Asia in 2016: India
|Jan 12, 2017|
Landmark economic reforms introduced in India last year contrasted sharply with rising extremism, suggesting that the rapidly growing country is still battling old demons of religious divisiveness, rigidity and orthodoxy even as the government of Prime Minister Narendra Modi adopts a more streamlined financial outlook.
Growing intolerance of dissent was highlighted in February 2016 during street clashes between students from Jawaharlal Nehru University in Delhi and members of the All India Student Council, the youth arm of the right-wing Hindu Rashtriya Swayamsevak Sangh organization. JNU students had organized a peaceful protest against the 2013 execution of Kashmiri militants Maqbool Bhat and Afzal Guru. (Guru had been convicted for his role in the 2001 attack on India’s parliament; Bhat for killing an intelligence officer). Several students, including JNU Students’ Union President Kanhaiya Kumar, were arrested on charges of sedition, under an antiquated British-era law originally targeted at silencing any dissent against the Raj.
Meanwhile, in Kashmir itself, militants attacked an Indian army camp in Uri, a town on the border with Pakistan, in September. The incident, which killed 19 soldiers, was the deadliest attack in two decades. The Indian government blamed Pakistan, calling it a “terrorist state”. As rhetoric escalated and fears of an outbreak of war grew, India announced that its military had conducted a “surgical strike” on terrorist sites across the border.
India adopted its biggest indirect tax reform in 2016 with the introduction of a national goods and services tax, rolled out in a process that ended in November. The National Council of Applied Economic Research estimates that the GST, effective from April 2017, could add between 0.9 percent and 1.7 percent to India’s gross domestic product.
While reaction to the GST was mostly positive, the Indian government’s decision in November to withdraw 86 percent of the value of cash in circulation – by demonetizing the 1,000-rupee and 500-rupee banknotes – was more controversial. The motivation was to flush out “black” money held by wealthy individuals, but the decision played havoc with the lives of the cash-reliant masses. Goldman Sachs adjusted India’s GDP for the 2017 financial year to 6.8 percent from 7.6 percent for current year expecting lower consumption and pinning part of the blame on the upheaval caused by demonetization. Although the government issued new 2,000-rupee and replacement 500-rupee notes, their introduction is proving to be a drawn-out process.
At the end of the year, national affairs took a back seat to state politics with the death of J. Jayalalithaa, the popular Chief Minister of Tamil Nadu, India’s sixth most populous state. Thousands of people attended the funeral of the 68-year-old firebrand known to voters as Amma, or “Mother”, a former actress who had held the state's top elective post five times since 2001.