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‘Remonetisation almost complete’: Consumption concerns; Shaktikanta Das says period of impact over

‘Any adverse effect on consumption is not likely to spill over to next year’

By: ENS Economic Bureau | New Delhi |
March 1, 2017 1:29:16 am
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The process of remonetisation is almost complete and will drive consumption going forward, Economic Affairs Secretary Shaktikanta Das said, adding that the positive effects of demonetisation will be visible from April. The proposed Goods and Services Tax (GST) regime from July 1 will also help in unleashing the growth potential of the economy, Das said. “The impact of DeMo was mostly on consumption and that was temporary. Long term and medium term, in the next quarter onwards, the benefits and outcomes are going to be very very positive…as the process of remonetisation progresses, and it is almost near complete, any adverse effect on consumption during that quarter is not likely to spill over to next year. So that phase is over, it is behind us,” Das said at the launch of OECD’s Economic Survey for India.

On GST, Das said, “GST is going to unleash a huge quantum of growth impulses. The effect will be felt and once India becomes one market, there will be positive impact on growth impulses.” OECD in its Economic Survey for India cut its growth forecast to 7 per cent from its earlier estimate of 7.4 per cent due to demonetisation. OECD also signed a Memorandum of Understanding with CII for policy research. However, OECD expects growth to pick up to 7.3 per cent in 2017-18 and further to 7.7 per cent in 2018-19. OECD’s Secretary-General Angel Gurria supported demonetisation and said that India is moving towards a less cash society and this will not affect investment or jobs.

“Jobs don’t happen overnight, it happens due to investment flow which has to do with level of confidence. Demonetisation may have something on consumption pattern in the quarter which has just passed. Right now, as the situation normalises, you can have a normalisation. But the impact is going to continue to bite,” he said. On the government’s initiatives like Skill India Mission, Das said reduction in corporate tax rate and increased allocation towards infrastructure would help create more jobs. OECD has highlighted reform areas for the government to work on, including those relating to labour laws, stressed assets, and other stringent product regulation, and said there is no room for “complacency” by policy makers.

Das, on his part, assured  that there is no complacency with the government as the focus is on greater delivery and faster implementation of schemes. “Government is aware of all the challenges. It is Work in progress for all the challenges and Government will announce steps to deal with them…. One should expect more positive outcomes in the coming months,” Das said. Asserting that adequate capital will be made available for state-owned banks, Das said every amount of taxpayers’ money given would be linked to their performance. “The easier solution people have been talking about the problem of balance sheet of the banks, the problem of NPA is to provide more capital, inject more capital into the banks,” he said.

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“I think every amount of tax payers’ money that goes into the bank will have to be performance linked. That is precisely what the government is doing,” he said. Under Indradhanush roadmap announced last year, the government will infuse Rs 70,000 crore in state-owned banks over four years, while they will have to raise further Rs 1.1 lakh crore from the markets to meet their capital requirement in line with global risk norms Basel-III. In line with the blueprint,  Rs 25,000 crore earmarked for the PSBs in each fiscal, 2015-16 and 2016-17. Besides, Rs 10,000 crore each would be infused in 2017-18 and 2018-19.

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