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India Demonetization Effect Transitory, UN Expert Says
World Economy

India Demonetization Effect Transitory, UN Expert Says

The demonetization policy is not expected to have a long term impact on domestic demand in India, which is projected to clock a 7.9% growth in fiscal 2018, a senior UN economic official has said.
“We do not really see that the dynamics of India have shifted very much,” Dawn Holland, senior economic affairs officer, Global Economic Monitoring Unit, Development Policy and Analysis Division in the UN Department of Economic and Social Affairs, told reporters at UN headquarters in New York Tuesday, PTI reported.
The official was responding to a question by PTI on a UN report released Tuesday which revised downward India’s economic growth forecast for 2017 but predicted an increased 7.9% GDP growth next year.
“Slower growth this year and faster growth next year is more a shift in the timing of expenditure which is largely related to the demonetization policy that did have an impact slowing domestic demand in the short term but we do not see this as having a longer term impact,” the official said.
“It is sort of a transitory effect on the economy as a whole. So India still remains one of the fastest growing countries in the world,” Holland added.
The UN World Economic Situation and Prospects as of mid-2017 report said India is projected to achieve a 7.3% growth in fiscal 2017, a downward revision from the 7.7% forecast for the year made when the report was launched in January.
The January report had not taken into consideration the impact of the demonetization policy on India’s economic growth. The revised report projected that India will achieve an impressive 7.9% GDP growth in fiscal 2018, revising upwards its January estimates when it had said India’s growth will be 7.6% next year.
On November 8, Prime Minister Narendra Modi made an unscheduled televised announcement that on the stroke of midnight the country’s 500 and 1,000 rupee notes would cease to be legal tender.
As per government officials, demonetization had a direct effect in inspiring more Indians to pay taxes, and this is a huge achievement. As per their statement which was given on May 3, two government officials said, “About 9.1 million new taxpayers have been found, significantly expanding the taxpayer base”.
This is one crucial, tactical data which proves that demonetization has indeed helped the government to rope in more tax-payers, and increase tax collections.

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