Note ban significantly impacts third quarter GDP growth: Arun Jaitley

02 Mar 2017 Evaluate

Encouraged by stronger-than-expected quarterly gross domestic product (GDP) number, Finance Minister Arun Jaitley has said that a surprise 7 per cent economic growth in the October-December quarter was significantly impacted by demonetisation of high value currency notes. He also said that GDP data belies overstated claims made by many that rural sector was heavily in trouble. Jaitley also seemed to agree with RBI Governor Urjit Patel's statement of a sharp V-shaped recovery as remonetisation picks up.

The finance minister has stated that note ban, certainly, had led to the squeeze of currency because this was the period during which the replacement of high denomination currencies was taking place and many people were anxious to what its impact on overall economy would be. However, he said that with a 7 per cent growth in GDP the worst fears for the economy have been put behind. FM believes that the combination of demonetisation with remonetisation has been fruitful and the results are evident.

Jaitley further said that he had consistently maintained that the revenue (tax collection) figures, which actually show the real level of growth, showed that the growth was there, and some areas could be adversely impacted, mainly those which were cash dominated and also a part of the shadow economy and even constituted parts of the informal economy. However, he noted that demonetisation has helped integration of informal with the formal economy. He also observed that the money that was deposited in the banks is now being spent through a system which is being recorded.

Emphasizing growth in agriculture, FM said that this year growth is at a record high and has contributed to Q3 GDP. Similarly, he said that manufacturing increase has too contributed to the Q3 GDP and this was already reflected in the VAT data of the states and also the excise data of the Central revenue collection. Meanwhile, the Central Statistical Organisation (CSO) has projected a 7.1 per cent economic growth in the year ending March 31, the slowest since 2014 but still the fastest among major economies.

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