Demonetisation: The major shock to Indian economy

Demonetisation: The major shock to Indian economy

Demonetisation was a major shock to Indian economy as it pushed down GDP from 7.6% to 6.1%. Finally, the impact of demonetisation is visible in the gross domestic product numbers. On June 2, the Finance Minister Arun Jaitley played slow down concerns after India’s economic growth fell to 6.1 percent in the fourth quarter of 2016-17 (FY17), primarily because of demonetisation adversely affecting economic activity. In the press conference, he said that we have restored the credibility of the Indian economy through decisiveness and tough policies. There have been multiple geopolitical uncertainties in the last three years and India was not on global radar three years ago. “Government has taken tough steps to root out corruption,” he said.

“I do believe that in the current global situation, a 7-8% growth, which at the moment is the Indian normal, is very reasonable,” he told the press conference.

Looking ahead to the planned launch of a new Goods and Services Tax (GST) from July 1, Mr Jaitley said the government was “in a state of preparedness” for the rollout. He said that the GST would add to the rate of economic growth.

Finance Minister Arun Jaitley also told reporters that they resolve the issue of non-performing assets weighing down banks balance sheets was a work in progress and a major challenge.

On 8 December 2016 GDP, Prime Minister of India Narendra Modi announced the demonetisation or the cashless economy to overcome corruption and black money issues from India but this initiative of government has adversely affected the economic growth of India. In 2016 GDP(gross domestic product) numbers of India was around 7.6% which is now fallen to 6.1%. That time also the finance minister Arun Jaitley said that India will be raked up economically with this initiative. But clearly, the impact of the pay hike to government personnel has bailed out the economy. And if we leave out “public administration, defence and other services” as well as agriculture, on the grounds that agricultural growth is chiefly due to the rain gods’ generosity, then growth in the rest of the economy at constant prices drop down to 3.8% in the fourth quarter.

Although there are also some advantages of demonetisation which discussed by the Finance Minister Arun Jaitley in his speech he said they don’t see any adverse impact of goods and services tax on GDP Growth, Reforms in subsidy have helped save resources, plug leakages, Taxpayers base has increased post-demonetisation Setting up of Monetary Policy Committee, new bankruptcy code have been transformational changes after demonetisation.

According to him GDP growth of 7-8% is reasonable given global conditions and is normal standards. He said I am sure the impact of government policy will surely increase the growth and GST which is set to roll out from July 1 will help in India’s Economic Growth.

About the author

Pallavi Parmar

Journalism is my profession, Blogging and Writing are my passion, Travelling is my love, Food is my life and Feminist by nature.