NEW DELHI: Finance Minister Arun Jaitley on Friday admitted that the disruption from demonetisation of old high denomination notes and the cash crunch that has followed will continue for a while. According to Jaitley, the cash crunch will ease only after December 30 and the disruption to the economy and growth will likely extend to a “quarter or so”.
However, he added that once the disruption is over, the benefits from both the demonetisation and the rollout of the GST will be huge.
“When you switch over, it creates disruption,” he pointed out while speaking at an event in the city, “I don’t see disruption lasting too long. You may see the impact for a quarter or so. Then when you look at next 12-15 quarters, it’s certainly going to benefit.” Jaitley also went on to cite a few economic trends post demonetisation, including rabi sowing this season being higher than last year and noting that auto sales have been a mixed bag.
The Finance Minister pointed out that the Indian economy’s high growth curve over the past two years will be retained and it would keep the tag of the fastest growing large economy. “This year too, India would probably remain the fastest growing economy,” he said.
While acknowledging that the cash crunch would only ease post December 30, Jaitley said that the amount of cash to be issued in the form of new 500 and 2,000 rupee notes would not be the same as the amount circulating before November 8, when Prime Minister Narendra Modi announced the so-called demonetisation.
“One of the advantages of this exercise is going to be that you won’t have the same level of paper currency which existed,” Jaitley said, pointing out that officers in the administration expect some illicit cash never to be returned and to expire worthless, while some of the money deposited will remain inside the banking system.
“Demonetisation is the new normal confronting black money, which was a norm in India for seven decades,” Jaitley said, adding that the move would also ensure that political funding becomes “transparent”. “We are at the cusp of change and the battle between the taxman and the people who try to beat the system will continue,” he warned.