New Delhi, February 17: Economic growth of India will make a sharp healing taking after the recall of old 500 and 1,000 rupee notes, said Reserve Bank Governor Urjit Patel today. he said, gives more flexibility to cut, raise or hold rates as compared with an accommodative one on inflation outlook.
In an interview, Patel made a strong case for continuing with globalisation, even in the face of a potential shift to trade protectionism under US President Donald Trump, as India has benefited from open trade. He said, the remonetisation has happened at a fast pace and that was part of the plan.
RBI last week lowered economic growth projection for the current fiscal to 6.9 per cent from the previously estimated 7.1 per cent, but saw it bouncing back in a big way to 7.4 per cent in 2017-18. Patel said, the benefit of junking 86 per cent of currency in circulation will take time to fully play out and needs more work to ensure they are lasting.
He said it is difficult to predict sustainable growth rates. Higher growth rate is possible if very fundamental reforms, especially in factors of production like land and labour, are undertaken, the Governor said.
The six-member monetary policy committee headed by Patel had last week kept interest rates unchanged at 6.25 per cent for the second straight meeting and changed policy stance to neutral from accommodative.
Significantly, Finance Minister Arun Jaitley today heaped praises on PM Modi’s much-debated demonetisation move claiming that perhaps such a massive exercise has not happened in any country. Jaitley said normalcy has been restored within few weeks of the decision to recall 86 per cent of the currency in circulation and now there is no shortage of notes in market.