BJP President Amit Shah has rejected reports linking the slowdown in the country’s economic growth to Prime Minister Narendra Modi’s demonetisation announcement.
Speaking in Odisha, Shah said, “The demonetisation has not had any negative impact (on economic growth). ‘Notebandi’ cannot be reason for GDP coming down to 5.7 per cent from 7.1 per cent. So many quarters have passed since demonetisation. If it was for ‘notebandi’, the GDP would have fallen on that quarter when demonetisation was announced (October to December 2016).”
Shah said that the slowdown in GDP was a “temporary” phenomenon and the reason were purely “technical.”
“The GDP growth came down because a lot of traders cleared their stocks in advance in order to get input tax credit. This is a technical reason and you will see normal growth from the next quarter itself,” he was quoted by IANS.
Shah’s comments come amidst India recording the slowest economic growth in three years with experts warning that the decision to ban old notes in a hurried manner could further adversely impact the Indian economy.
Former Reserve Bank of India governor, Raghuram Rajan, recently warned that the demonetisation decision could hurt the Indian economy at least by Rs 2.5 lakh crore.
In an interview to Times of India, Rajan had said, “Certainly, the government’s move to try and reduce the amount of black money in the economy through various measures is an important one. But as for demonetisation itself, there are really two or three questions. One, of course, is that we have seen the costs of demonetisation upfront, and they are substantial. Let us not mince words about it – GDP has suffered.
“The estimates I have seen range from 1 to 2 percentage points, and that’s a lot of money – over Rs 2 lakh crore and maybe approaching Rs 2.5 lakh crore. Then there are the other costs – the hassle cost of people standing in line, the printing cost that the RBI says is close to Rs 8,000 crore, the cost to the banks of withdrawing the money, and the time spent by their clerks, by their managers and by their senior officers doing all this, and the interest being paid on all those deposits, which earlier were effectively an interest-free loan to the RBI.”
However, PM Modi has justified his note ban decision even amidst raging controversy over its economic fallout. Addressing the Indian diaspora in Myanmar, he said that his government could take such decisions because it considered the country bigger than politics.
Referring to the note-ban, the prime minister said the step was taken to curb black money and that it had helped identify lakhs of people who had crores of rupees in bank accounts but never paid income tax.