With just over a week left for the December 30 demonetisation deadline and a month ahead of the Union Budget 2017-18, OTV catches up with Arvind Panagariya, vice-chairperson, Niti Aayog here on Thursday. Panagariya expects demonetisation to bring significant tax gains going ahead, and help the economy bounce back strongly in the years ahead.
In the absence of liquidity, is demonetisation will have a larger impact on the economic activities even in the first half of next financial year?
No certainly not. A lot of liquidity has been restored and economic activities have been coming up for a while. The situation which was in the first week of November has changed. And, analysts are saying in most cases the economic activities have gone up to 90% or more of what it was pre November 8.
Going forward Centre’s war on black money, what is next? Is it something related to tracking gold transaction and real estate business?
That I should not speculate (smiles)… See at the end the Prime Minister has to decide about this in consultation with his advisors and all. We will wait and see…If you are asking that demonetisation is the last step to curb corruption, then I will say, its no. I think more actions will be taken but in terms of taking action against the existing black money, and also in changing the roles, and the policy in such a way that future accumulation of black money is discouraged….So we need to do both.
Any tax reform being planned by the Centre?
The discussions are under way on the budget, and hopefully we will see some action in the budget. The Finance minister has already committed to streamline the corporate income tax. Some progress we have already made last year and let’s hope we will make more progress in the coming year. So simplification of some taxes, reduction in the tax rate and these should also discourage the accumulation of black money.
Looking at the current scenario what should be the growth of Indian economy?
There will be some impact in 2016-17 because of demonetisation. We have only last five month left. In the pre-demonetisation we did okay and GDP growth was 7.2 per cent. Currently we don’t have information to access but I can tell you of the 13 analysts and observers, 11 said the impact will be less than 1 per cent while two predicted a larger impact.
Is demonetisation going to create a negative image of Modi govt?
The people have been with the Prime Minister despite hardship and they are also observing that he is doing it ultimately for the benefit of the country. The black money holders are being punished. I will say few governments have taken this courage to make a frontal attack on black money. He has done a frontal assault on black money and people are generally supportive of it.