.
Adding to this, India’s financial institutions have taken a pounding. With the government preferring fealty over capability, institutional autonomy has come under a cloud. At the Reserve Bank of India, for instance, the government first replaced Raghuram Rajan, who opposed demonetisation, with Urjit Patel, who mutely allowed it, and then with Shaktikanta Das, who loudly defended it.
In April, Yashwant Sinha, finance minister from 1998-2002, during the Atal Bihari Vajpayee government, resigned from the Bharatiya Janata Party. He has emerged as one of the most prominent critics of the Narendra Modi government. His book India Unmade: How the Modi Government Broke The Economy, released in December, details his thoughts on what the administration has done wrong. Scroll.in spoke to him about how the economy could be revived.