How will GST, demonetisation affect BJP's chances in MP? Traders are split

Some say GST helped their businesses grow while others say they are bearing the pain for a good future

The small and medium entrepreneurs of Dewas, an industrial cluster 33 kms away from Indore, as well as the traders of Madhya Pradesh’s Malwa region are split in their views on the impact of demonetisation and the Goods and Services Tax regime on their businesses. In this demonstrably prosperous pocket of a state that’s struggling to come out of the BIMARU quagmire, the traders have been hit much harder than the SMEs by the combined effect of the new order. However, many of them slowly absorbed the changes and are coming to terms with them. They believe that the “reforms” are the “signposts” of a system that will be marked by “a new work ethic and transparency and address the demands of digitalisation for a new generation”.

Ashok Khandelia, president of Dewas’s Association of Industries, explained the reasons for the layered responses. “The marginal impact on the SMEs is because we are unused to doing cash transactions for quite some time, before ‘note bandi’ came in. You may not believe but the turnover in many of the 800 or more units in my town has increased after the new policies came in. May be a small number that was never law-abiding because the laws are very complicated says it’s hurt. Money’s back in circulation. The problem for the unethical category that’s largely made up of small traders is that they don’t want to come into the system. They still don’t report their transactions because then they will be covered by the laws. But yes, there’s no denying that for months, Dewas’s ‘mandi’, which is larger than Indore’s, was disturbed and is still recovering.”

Girish Mangla, whose eponymous engineering unit manufactures household pumps, is gung-ho about the new order unlike Ashit Gandhi, who runs an engineering plant, ran into problems and is still grappling with the new arrangement. “Demonetisation had an impact for six months because of external issues at the tail end of a business year. Everything was dealt with in cash. Since 99 per cent of my products are sold in cash, the demand went down for about six months. But later it picked up like anything. Then, we came into GST and that boosted the demand. There are two verticals for the organised sector. Ease of taxation and ease of competitiveness. GST did away with CST, octroi, entry tax and what not and created a single platform where competition’s based not on location but efficiency. Today my pumps are sold all over India so I am benefitting,” said Mangla. He added that GST was not a “shocker” for him because “Industry was always controlled by the central excise department and GST is like central excise.”

For Gandhi of Raghu Precision Engineering, demonetisation meant toting up losses for four months or so because the orders for the auto parts he makes dried up. “There was no cash. We cut costs. We had to lay off 10 per cent of the staff against our wishes,” he recalled. While Gandhi too welcomed GST, he wasn’t as effusive about it as Mangla. “The orders fell by about 30 per cent because the market knew GST was coming. Our buyers wanted to clear out the stocks they held and not add to them. Even now, my main issue is the cumbersome process involved in filing GST returns. I had two options. Purchase the software or engage chartered accountants. I chose the latter,” he said.

How will the conversion from the old to the new affect political preferences? One of those spoken to was candid, off record. “No question, we will vote the BJP (Bharatiya Janata Party). We have no confidence in the Congress’s leadership because it is confused about economic fundamentals,” he said.

In Indore’s commercial hubs, Rajwada and Sarafa Bazar, the mood swung from optimism to despondency. Optimism about GST and demonetisation ushering in fiscal integrity and hope that the taxes in the kitty of the states and the Centre will be “distributed uniformly” among all classes and not funnelled into bankrolling populism. 

Pradeep Kumar, the owner of a garment shop, said, “Both the policies are the perfect antidote to checking ‘do number ka dhanda’ (illegal trade). We want everything from the government, roads, subsidised power and water, education, health but when the government wants something in return from us, why the noise? We want to steal but this can’t go on forever.” 

At Milan Jewels, owned by Shyam Soni, there’s not one customer at peak buying hour. Yet he’s not pessimistic. “Problems are inevitable with changes. I know my CA is taking undue advantage of my ignorance about GST. I have to file monthly returns instead of every three months. Yet, I am looking towards the future, my grandsons and great grandsons. The new generation hates the practices we adopted for decades. I believe the BJP and Narendra Modi rightly felt their pulse,” he said.

A few outlets away, hopelessness loomed large over Subhash Soni’s face. He wound up the family trade of making ornaments, will dispose whatever’s left, board up and return to Agra, his home town. “There were hardly any orders this Diwali. That’s when the harsh reality of GST and note ‘bandi’ hit me. I am a ‘pukka’ BJP-wallah. But this time God help the BJP. We are sceptical about the Congress so the options are using NOTA or staying at home,” said Soni. Twitter: @radrama