NEW DELHI: With the pain caused by demonetisation and the rollout of the goods and services tax (GST) easing, Finance Minister Arun Jaitley on Tuesday said that early economic indicators point to an improvement in the coming days.
Speaking at a conference here on Tuesday, Jaitley said both the moves had been structural in nature and both would help the economy in the long term.
“Having undertaken two major structural changes which are extremely important for the Indian economy, I think the impact being substantially behind us, the early indications for the future look to be positive.” he said.
Jaitley used the revival of the purchasing managers’ index as an example for how early indicators point to a growth surge. “In the last 2-3 months, PMI data has come out positive, similar to industrial output and core sector growth. These probably point to an improved situation,” he said.
The FM also defended the demonetisation move, which has been blamed for the sharp downturn in growth over the past few quarters, along with stocking issues pre-GST rollout.
GDP growth has fallen from 7 per cent during the third quarter of 2016-17 to 5.7 per cent in the first quarter of 2017-18, the weakest pace since 2014. Demonetisation had sucked out 86 per cent of the currency in circulation throwing cash-dependent businesses in disarray and the implementation of GST from July 1 hit small and medium enterprises.
Jaitley, however, said that demonetisation had shaken the status quo. “If you don’t have the capacity or courage or broad shoulders to undertake those structural reforms, then of course, that status quo would have continued. And, the status quo ante that existed in India, I don’t think that is an ideal situation where India would have lived to be,” he said.
With India proving itself as the fastest growing economy for three years running, the time was opportune to undertake structural reforms, he noted.
Jaitley also pointed out that growth had been slipping even the quarters prior to the decision to demonetise Rs 500 and Rs 1,000 notes, adding that “manufacturing activity declined in the run up to the GST roll out from July 1 as businesses started destocking their goods”.