Prepare a report on the implications of demonetization.
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While the year 2019 will bring with it formation of new Government after the elections in April 2019, the after effects of Demonetization that happened on November 8, 2016 still haunt the Indian Economy. After more than 2 years of Demonetization, Indian Economic Survey claims that the economy has done away with all the negative impacts of Demonetization. However, economic experts are of the view that the economy is still crying for a faster growth and little objective has been achieved by the demonetization move.
Demonetization: Still Haunts Indian Economy
The Demonetization was announced as a surprise in the night on November 8, 2016. The Economic Survey of India which was released just before the presentation of General Budget 2018 in Parliament emphasized that all the negative impact of Demonetization of Rs.500/- and Rs.1000/- currency notes has ended. However, the analysis in India and abroad has claimed that demonetization of November 2016 has failed to do what it was supposed to do and its impact has turned out to be more protracted than initially expected.
Experts think that even from the point of view of promoting digital money, there was no need for the government to have put 86 per cent of all currency out of circulation. Studies have pointed out that very little black money was caught. On August 30, 2017, the Reserve Bank of India released its report on Demonetisation. The report said 99 per cent of the banned notes came back into the banking system. This belies the Government claims that the Demonetization would flush out the black money and counterfeit currency. Claiming the Demonetization as a wrong decision, as 99 per cent currency is back in the system, it points to one of the two things -
Either the black money held in cash was very low, or The government could not implement the demonetization efficiently due to which all the black money held in Rs. 500 and Rs. 1000 bank notes laundered back to the banking system.
Demonetization: Positive Impacts on Indian Economy Claimed
Economic Survey after careful review of Demonetization which was announced one and a half year back, has found that the cash-to-GDP ratio has stabilized. It suggests a return to equilibrium:
- The Economic Survey says that India's GDP is set to grow at 7 to 7.5 percent in 2018-19. This is an increase from its prediction of 6.75 percent growth this fiscal year.
- The Economic Survey has cited exports and imports data to claim that the demonetisation effect was now over. It claims that re-acceleration of export growth to 13.6 percent in the third quarter of Financial Year 2018 and deceleration of import growth to 13.1 percent is in line with global trends. This suggests that the demonetization and GST effects are receding. Services export and private remittances are also rebounding
- According to the statistics released in the Survey, the Demonetization had led to Rs 2.8 lakh crores less cash (Equivalent to 1.8% of GDP) and Rs 3.8 lakh crores less high denomination notes (Equivalent to 2.5% of GDP) in the Indian economy.
- The Economic Survey has also clarified that income tax collections have touched new high with demonetization and introduction of GST, “From about 2 percent of GDP between 2013-14 and 2015-16, they are likely to rise to 2.3 percent of GDP in 2017-18, a historic high.”
Demonetization: Positive Impacts on Indian Economy Claimed
Economic Survey after careful review of Demonetization which was announced one and a half year back, has found that the cash-to-GDP ratio has stabilized. It suggests a return to equilibrium:
- The Economic Survey says that India's GDP is set to grow at 7 to 7.5 percent in 2018-19. This is an increase from its prediction of 6.75 percent growth this fiscal year.
- The Economic Survey has cited exports and imports data to claim that the demonetisation effect was now over. It claims that re-acceleration of export growth to 13.6 percent in the third quarter of Financial Year 2018 and deceleration of import growth to 13.1 percent is in line with global trends. This suggests that the demonetization and GST effects are receding. Services export and private remittances are also rebounding
- According to the statistics released in the Survey, the Demonetization had led to Rs 2.8 lakh crores less cash (Equivalent to 1.8% of GDP) and Rs 3.8 lakh crores less high denomination notes (Equivalent to 2.5% of GDP) in the Indian economy.
- The Economic Survey has also clarified that income tax collections have touched new high with demonetization and introduction of GST, “From about 2 percent of GDP between 2013-14 and 2015-16, they are likely to rise to 2.3 percent of GDP in 2017-18, a historic high.”
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