Rebutting economists' estimates that demonetisation would pull down the country's growth rate, Minister of State for Finance Arjun Ram Meghwal has said the government's latest drive against black money, coupled with the Goods and Services Tax (GST), would take the GDP growth to double digits by 2017-18.
"GDP will increase. It will reach double-digit within a year, the results will be seen. GST and demonetisation will show effect. Within a year, the GDP (Gross Domestic Product) will reach the double-digit figure," Meghwal told IANS.
The International Monetary Fund has given a projection of 7.6 per cent for 2017-18 while rating agency Fitch has predicted 7.9 per cent. But post demonetisation, economists and analysts are predicting that the GDP will be pulled down by at least 0.7-1 per cent in the current fiscal itself.
Scoffing at these predictions, Meghwal said, "The economy is sound. The Indian economy is huge, but it is unaccounted. So we want it to become accounted through demonetisation move."
The demonetisation of Rs 500 and Rs 1,000 currency notes, announced on November 8 by Prime Minister Narendra Modi, will bring the unaccounted money into the banking system that will subsequently push up the GDP numbers, Meghwal said.
It is estimated that Rs 16 lakh crore is in circulation. Out of that, 86 per cent is in circulation through high denomination notes.
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"The situation is grim right now with less demand and low liquidity. But as the demand picks up and economy grows, slowly this money will come back (in the banking system)," Meghwal told IANS.
He said that the entire amount may not be returned to the banking system as the circulation of small denomination notes will increase.
Stressing that demonetisation will boost the economy, Meghwal said it is targeted at resolving 4-5 issues simultaneously, including fake currency, terrorism, drug trafficking and corruption.
"The decision's outcome is that the country should move towards being a cashless society," he said.
Also placing his bet on the biggest ever indirect tax reform in the country -- GST -- to push up the GDP numbers, Meghwal said the government is targeting April 1, 2017, as the implementation date for GST.
The listed agenda of the winter session of Parliament, which began on November 16, includes passage of pending legislation for the rollout of GST. It includes the passage of Central Goods and Service Tax Bill, Integrated Goods and Service Tax Bill and the Goods and Services Tax (Compensation for loss of revenue) Bill.
But it remains to be seen if the government will be successful in getting the three GST Bills passed in the Winter Session as the Parliament remains caught in the uproar arising out of demonetisation.
(Meghna Mittal can be reached at meghna.m@ians.in)
--IANS
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