The government’s move to pull back high-value notes had “little impact” on India’s growth and the economy will continue to grow at 7-8 per cent, eminent economist Lord Meghnad Desai has said. “Demonetisation had small negative effect as the latest estimates show. I predicted this as small impact… Indian economy will continue to grow at between 7-8 per cent,” the India-origin British politician told PTI. Desai claimed that he had supported demonetisation.
“Indeed, I proposed it myself back in 2004. It will not by itself eliminate corruption, but if the government follows it through with action to make large anonymous cash transactions illegal and insist on PAN cards for all large purchases, corruption will be reduced,” the professor emeritus at the prestigious London School of Economics said.
Asked if he would ever advise any other economy to undertake such a drastic step as replacing 86 per cent of its currency, Desai replied, “I would advise other economies to try demonetisation, but (go for) better arrangements for introduction of new currency.”
The government last month had pegged GDP growth at a higher-than-expected 7.1 per cent for 2016-17 despite the note ban. The Central Statistics Office (CSO) had put the figure for October-December at 7 per cent, compared to 7.4 per cent in the second quarter and 7.2 per cent in the first.
India’s growth was higher than China’s 6.8 per cent for October-December of 2016.
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The growth numbers were better than those projected by the RBI (6.9 per cent) and international agencies like IMF (6.6 per cent) and OECD (7 per cent) in view of the cash recall.
The Organisation for Economic Cooperation and Development (OECD) in February last year had projected the country’s economy expanding at 7.4 per cent in 2016-17. Buoyed by higher-than-expected growth, Finance Minister Arun Jaitley has also said a 7 per cent expansion in the third quarter belies the exaggerated claims of note ban impact on the rural economy.