Economic Survey: Remonetisation to be completed in 2-3 months, says Arvind Subramanian

Written By DNA Web Team | Updated: Jan 31, 2017, 03:47 PM IST

Subramanian gave a presentation on the Economic Survey that was tabled in the Parliament today.

Chief Economic Advisor Arvind Subramanian said the remonetisation exercise could be completed in two to three months from now. Subramanian was giving a presentation of the Economic Survey 2016-17.

While talking about demonetization, Subramanian said, the aim of the action by the government to remove 86% currency (in value terms) in one fell sweep was to to curb corruption; counterfeiting; the use of high denomination notes for terrorist activities; and especially the accumulation of “black money”, generated by income that has not been declared to the tax authorities.

However, while speaking about the extent and impact of demonetization, he said "forecasting its impact is hazardous."

Subramanian, however highlighted post November 8 indicators

⇒ Agricultural rabi crop, wheat and gram sowing up 7% and 10.7%, more than the previous year and the five-year average. So, sowing hasn't been affected;

⇒ There is a slight dip in the indirect tax collection but there was no significant blip in indirect tax collection after November;

⇒ There is a dip that can be clearly seen in real estate, sales, new launches. But then it will be good in the long run, as the aim of demonetization was also to bring down real estate prices.

⇒ There was a huge impact on two-wheeler sales.

⇒ For 2016, we expect real GDP growth to slow down by 0.25% - 0.5%

Further, he said,

Arvind Subramanian Chief Economic Advisor

It is likely, for example, that uncertainty caused consumers to postpone purchases and firms to put off investments in the third quarter. But as the economy is remonetised and conditions normalise, the uncertainty should dissipate and spending might well rebound toward the end of the fiscal year.

The faster remonetisation takes place, the shorter and less severe will be the overall impact of demonetisation, he added.

Subramanian reiterated the government's stand on demonetization, saying that it "had short-term costs but holds the potential for long-term benefits.

He said that follow-up actions to minimise the costs and maximise the benefits include,

> Fast, demand-driven, remonetisation

> Further tax reforms, including bringing

> Land and real estate into the GST

> Reducing tax rates and stamp duties

> Acting to allay anxieties about over-zealous tax administration.

"These actions would allow growth to return to trend in 2017-18, following a temporary decline in 2016-17," he added.