12 May, 2021

Demonetisation And GST: Curse Or Masterstroke? Ask, World Bank

Demonetisation and the subsequent introduction of Goods and Service Taxes (GST) were aimed at lifting Indian economy. But the government's vision has been counterproductive given the way international bodies are calculating India's economic growth

Illustration by Manjul
Demonetisation And GST: Curse Or Masterstroke? Ask, World Bank

Three years after the ‘war on black money’, demonetisation’s negative impact on the economy lingers, as does the subsequent introduction of GST, with its many implementation glitches. Over the past few weeks, three multilateral bodies—the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB)—lowered their growth expectations for India to 7.2-7.3 per cent, while India’s Central Statistics Office (CSO) has scaled down its forecast for 2018-19 fiscal year to 7 per cent, following the 6.6 per cent growth recorded during October-December, the lowest in five quarters.

“Though the immediate shock, in the economic sense, of demonetisation and GST, is over, the impact of an economic policy shock takes time to die out,” says Rajat Kathuria, director and chief executive of Indian Council for Research on Inter­national Economic Relations (ICRIER). “The impact of GST on MSMEs (micro, small and medium enterprises) needs to be addressed. More than growth, employment and jobs will be...

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