End fear psychosis
With reference to the article, “No longer on the buy list” (October 3), the damage is largely self-inflicted and has no relation to product quality or marketing skills.
Although demonetisation retrieved a small percentage of black money and there was an attempt to adopt digital transactions on a large scale, it is not possible for an economy like India with huge disparities in income and standard of living to abruptly embrace total functional change.
Further, demonetisation was enforced so abruptly that markets were shocked and commercial activity, especially retail trade, was paralysed. Absence of cash and a switch to digital transactions increased transaction costs, despite the benefit of tracking funds movement. The Indian economy consists of agriculture, retail trade, services sector, personneland industry; these are interdependent, not isolated, segments. It is not possible to go cashless totally and embrace a technical change in transacting, especially in agriculture and retail trade. That can lead to lack of market stimulus, essential for generating income to promote economic growth.
Even after a delayed implementation of the Central Goods and Services Act, there are still areas of uncertainty and hoarding is apparent in retail trade. Manufacturers are still seeking clarifications before releasing their stocks. This market stagnation is making foreign investors uncertain and they are gradually withdrawing manufacturing and market support to the economy. The drop in production is hampering foreign trade — a high volume of imports against a diminishing level of exports. This increases costs and upsets the balance of trade. It is essential to eradicate the fear psychosis by introducing new supportive policies to induce growth. This is feasible because there is a stable government till 2019; policies can be built upon by future governments, as such decisions have to be supported at international forums regardless of political affiliations. Bond markets perform only a secondary function with short-term benefits, which cannot be termed as capital gains. Economic stimulation is essential for India to regain its strength and woo foreign investors again.
C Gopinath Nair Kochi