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We may never figure out the true impact of demonetisation: CEA  

The actual impact of demonetisation on the entire economy might never be calculated, chief economic adviser Arvind Subramanian conceded on Friday.

Published: 01st April 2017 12:18 AM  |   Last Updated: 01st April 2017 06:17 AM   |  A+A-

Chief Economic Advisor Arvind Subramanian. (File photo | EPS)

By Express News Service

CHENNAI: The actual impact of demonetisation on the entire economy might never be calculated, chief economic adviser Arvind Subramanian conceded on Friday.

This, according to Subramanian, is primarily due to the lack of effective means to measure its overall impact on the unorganised sector. The lack of such tools, he added, was also one of the reasons why economists’ expectations and headline numbers on the impact were so wide apart. 

Answering a student’s question – during an interaction with students of IIT-Madras – on the huge differences between economists’ predictions of the impact and those reflected by government-released economic data, Subramanian said, “Demonetisation had an impact in the short term. ​

But one of the worst affected sectors was the unorganised sector of the economy. We have very little high- frequency data that is gathered from this segment and we cannot capture the impact on it as well as we can the impact on the organised sector.”

He went on to add that this was why the headline numbers were so different. 

“Headline numbers do not reflect the impact on this segment very well. We will have to wait for some more time before we get a better picture,” he pointed out.

However, he also warned that this might never be possible. “But, we will probably never get a true picture of the impact…” because we lack the tools. 

Subramanian, who was speaking on the Economic Survey tabled every year before the Union budget, also touched upon the effect of foreign exchange rates on exports and domestic competition, pointing out that governments have to do a tricky balancing act in maintaining the value of the rupee. 

“Devalue too far and it leads to higher import costs, but if rupee value rises, exports suffer,” Subramanian noted. 



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