A file image of Niti Aayog’s vice chairman Arvind Panagriya.
New Delhi: Arvind Panagariya, Vice-Chairman of the NITI Aayog, believes that Demonetization will have minimum impact on growth and therefore the need for a stimulus to kick start the economy is minimal.
“There may be some decline in growth over the next two quarters, but the impact of Demonetization on the growth rate will be small in FY 2017,” Panagariya told CNBC TV18 in an interview.
“It is premature to conclude that the economy needs a stimulus,” he added.
Arvind Panagariya is one of the high profile economists recruited by Prime Minister Narendra Modi’s government to provide policy inputs. He is a former chief economist of the Asian Development Bank and professor of economics at Columbia University.
Panagariya told CNBC TV18’s Shereen Bhan that the government can stick with its fiscal consolidation plan for now, “unless there’s a compelling reason not to”.
Finance Minister set a 3.5% target for the fiscal deficit for FY 2016-17, smaller than then 3.9% in the previous financial year. Adherence to the deficit targets means that the government has to cut down on its expenditure, which leaves little space for spending programmes.
Panagariya said in the interview that the steps that Prime Minister Modi announced in his speech on December 31 regarding housing would provide adequate stimulus to the economy.