Former Prime Minister has taken a dig at PM Narendra Modi saying that the after effects of demonetization has been adverse on India’s GDP Growth.
After Effects Of Demonetisation
Former Prime Minister Manmohan Singh on Monday took potshots at the Narendra Modi-led central government, insisting that demonetisation and hasty implementation of GST have adversely impacted GDP growth. The after effects of demonetization and the GST both have had some impact (on GDP growth), was told by him to CNBC-TV 18. Both would affect the informal sector, the small-scale sector. The sectors today are responsible for 40 percent of GDP.
With informal and small-scale sectors accounting about 40 percent of the USD 2.5 trillion economies, Manmohan Singh said that the decision of demonetisation, coupled with GST, had an adverse impact on the economy. And the withdrawal of 86 percent of currency plus also GST, because it has been put on practice in haste, there are lots of glitches which are now coming out. These are bound to affect the GDP growth adversely.
On January 9, Singh had said that Demonetisation will have a very significant adverse effect on the country’s GDP. Notably, PM Modi had in Parliament said one should learn the art of “bathing with a raincoat on” from Manmohan Singh as there was not a single taint on him despite so many scams have taken place during his regime.
Notably, GDP growth in the first quarter of current fiscal slumped to a three-year low of 5.7 percent, down from 7.9 percent in April-June quarter of 2016. However, the government had blamed de-stocking ahead of the rollout of the Goods and Services Tax from July 1 as the primary reason for the fall in the GDP growth rate. Last month, the Reserve Bank of India announced that nearly 99 percent of the Rs 15.44 lakh crore demonetised currency had returned to the banking system, prompting critics to raise questions about the efficacy of the government’s note ban decision that was aimed at curbing corruption and black money.
Meanwhile, Union Finance Minister Arun Jaitley listed out the increase in the volume of digital transactions, widening of tax base and squeezed circulation of high denomination currency as the real measures of success of demonetisation. He has always stated and will support the fact that the after effects of demonetization will turn out to be better in the long run.
Jaitley said at the launch of Google’s new digital payment app -Tez that Some circles have lack of understanding and measure the success of demonetisation with only how much money reached banks.He said he had three red lines to measure the success of demonetisation. First, how much volume of cash that RBI prints are they able to squeeze over time. High denomination currency has already squeezed in terms of volume. The second test is that as its (demonetisation’s) consequence, how many assessees are they able to add and expand the tax base. And the third measure would be the increase in digital transaction volumes, he added.