Arun Jaitley Rejects Demonetization As Reason For GDP Decline
India’s Finance Minister Arun Jaitley has dismissed criticism that demonetization has negatively impacted India’s gross domestic product (GDP) and that the government were responsible for just promoting jobless growth in the last 3 years.
Speaking at a press conference held on the occasion of Modi government completing three years in office, Jaitley said that several factors such as slow down in the global economy were responsible for having a negative impact on the country’s growth rate. Jaitley pointed out that the slow-down in the global economy occurred before demonetization could be implemented.
According to latest data, the last quarter of the FY 2016-17 has recorded a growth of 6.1 percent, down from 7 percent of prior quarter. Observers have largely blamed it on the sudden demonetization of Rs. 1000 and Rs. 500 currency notes in November 2016 as it triggered a severe cash shortage for a few months stalling economic activity nationwide.
In a statement Jaitley said
Let us not be guided by erroneous premises. There are several factors which can contribute to GDP in a quarter. here was some slowdown visible even before demonetization in the last year. There was impact of global factors. There could be some impact on two quarters (due to) the issue which you mentioned.
He additionally pointed out that key sectors like the financial market and services industry which typically see growth of 9-10 percent, were declining before demonetization was announced. Jaitley also rejected accusations of poor job growth, stating that the opposition parties had raised the concern without any basis. He stated that jobs have been created in both formal and informal sectors but no data has been collected for the informal sector leading to such a view.
The Finance Minister asserted that in the last three years, the Indian government has made an impact in three areas: taking quick decisions, transparency in allocation of public resources using market mechanisms and clear direction in decision making. Defending the decision to demonetize, Jaitley said that it had created a new normal, eliminating the old cash-focused economy as well as the country’s extensive parallel economy.
Jaitley noted that the three biggest benefits of demonetization were: increased impetus towards digitization, widening of the tax base resulting in 18 percent jump in tax revenue and the launch of ‘Operation Clean Money‘.
Another concern raised in the press conference that the upcoming Goods and Services Tax (GST) would slow down the economy was also dismissed by Jaitley. Chief Economic Advisor (CEA) Arvind Subramanian refuted the view stating that the launch of GST would result in curbing inflation and boost consumer spending.
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