Leaked Rs 2,000 notes seem to have forced PM Narendra Modi hand; GDP set to be hit, says Arvind Panagariya

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New Delhi | December 01, 2016 6:55 PM

Niti Aayog Vice-Chairman Arvind Panagariya on Thursday said Prime Minister Narendra Modi's much-debated demonetisation move might affect the growth of the country's economy.

Niti Aayog Vice-Chairman Arvind Panagariya on Thursday said Prime Minister Narendra Modi's much-debated demonetisation move might affect the growth of the country's economy. (PTI)Niti Aayog Vice-Chairman Arvind Panagariya on Thursday said Prime Minister Narendra Modi’s much-debated demonetisation move might affect the growth of the country’s economy. (PTI)

Niti Aayog Vice-Chairman Arvind Panagariya on Thursday said Prime Minister Narendra Modi’s much-debated demonetisation move might affect the growth of the country’s economy. The eminent economist opined that GDP rates might decline in the third and fourth quarters of the current fiscal, a report said. Notably, according to the data released by the Central Statistics Office, the gross value added (GVA), which is estimated at the basic price, showed a growth of 7.1 per cent in the second quarter of 2016-17, as against 7.3 per cent a year ago. As Indian economy grew at 7.3 per cent in the September quarter, experts and India Inc said downside risks prevail on account of lower consumption due to demonetisation and global headwinds, predicting the countrys GDP growth to slow down in the near term. Panagariya, however, had earlier backed the move saying will leave a “very positive” impact on the economy in the long term as more people will move towards digital transactions.

“It is my belief that the Prime Minister had to announce the roll out of demonetisation sooner than earlier planned, because information about the new Rs 2000 notes starting leaking online. This seems to have forced the Prime Minister’s hand,” he told India Today. Echoing PM Narendra Modi’s statement that demonetisation is only the beginning, he said, “A reduction in customs duty on gold is being mulled since high customs duty on gold encourages smuggling. Hence, the government is looking at reducing customs duty so that there is no incentive for illegitimate transactions.”

He also lauded the government’s effort to flush out black money from the real estate sector. “One of the reasons why stamp duty is high in real estate is on account of black money in the system. With black money knocked out, there is a case for stamp duty to be brought down.” With the government scanning all benami transactions in real estate, he said that black money inflow will be checked.

Panagariya said possible simplification of tax laws will pivotal. “Current tax laws give a lot of discretionary powers to the tax man. The government is looking at reducing exemptions and simplifying tax laws so that there is no scope of discretionary powers being misused,” he said.

Earlier, on concerns being raised by economists and rating agencies on the economic growth front, Panagaria had said, “Everybody is expressing their views. It has to be seen what happens quantitatively. Mr (Aditya) Puri from HDFC Bank has said that it is an overstatement regarding this (impact of demonetisation on GDP growth).”

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