Remonetisation to revive economic growth: CEA

Confident of economic recovery post demonetisation, Chief Economic Adviser Arvind Subramanian today said remonetisation will be completed in a month or two and growth will pick up once the process is over.
The demonetisation is an "unique experiment in monetary history" and 50-100 PhDs thesis would be written on it after five years, Subramanian added.
He said as against the perception, cash crunch was less severe in November, the month demonetisation was effected, than December.
The Chief Economic Adviser, while addressing the media after the pre-Budget economic Survey was tabled in Parliament, said there has been short-term cost of demonetisation on unorganised sector, but potential for long term benefits are high.

He said scrapping of the old high denomination notes will lead to increased financial savings and corruption is expected to decline.
India's economic growth is likely to dip to 6.5 per cent this fiscal as shock demonetisation seems to have shaved off a good 0.5 percentage points.

"As remonetisation happens the economy will recover back. I think there should be a fast remonetisation. The earlier we withdraw the limit on the cash, the better," he said.
He further said the push to digital payment must be continued, "but I think one must be careful there".
"The transaction has to be gradual. It must be inclusive because there are a lot of people who are not digitally connected. I have preference for doing it through incentives rather than controls," he said.

Subramanian said at every stage there has to be a balance between the cost and benefit of cash versus digitalisation.
"I think we should remember digitalisation offers lots of benefits. It can also have cost because poor don't have access. Similarly cash, while lot of it is prone to misuse, it also has certain conveniences," he added.
Talking about economic growth, he said "two potentials" that would lift growth next financial year is faster catch up to remonetisation (that would increase consumption) and revival in exports.
Subramanian further said one of the aims of demonetisation is to bring down real estate prices.

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Property prices fell due to cash crunch following demonetisation and could decline further as investing undeclared income in real estate becomes more difficult, says the Economic Survey.
In an apparent reference to Former Finance Minister P Chidambaram's comment that certain key people, including the CEA, have not spoken on scrapping of notes, Subramanaian said "finally the CEA has spoken (on demonetisation)".
It is difficult to assess the impact of demonetisation on the economy, he said.
He further said the Economic Survey is a government document and a review of the survey will take place "sometime during the summers".

Sources said the review survey would be unveiled in July.
The CEA also exhorted the media to refrain from "misinterpreting and mischievously interpreting" GDP projections.
He said it is not appropriate to do a before-after analysis of GDP growth, with respect to demonetisation. However, on the other hand, it is correct to analyse impact in current year, "with and without demonetisation", he added.
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Later, in an interview to CNBC TV18, Subramanian said,"We will not get the same bonanza from oil excise duties next year."
He noted that existing NPA solutions in the banking sector have not been very fruitful.

The CEA said there will be implementation challenges in the first year of the Goods and Services Tax (GST) regime.
Subramanian added that the need of the hour for the government is to not take away demand and maintain fiscal credibility.