Chief Economic Adviser Arvind Subramanian said Tuesday that it was not appropriate to do a before-after analysis of GDP growth with respect to the Centre’s demonetisation move. He was addressing the media after finance minister Arun Jaitley tabled the Economic Survey 2017 before Parliament.
“Demonetisation has short-term costs, but it has potential long-term benefits…one of the aims of demonetisation was to bring down real estate prices,” said Subramanian. He also assured the country that full remonetisation is expected to happen in a month or two.
Demonetisation “will have significant implications for GDP, reducing 2016-17 growth by 0.25 to 0.50 percentage points compared to the baseline of 7 per cent,” the economic survey said. “Once the cash supply is replenished, which is likely to be achieved by end-March 2017, the economy would revert to the normal,” the document said.
The economic survey predicted GDP growth will rebound to 6.75-7.5 per cent in the 2017-18 fiscal year. For the current fiscal, the GDP growth has been estimated at 6.5 per cent, lower than 7.1 projected by Central Statistics Office earlier this month.
Subramanian, at the press conference, said the external challenges for the Indian economy would be rise in oil prices and protectionism. He also remarked on the idea of Universal Basic Income, calling it ‘radical’ whose time is right for deliberation but not necessary for immediate implementation.
Stating that the Mahatma would have anxieties about UBI as being just another add-on government programme, but on balance may have given the go-ahead, the Survey pointed out that the two pre-requisites for its success are functional JAM (Jan Dhan, Aadhar and Mobile) system and Centre-state negotiations on cost sharing for the programme.
The Survey estimated that a UBI that reduces poverty to 0.5 per cent would cost 4-5 per cent of GDP, assuming that those in the top 25 per cent income bracket are not part of it.
(With inputs from PTI)