KOCHI: Former Prime Minister Manmohan Singh has reckoned it will take at least a year for the economy to recover from the double shock of demonetisation and hasty implementation of Goods & Services Tax (GST).
Stating that he does not have readymade answers on how to tackle black money in the country, Singh added that demonetisation was not the appropriate response to the issue. He said a better way to counter the black money in the country would be by simplifying our tax system, land registration system and administration.
Dr. Singh was replying to questions from the students of St. Teresa's College, Ernakulam, after delivering a talk on 'Macroeconomic developments in India: Policy Perspectives' here on Saturday.
Elaborating on why demonetisation failed to address the black money issue, Singh said not a large amount of black money was kept in currencies. In fact, studies have shown that only six per cent of money in circulation was kept by way of circulation. "Demonetisation has led to a lot of distress to our farmers, small traders, and small and medium industries. The pride of cash suffered enormously," Dr. Singh said.
He said the shock from the demonetisation has resulted in the slowing down of the economic growth from 7.2 per cent in 2015-16 to 5.7 per cent in the first quarter of 2017-18. "There are people who believe that the economy will return to normal speed soon. But, I believe the (Indian) economy will remain in the doldrums for next one year," Singh said.
MOODY'S RATING
Dr. Singh also welcomed the upgrade of the country's rating by the international rating agency Moody's but added that "we must not fall into the false belief that our economy was out of the woods".
SPURT IN OIL PRICES
He said the recent spurt in the crude oil prices will affect India's balance of payments that will also impact our economy.
The crude oil prices which were ruling at $40-45/barrel has now risen to $62-64/barrel, Singh said, adding that it will hurt the country's economy.
India imports more than 70 per cent of its oil demands.
GUJARAT AND HIMACHAL ELECTIONS
Asked about Congress' chances in Gujarat and Himachal Pradesh elections, Singh began by saying "politics was an unpredictable profession" and added that the Congress vice-president Rahul Gandhi is working hard, and hopes that his efforts would bear fruit for the party when the election results of the two states are announced.