FM Jaitley downplays note ban shadow on growth

Says growth rates between 7-8% 'very good' by global standards

A day after gross domestic product (GDP) growth showed a sharp slowdown in the January-March quarter, Finance Minister Arun Jaitley said demonetisation alone could not be blamed for the slower rate of growth. Growth rates between 7-8 per cent were “very good” by global standards, he added.

Official data released on Wednesday showed economic growth fell to at least a four quarter low of 6.1 per cent during January-March 2017, and to a three-year low of 7.1 per cent in FY17, reflecting the impact of the note ban.

“There are several factors which can contribute to GDP in a particular quarter. There was some slowdown visible, given the global and domestic situation even prior to demonetisation in the last year,” Jaitley said on Thursday at a media briefing on three years of the Narendra Modi government. “If you look at the growth of some sectors, the 9-10 per cent growth that was normal in services, especially in the financial sector, has come down,” he said.  

“The ability of banks to lend was put to task. So these are cumulative factors, which played a part,” he added.

Jaitley said resolving the problem of nearly Rs 7 lakh crore worth of toxic assets in the banking system remained the biggest priority for the government. He promised some visible action will be taken soon under the recently passed ordinance that empowered the Reserve Bank of India to intervene directly to clean up bad loans. The other priority area would be "to increase private sector investment, even though our foreign direct investment and public investments have significantly increased,” Jaitley said

He said the government was committed to implement the goods and services tax (GST) from July 1. “I will expect that the industry, or those sections which say they are not ready, also fall in line because we are quite clear about the date,” the minister said. He asked the industry to look at the current indirect tax rates before seeking reduction in upcoming GST rates. “It is the GST Council which takes the decision…Using media propaganda for making the rates vary will not make any significant impact on the decision of the Council,” he said.

Chief Economic Advisor Arvind Subramanian, who was also at the briefing, said the GST will boost GDP growth and bring down inflation. On the issue of total deposits received during demonetisation, the finance minister said, “The RBI, as an important institution, can’t give approximations. Today, every currency note has to be counted, if there is any counterfeit that has to be eliminated and real count has to come. It’s an enormous exercise that the RBI is doing. As soon as they complete it, accurate figures will be out.”