The Grim Gabbar Curve

Winter is yet to set in. The festive five-day break after Diwali (New Year for the business community) is alm­ost over and markets are slowly putting their shutters up for business. However, according to the traders, the lethargy is ind­uced more by the downturn and less by the holiday season.  Even as businessmen hurry to file their GST returns before they are fined for delays, or get discounts while figuring out losses, one hears unpleasant murmurs about Black Money Day, set to be obs­erved on November 8 to mark one year of demonetisation.

The lull in the markets—down by 20 to 50 per cent depending on whom you speak to—is inv­ersely proportional to the excitement in political circles. And the downturn is likely to play a big role in the voting pattern of cities like Surat, which saw a complete closure of its textile market for two weeks in July (although the BJP has tamped down the anger to an extent). The daily turnover of the market is estimated at between Rs 115 and 135 crore. Surat has 70,000 shops spread over 165 markets dealing in polyester—saris, dress materials etc.  

“Business is totally down. People have reduced their spending since demonetisation and footfall has reduced in the retail market. It naturally has an impact on wholesale too. Moreover, with the GST regime, the previous business model and credit cycles are not working out. The market is down by almost 40-50 per cent,” says Mukesh Lalwala, owner of a design unit in Surat. Traders say that most of their Diwali orders—the most crucial time of the year—were reduced by GST-induced confusion. From having to file every month and having to calculate which items fall in which tax slab, to fighting for reduction, the traders have been busy and angry. They point out that closing the market for two weeks is a major step to take.

Analysts say that the government has failed to differentiate between unorganised and illegal trade. Big companies and traders, who run end-to-end businesses from the making of the yarn to dispatching the finished cloth, can stomach GST’s glitches. However, small traders running units for individual jobs are unable to adapt. While some say it is because of the “kaccha dhanda”, i.e. illegal businesses that stay out of sales tax brackets, many also run on longer credit cycles and deal in cash.

“Payments from Nepal, Bangladesh and Bhutan have stopped because they run on cycles of six to eight months. It’s not just about those evading tax, but overall money has stopped rolling. It’s not easy to generate bills, OTPs etc at the time of delivery. Not everyone is equipped, and people are asking what the rush was,” says Rohit Bansal. “It’s like implementing Swachh Bharat without providing dustbins. It won’t work.”    

Congress leader Siddharth Patel says the two economic decisions have hit the soul of Gujarat. “This government is supportive of large businesses, but it is actually small traders and medium sized businesses that generate employment. Business and entrepreneurship is in the blood of Gujarat, it is the pride of the state. But 99 per cent of subsidies are going to large industries and companies and only one per cent to SMEs.”  The Patel traders, who have their links in North Gujarat where the Patidars are agitating for reservations, will be restive unless they are compensated for their losses and their problems are addressed.

However, rumours of political pressure and threats of tax raids are doing the rounds. The BJP is trying to pacify the community but, with the code of conduct in force, more discounts are unlikely. It’s hard to tell if the tapering of protests and threats to turn it into an election issue signal acceptance of the BJP or simply anger swallowed.

Jitubhai Vakharia, president of the Fede­ra­tion of All India Textile Processors Asso­ciations, is a typical voice: “I don’t want to say anything political about the GST problem. The point is to acc­ept it now and find ways to make sure that my community survives and moves ahead. We are only trying to find solutions for that.”