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Q. Economic survey on demonetisation: Comment on economic survey view on demonetisation and its impact.
Feb 02, 2017 Related to : GS Paper-3

Ans :

Introduction-

The Government of India has withdrawn high value currency notes of Rs.500 and Rs.1000 on November 8th 2016. The economic Survey presented on the eve of the Union Budget found that the economic growth this year has been impacted adversely by demonetisation.

What survey found-?

  • According to economic survey 2016-17, economic growth this year has been impacted by demonetisation, up to 1% in nominal terms and up to 0.5% in real terms. 
  • Similarly the economic survey admitted that official GDP numbers could underestimate the impact on the informal sector, worst affected by cash shortages.
  • The survey also found that demonetisation has increased transparency, reduced corruption and enhanced digitalisation, which would make the exercise boost for future growth.


Analysis-

  • Survey has candidly admitted that demonetisation impacted adversely on the economy. That estimate of depressed nominal growth puts a number to the income lost to demonetisation: 1% of the 2015-16 GDP, or Rs 1,35,761 crore. 
  • The survey has opined that while there have been short-term costs to the economy, which would need to be expeditiously addressed, there will be long-term benefits.
  • For that it has recommended for demand-driven remonetisation, further tax reforms, including bringing land and real estate under the ambit of the Goods and Services Tax, and reducing tax rates and stamp duties.

Conclusion-

The economic survey presented on the eve of budget has outlined the short-term costs and long-term benefits due to demonetisation. According to it though we lost some economic growth for short period, but in the long run it will bear fruit due to many changes brought in by demonetisation.


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