NEW DELHI: Finance Minister Arun Jaitley has said demonetization may impact growth “for a quarter or so” but this disruption will not last too long and the move along with GST will help create a larger and cleaner economy.
“I have least doubt in my mind that (one year from now) you will have a bigger economy, higher GDP, cleaner GDP. You will have a higher tax base and more money in banks, and probably interest rates will be more reasonable. Therefore, all these collectively could contribute a lot as far as GDP is concerned,” he said at the HT Leadership Summit.
Both the economy and social system will see a major transformation after the implementation of the Goods and Services Tax (GST) post demonetization.
“I personally believe that once the demonetization process is complete and the GST is implemented, it’s going to hugely impact India’s businesses and also the Indian way of life.
“You will have more of digitized expenditures, you will have a taxation system far more efficient, which is extremely difficult to evade, where each limb of the transaction is being captured,” he said.
As far as the negative impact of demonetization is concerned, Jaitley said, “When you switch over, it creates disruption. I don’t see disruption lasting too long. You may see the impact for a quarter or so. Then when you look at next 12-15 quarters, it’s certainly going to benefit.”
Citing a few economic trends post demonetization, the Minister said rabi sowing this season has been higher than last year, while auto sales were a mixed bag.
“Of course, you will have some disruption created because of the switchover, in the long run, advantages are going to be huge as far as the relative cost of disruption is concerned,” Jaitley said.
Speaking about the various advantages of the demonetization, the Finance Minister said, it could lead to reduction in interest rates.
“Rates will now hopefully at some stage come down. With more money in the taxation system, our base itself increases,” he said.
As far as inflow from demonetization is concerned, he said it would come from many sources including higher tax penalty to be levied on unaccounted money.-PTI
