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

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

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