Indian economy to recover post demonetisation: Economic Survey
Q. Economic Survey 2017-2018 has stated that cash supply replenishment will restore economy to __________- Published on 02 Feb 17a. Normal
b. Average
c. Deficit
d. None of the above
ANSWER: Normal
The Indian economy will recover in 2017-18 after the cash supply is replenished post demonetisation.
Following the demonetisation of Rs. 1,000 and old Rs. 500 notes, country’s gross domestic product (GDP) is expected to grow in the range of 6.75-7.5 per cent, the Economic Survey 2016-17 tabled on 31st Jan 2017 said.
Demonetisation led to temporary slowdown in the GDP growth.
Economy will reap benefits in terms of increased digitalisation, greater tax compliance and a reduction in real estate prices.
This could increase long-run tax revenue collections and GDP growth.
The Survey, however, said the cash squeeze will have significant implications for the GDP, reducing 2016-17 growth by ¼ to ½ percentage points compared to the baseline of 7 per cent.
The GDP may not be able to gauge the impact of demonetisation on the informal sector.
The Survey illustrated a sector-wise impact of demonetisation.
It stated demonetisation led to job losses, decline in farm incomes and social disruption, especially in cash intensive sectors.
According to the Survey, the weighted average price of real estate in eight major cities, which was already on a declining trend, fell further after demonetisation was announced on November 8.
The Survey suggested a few measures to maximise long term benefits and minimise short-term costs due to demonetisation:
One such is fast remonetisation and especially, free convertibility of cash to deposits including through early elimination of withdrawal limits.
This would reduce the GDP growth deceleration and cash hoarding.
Land and real estate should be brought under the Goods and Services Tax following demonetisation.
Demonetisation: Know More
On 8 November 2016, the Government of India announced the demonetisation.
This was of all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes of the Mahatma Gandhi Series.
The government claimed that the action would curtail the shadow economy.
It would also crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism.
