New Delhi, January 31: Chief Economic Advisor (CEA) Arvind Subramanian while addressing a press conference firstly defended the government's demonetisation move as a radical social engineering measure to curb the black money. He further said that India will be completely remonetised within the next 1 month. He also highlighted the various achievements of government over the past year.
Arvind further advocated the quick removal of all cash withdrawal limits to expedite pick-up in growth. Subramanian further said that the volatility from both US election and demonetisation has been weathered by the economy. “The past year has had robust macroeconomic stability, reserves at all time high, CPI inflation has come down,” he added.
Highlights of the facts presented by Arvind Subramanian in Press conference are as follows:
i) Criticizes rating agencies says they are inconsistent while rating India and China.
ii) Our intent to provide an honest picture. Despite growth, there has been a sense of anxiety among people. Some of this has been due to demonetisation.
iii) Demonetisation has potential long-term benefits, depends on follow-up actions.
iv) Currency squeeze was less severe than perceived.
v) Demonetisation simultaneously reduced the supply of cash, and increased the supply of deposits.
vi) India will be completely remonetised within the next 1 month.
vii) The aim of demonetisation is to bring down real estate prices.
viii) Bank credit affected by demonetisation, seems like it has come down. The overall picture is mixed.
ix) Not appropriate to do a before-after analysis of GDP growth, with respect to demonetisation.
x) There should be fast remonetisation, ATM & banks limits should be withdrawn.
xi) At every stage, we have to balance the costs and benefits of cash and digitization.
xii) Anxiety about the festering twin-balance sheet problem. NPA is high and rising especially in public sector banks.
xiii) Create a government agency to evaluate & reduce NonPerforming Assets.
xiv) Universal Basic Income is based on universality, unconditionality.
xv) Universal Basic Income a radical new idea; an idea whose time is right for deliberation, not necessarily for immediate implementation.
xvi) We are the economy more open to trade than China, we are open to capital, says CEA Arvind Subramanian.
xvii) The balance sheet of banks and Pvt sector still challenged; much of debt is in large companies.
xviii) We need more activism in fiscal policy.
xix) There should be an experiment with universal basic income in states with pilot projects.
xx) There is a job challenge that we need to address.
xxi) India cannot afford a UBI that’s an add-on to a programme; UBI should gradually replace existing programmes.
Subramanian also briefed media about the Economic survey are as follows:
i) GDP growth for next fiscal pegged at 6.75-7.5 per cent.
ii) Prescribes cut in individual I-T rates, real estate stamp duties.
iii) Time table for cutting corporate tax should be accelerated.
iv) Tax administration could be improved to reduce discretion and improve accountability.
v) Growth to return to normal as new currency comes in circulation.
vi) Demonetisation to affect growth rate by 0.25-0.5 PC, but to have long-term benefits.
vii) GST, other structural reforms should take the trend growth rate of 8-10 PC.
viii) Fiscal windfall likely from Pradhan Mantri Garib Kalyan Yojana, low oil price.
ix) Farm sector to grow at 4.1% this fiscal, up from 1.2% last year.
x) Fiscal gains from GST will take the time to realize.
xi) Demonetisation may affect supplies of certain agricultural products like sugar, milk, potatoes and onions.
xii) The growth rate of the industrial sector to moderate to 5.2% this fiscal, from 7.4% last fiscal.
xiii) Efforts to collect taxes on disclosed and undisclosed wealth should not lead to tax harassment.
xiv) Universal Basic Income Scheme is an alternative to the plethora of state subsidies for poverty alleviation.
xv) Demonetisation should be followed up with fast and demand-driven remonetisation, tax reforms, GST and lower taxes.
xvi) These would allow in returning to trend growth in 2017-18, making India the fastest-growing major economy.
xvii) Middle class to get affordable housing due to fall in real estate prices
xviii) Remonetisation to eliminate cash crunch by April 2017.
xix) Balance sheet problem of over-leveraged companies and bad-loan-encumbered banks has continued to fester.
xx) A centralised public sector asset rehabilitation agency needs to look after the largest, most difficult cases and make politically tough decisions to reduce debt.
xxi) Addressing the twin balance sheet problem will be vital.
xxii) Suggests incentivising states for good fiscal performance.
xxiii) Demographic dividend to peak in next five years.
xxiv) Fiscal activism embraced by advanced economies not relevant for India.
xxv) Swachh Bharat to promote a broader fundamental right to privacy for women.
xxvi) Service sector estimated to grow at 8.9% in 2016-17.
xxvii) Income Tax net could be widened gradually by encompassing all high-income earners.