The positive effects of demonetisation will be visible from April and the completion of remonetisation process will drive consumption going forward, Economic Affairs Secretary Shaktikanta Das said on Tuesday.
The states and the Centre have “converged on all areas of differences” over the Goods and Services Tax and the indirect tax reform will be implemented from July 1, unleashing the growth potential of the economy.
“The impact of DeMo was mostly on consumption and that was temporary. Long term and medium term, in the next quarter onwards, the benefits and outcomes are going to be very very positive,” Das said.
“As the process of remonetisation progresses, and it is almost near complete, any adverse effect on consumption during that quarter is not likely to spill over to next year. So that phase is over, it is behind us,” he added.
Das was speaking at the launch of OECD’s Economic Survey for India which cut its growth forecast to 7 per cent from 7.4 per cent earlier due to demonetisation. It, however, forecast growth to pick up to 7.3 per cent in 2017-18 and further to 7.7 per cent in 2018-19.
“GST is going to unleash a huge quantum of growth impulses. The effect will be felt and once India becomes one market, there will be positive impact on growth impulses,” Das said.
The Organisation for Economic Cooperation and Development (OECD) Secretary-General Angel Gurria supported demonetisation and said that India is moving towards a less cash society and this will not affect investment or jobs.
“Jobs don’t happen overnight, it happens due to investment flow which has to do with level of confidence. Demonetisation may have something on consumption pattern in the quarter which has just passed. Right now, as the situation normalises, you can have a normalisation. But the impact is going to continue to bite,” he said.
On the government’s initiatives like Skill India Mission, Das said reduction in corporate tax rate and increased allocation towards infrastructure would help create more jobs.
OECD has highlighted reform areas for the government to work on, including those relating to labour laws, stressed assets, and other stringent product regulation, and said there is no room for “complacency” by policy makers.
Das, on his part, assured that there is no complacency with the government as the focus is on greater delivery and faster implementation of schemes.
“Government is aware of all the challenges. It is Work in progress for all the challenges and Government will announce steps to deal with them.... One should expect more positive outcomes in the coming months,” Das said.