Finance Minister Arun Jaitley on Thursday played down the impact on economic growth of the government’s decision last November to scrap most of the cash in circulation, saying the annual rate of growth was “very reasonable”.
"Through demonetisation, the government created a new normal, with a big step in removing the earlier scenario of cash economy and shadow economy," Mr. Jaitley said at a press conference on India's growth figures.
Mr. Jaitley spoke after data on Wednesday showed that India’s economy, Asia’s third largest, suffered a growth slowdown in the quarter to March, to 6.1%, well below the expectations of economists.
He focused, however, on the growth figure of 7.1% in the 2016/17 fiscal year to March.
“I do believe that in the current global situation, a 7-8% growth, which at the moment is the Indian normal, is very reasonable,” he told a news conference.
Looking ahead to the planned launch of a new Goods and Services Tax (GST) from July 1, Mr. Jaitley said the government was “in a state of preparedness” for the rollout. He said that the GST would add to the rate of economic growth.
NPAs a cause of worry
Mr. Jaitley also told reporters that resolving the issue of non-performing assets weighing down banks’ balance sheets was a work in progress and a major challenge. "Linked to that is the challenge of increasing private sector investment," he added.
Mr. Jaitley opined that past three years were challenging not just for India but around the globe. "Economic growth has slowed, trade has shrunk, and there have been protectionist noises in major economies, along with geopolitical uncertainty," he said adding that monsoon failed for the past two years.
However, government's FDI reforms, implementation of 14th Finance Commission recommendations and Aadhaar laws enabled in plugging leakages and enabling economic growth, Mr. Jaitley said.
With inputs from Reuters