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India’s economic growth held back due to demonetisation, GST: Raghuram Rajan

Prime News, International (Washington), November 10:- Demonetisation and the Goods and Services Tax (GST) are the two major headwinds that held back India’s economic growth last year, former RBI Governor Raghuram Rajan has said, asserting that the current seven per cent growth rate is not enough to meet the country’s needs.

Addressing an audience at the University of California in Berkley on Friday, Rajan said for four years — 2012 to 2016 — India was growing at a faster pace before it was hit by two major headwinds.

“The two successive shocks of demonetisation and the GST had a serious impact on growth in India. Growth has fallen off interestingly at a time when growth in the global economy has been peaking up,” he said delivering the second Bhattacharya Lectureship on the Future of India.

On the second anniversary of demonetisation on November 8, Finance Minister Arun Jaitley staunchly defended the demonetisation drive, saying ‘prophets of doom’ have been proven wrong as hard data of two years shows an increase in tax base, greater formalisation of the economy and India retaining the fastest growing economy tag for the fifth year in a row.

“By the time the first five years of this government are over, we will be close to doubling the assessee base,” he said in a Facebook blog ‘Impact of Demonetisation’.

Jaitley said India clocking the fastest growth rate has proved “prophets of doom”, who had predicted that demonetisation will shave off 2 per cent of growth rate, conclusively wrong.

Rajan, in his address, said a growth rate of seven per cent per year for 25 years is “very very strong” growth, but in some sense this has become the new Hindu rate of growth, which earlier used to be three-and-a-half per cent, Rajan said.

“The reality is that seven is not enough for the kind of people coming into the labour market and we need jobs for them, So, we need more and cannot be satisfied at this level,” he said.

Observing that India is sensitive to global growth, he said India has become a much more open economy, and if the world grows, it also grows more. (MR, Inputs: Agencies).

 

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