Jaitley discounts note recall impact on GDP
GLOBAL FACTORS Says India’s 7% growth reasonable
Finance minister Arun Jaitley played down the impact of demonetisation on growth saying that a “7-8% growth is very reasonable”, he clarified that global factors were responsible for a GDP growth of 6.1% in the three months of January to March.
“There are several factors which affect GDP. Even before demonetisation, there was some slowdown. I do believe, that in the current global situation, a 7% to 8% growth which is at the moment an Indian normal, is a reasonable growth,” said Jaitley.
The finance minister was addressing a press conference on the Narendra Modi government completing three years in office and highlighted key achievements of his ministry.
Asia’s third largest economy has been on a path on deceleration since July-September 2016-17, but the fall in growth has been sharper post-demonetisation in the third quarter, where GDP stood at 7%, and in the January-March phase, when growth dropped to 6.1%. This is slowest quarterly GDP growth in three years, experts say.
“To be fair, the economy was in a slowdown mode from the second quarter of 2016-17, and only accelerated in Q3 and Q4. On the other hand, the distinct slowdown in Q4 could be explained partly by the price impact... In a nut shell, the GDP slowdown is both a pre and post demonetization phenomenon,” said Soumya Kanti Ghosh, chief economic advisor, SBI.
But economists such as Kaushik Basu and former Prime Minister Manmohan Singh had warned that sucking out 84% of India’s currency would send shock waves through the economy that is heavily cash reliant.
“Demonetisation impacted the informal sector greatly, maybe temporarily. But the informal sector contributes 30-40% of the GDP, so it is not correct to brush away the impact of demonetisation on the latest GDP number,” said economist Ajit Ranade.
He listed decisive policy making and crackdown on black money as important factors that restored India’s economic credibility. “We set a new normal after demonetisation. It is no longer safe to deal in cash. We have shown decisiveness in policy making,”said Jaitley.
The finance minister rubbished claims of jobless growth as opposition’s propaganda.
“People need some issues for propaganda. Jobs don’t get created outside economic sector. If growth increases, jobs will also grow,”Jaitley said.