Terming demonetisation as an "unusual and unprecedented" monetary experience, Chief Economic Adviser Arvind Subramanian said on Tuesday (January 31) that the full remonetisation of the country's economy will happen in the next 1-2 months.
Subramanian said the economy will pick-up in the short run if the world economy picks up which will boost consumption.
For a one per cent increase in global GDP, India's exports will increase by three times. With faster remonetisation, growth in exports, things will look up even faster," he said.
Accepting that there was indeed a short-term pain, especially for the informal sector due to demonetisation, Subramanian said he was confident that will full remonetisation, the economy will be back on track.
Addressing the media while giving a presentation on the Economic Survey, the chief economic advisor said that the quick removal of all cash withdrawal limits will expedite pick-up in growth.
"In a month or two, we should be close to full remonetisation of the economy," Subramanian said. Citing transition to digitisation as a fall out of demonetisation as a positive, Subramanian said transition to digitisation should be based on incentives and not forced upon people.
"I think the transition must be gradual and inclusive because a lot of people are not digitally connected. I am for doing it through incentives and not by force. Digitisation has lots of benefits but can have costs because the poor don't have access to technology," he said.
Subramanian emphasized that while reporting, the impact of demonetisation should be judged "cautiously". "It was a very unusual experiment in monetary history. We should be cautious about assessing its impact. Demonetisation has affected different forms of money very differently," he said.
Subramanian said that the currency cash squeeze was less severe compared with common perception because the macro-economic indicators have been mixed. While sowing of rabi crop is way better than last year and there is no blip in direct and indirect tax collections after November 8, there is a dip in real estate sector and banks credit has dropped.
"The overall picture is mixed. Any uncertainty from demonetisation needs to be addressed. But it holds the potential for long-term benefits. It would require follow-up actions to minimise the costs and maximise the benefits," he said.
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
