The economy thus goes on the back-burne

With progressive remonetisation, the surplus liquidity in the banking system declines from a peak of `7,956 billion on January 4, 2017 to an average of `6.016 billion in February and further down to `4,806 billion in March. Singh committee for the Debt and Fiscal Responsibility Act to replace the little-over decade-old Fiscal Responsibility and Budget Management (FRBM) Act is a long-term gambit, which began when V. This development imparts uncertainty to the near-term outlook for inflation.Both the World Bank and the International Monetary Fund have pegged the Indian economy’s growth rate at 7. First, with the accelerated pace of remonetisation, discretionary consumer spending held back by demonetisation is expected to have picked up from Q4 2016-17, and will gather momentum over several quarters ahead.K. Whether demonetisation improved the economy remains an open question.
It would be a weak argument to say that demonetisation has not unearthed black money, which was the ostensible aim of the crude policy measure. There were "distress sales" of fruits and vegetables and other perishable goods during this period because of demonetisation."It shows that vegetable prices plunged as much as 21 per cent after demonetisation, between November 2016 and February 2017..  And it affects the long-term policy of the RBI to create the required equilibrium of money flows and to boost credit growth so that the economy in general can take off.The recovery will also likely be aided by the reduction in banks’ lending rates due to large inflows of current and savings account deposits, although the fuller transmission impact might be impeded by stressed balance sheets of banks and the tepid demand for bank credit. There is not much spring in the growth rate step: it is trudging well, but nothing beyond that.2 per cent for 2017-18, about four points up from 6. The rhetoric by Mr Modi, Mr Jaitley and their government and BJP colleagues can’t conjure away the economic dampener that demonetisation has been.The potholes of demonetisation are mentioned in the Reserve Bank of India’s Monetary Policy Report for April 2017. It has in the Monetary Policy Report of April just mentioned the measures taken to deal with the liquidity surge in bank coffers as people deposited all the specified banknotes — the Rs 500 and Rs 1,000 denomination notes — in banks.The political strike rate of the Modi government is at a brisker rate than that of the economy."This was the after-effect of demonetisation and the adjustment that was required to be made by the banking system.
The recommendation of the N. Singh was finance minister in the Rajiv Gandhi Cabinet in the mid-1980s, will only be a window-dresser and nothing more. The government has gone silent on the good that demonetisation is supposed have done to the economy. It is not yet clear how much of it was unaccounted for and therefore untaxed money. It dismisses with certain contempt the doomsayers with the observation: "With the effects of demonetisation turning out to be shortlived and modest relative to some doomsday expectations, the outlook for 2017-18 has been brightened considerably by a number of factors.8 per cent for 2016-17.It is busy preparing for the election in Gujarat at the end of this year, spring in machine and other Assembly elections in 2018 followed by the Lok Sabha elections of 2019.Mr Modi’s post-Uttar Pradesh Assembly poll jibe last month about hard work disproving Harvard (university-based and educated economists) and Mr Jaitley’s remark in the Lok Sabha in his reply to the Finance Bill 2017 debate that the people of UP had endorsed demonetisation seems a bit frivolous.The report ties itself up in knots in a way when it wants to downplay the negative impact of demonetisation while noting at the same time how the impact is being countered through remonetisation. Reality is unbending and resistant, and propaganda does not help in altering facts.75 per cent to 6 per cent, it was spelt out: "Activity in the services sector appears to be improving as the constraining effects of demonetisation wear off.  Demonetisation hurt the economy more than anything else.P. And this was no routine matter where money flow in the economy through cash and bills is always in a state of flux and there is a semblance of equilibrium. Policy pyrotechnics of the kind that the Prime Minister has indulged in is not exactly an ideal means to improve economic growth rates. It was not mere short-term inconvenience for people at large, particularly for those in the predominantly cash-based unorganised sector.  In discussing the outlook for inflation, the report hints in a tentative and uneasy tone: "As vegetable price declines were likely on account of demonetisation-driven distress sales in addition to seasonal factors, remonetisation could fuel a sharp reversal in vegetable prices, going forward.
The economy thus goes on the back-burner except for talk about the rolling out of the Goods and Services Tax (GST) on July 1."The beans are spilled, as it were, where it is stated that one of the reasons that shaped the Monetary Policy Committee (MPC) stance was "an overwhelming preference for waiting out the transitory effects of demonetisation". Like all facile politicians, the Prime Minister, the finance minister and others in the government are slipping into the false belief that electoral victories connote success on the economic front.Earlier, in the Monetary Policy Statement of April 6, when the reverse repo rate (the interest rate paid to retail banks for parking their funds with the central bank) was increased from 5.  The RBI has not yet offered any sustained analysis of the impact of demonetisation.
Posted in Default Category on December 25 at 10:22 AM

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