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Economic Activity 'Adversely' Affected by Note Ban, Says Economic Survey

Chief Economic Adviser Arvind Subramanian addresses media on Tuesday.

New Delhi: The Economic Survey has analysed the macro economic effects after demonetisation. It concludes that: “The balance of evidence leads to a conclusion that real GDP and economic activity has been affected adversely, but temporarily by demonetisation. The question is: how much?”

The survey lists the following points as evidence:

Outflow of foreign portfolio investment, amounting to $9.8 billion in November and December
Aggregate sowing of the two major Rabi crops — wheat and pulses —exceeded last year’s planting by 7.1% and 10.7%
Property markets in the major cities, and sales of two-wheelers show a marked decline
Indirect tax performance stripped of the effects of additional policy changes in 2016- 17 look less robust than the headline number
Decisive policy actions to dispel fears of overzealous tax administration will help ensure that the gains of demonetization are permanent
Private investment is unlikely to recover significantly
Risk to economic growth from the extent to which effects of demonetisation could linger into next year, especially if uncertainty remains on the policy response
Currency shortages also affect supplies of milk, sugar, potatoes and onions
Magnitude of fiscal windfall from return of demonetized notes and Pradhan Mantra Garib Kalyan Yojana (where black money from VDIS will be deposited) uncertain
The transition to the GST is so complicated from an administrative and technology perspective that revenue collection will take some time to reach full potential
Muted non-tax revenues and 7th Pay Commission payout could add to fiscal deficit.
An economy recovering from demonetisation will need policy support
One radical idea to consider is the provision of a universal basic income

Source: News18