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The surprise drop in the GDP pulls India from its status as the world's fastest growing economy
Our Prime Minister Narendra Modi, in his televised announcement on November 8, 2016 had said that 500 and 1,000 rupee notes would cease to be legal tender from midnight that night. He had also informed that ATMs would be shut for the next 2 days and would start working on November 11.

Three days later, there was a severe shortage of 100 rupee notes (which are still legal tender). Cash was drying up fast at ATMs, which were witnessing unprecedented queues, while serpentine queues outside bank branches did mean that a lot of people were coming away disappointed. 

A cap of Rs 4,000 had been imposed on withdrawals from bank branches while ATM withdrawals were limited to Rs 2,000 per card per day till November 18, after which it was raised to Rs 4,000.

It was a time of real crisis. There was a lot of commotion in the air. Apart from the opposition leaders, the voice of dissent could be heard from within RSS / BJP flanks. In the middle of November 2016, BJP MP Subramanian Swamy had lashed out at the government's poor planning and execution of the demonetisation drive and the subsequent currency chaos that has engulfed India. In his words : "….appalled by the lack of preparation. It is easy to argue that the ministry (Finance) was not in the loop, but that is no excuse for not having a contingency plan." 

He wished ad hoc roadside kiosks should have been set up for all and special kiosks organised for senior citizens. All these should have been planned as part of a contingency plan. Finance Minister Arun Jaitley had come with a lame excuse that ATMs had not been recalibrated and that it would take up to 3 weeks for all the 2 lakh teller machines in India to start dispensing the new currency notes.

Prime Minister Narendra Modi had then asked Indians to put up with the inconvenience of demonetisation for 50 days, or until December 30, in a speech in Goa.

On Dec 13, 2016, Swamy ji had tweeted that his Prime Minister's move to scrap high-value notes has led to "huge collateral damage." He had indirectly blamed the finance ministry for messed up "poor contingency planning". A "good contingency plan would have provided for (a) soft landing."

Like many Indians, I do rarely take Swami ji's outbursts seriously. However, much of his apprehensions seem to hold ground and proved true as the following news has shaken the confidence of average Indian in the efficiency of the NDA government:

The India's economic growth slowed for the fourth consecutive quarter in the three months ended March 2017, mirroring the impact of demonetisation on key sectors including construction and financial services. Gross domestic product (GDP) growth slowed to 6.1% in the fiscal fourth quarter from 7% in the third, according to data released by the government on Wednesday.

The Chief economic adviser Arvind Subramanian said the fourth quarter numbers had been expected to reflect the biggest impact of demonetisation."We can see some signs of bottoming out on account of the remonetisation, and recovery in the nominal aggregates which picked up in the fourth quarter shows that." The construction sector shrank 3.7% in the March quarter, compared with a 3.4% growth in the preceding quarter. The manufacturing sector (5.3%) as well as trade, hotels and transportation (6.5%) also slowed from their levels in the preceding quarter.

The surprise drop in the growth rate pulled India from its status as the world's fastest growing economy. According to famous economist Subhanil Chowdhury, the huge monetary shock from demonitisation to the economy has both short-term and long-term effects.

"The biggest impact of this demonetisation policy, however, has been on the informal sector and agriculture. India is an economy where around 45 per cent of the GDP is produced in the informal sector providing employment to 80 per cent of the workforce."

However, all is not lost. Most of the experts in economics feel that India's economy is "still robust" and forecast that GDP growth would bounce back in coming years.

"India is expected to regain its momentum, with growth rising to 7.6 per cent in Fiscal Year(FY) 2018 and strengthening to 7.8 per cent in FY 2019-20."

However, this report has handed over a big stick to Modi-haters to disparage the 'policies and implementation' of NaMo dispensation.

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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