November 8, 2018
22 ways in which the Indian economy was affected by DeMonetisation
Demonetisation has been proved, over the course of the past two years, to be a complete disaster for the Indian economy. For the economy, getting back on feet has been a herculean task.
Many people lost their lives, and lakhs lost their jobs. Businesses in both the formal and informal sectors have been devastated.
The purported aim of demonetisation, of recovering black money, has been proved to be an empty boast. The Reserve Bank of India (RBI) has stated that 99 per cent of the demonetised Rs 500 and Rs 1,000 currency notes, which formed an overwhelming 86 per cent of the paper currency in circulation, has come back into the economy, yet no black money has been traced.
1. Demonetisation failed all four stated objectives: curbing black money, corruption, terrorism and fake currency.
2. 99.3 per cent of demonetised currency came back to banks; so where did the black money go?
3. India is neither the fastest-growing economy in South Asia nor the fastest growing large economy in the world anymore.
4. International Monetary Fund (IMF) slashed India’s 2017-18 economic growth forecast by 50 basis points to 6.7 per cent.
5. Further, IMF cut India’s growth forecast for the next year, i.e., 2018-19, by 30 basis points to 7.4 per cent.
6. India’s GDP growth slowed down to 5.7 per cent in April-June, 2017. It was 7.1 per cent during the same period a year ago.
7. Bank credit growth to large industries contracted by 1.7 per cent and to medium companies by 4.1 per cent in 2017.
8. Only 448 new industrial and infrastructural projects were announced during the first quarter of 2017-18, the lowest since June 2014.
9. The value of stalled infrastructure projects in the quarter ended September 2017 increased to Rs 13.22 lakh crore. That is the fifth straight quarter of increase.
10. Agricultural growth in April-June 2017 declined to 2.3 per cent from 5.2 per cent in January-March 2017.
11. Gross fixed capital formation, a measure of private investment in the economy, grew by just 1.16 per cent during the April-June quarter of 2017 compared to 7.39 per cent in the same period in 2016.
12. The Business Confidence Index (BCI) of the services sector fell by 5.3 per cent between April-July 2017.
13. The BCI of the capital goods and consumer non-durables sectors declined by 13.5 per cent and 10.3 per cent, respectively, between April -July 2017
14. Fiscal deficit at July-end (2017-18) touched 92.4 per cent of the budget. The deficit figure for the same period of 2016-17 was 73.7 per cent of the target.
15. Incremental bank credit in the current fiscal year is declining. It is now less by Rs 1.37 lakh crore from 2016-17’s figure during the corresponding period of April to August: it is a negative growth of 1.8 per cent, which is a historical record.
16. In urban India, unemployment was 8.2 per cent in the week ended October 8, 2017. This is the highest unemployment rate in urban India in the past 11 months.
17. Reserve Bank of India’s (RBI) Consumer Confidence Survey showed that the Current Situation Index was in the pessimistic zone, reflecting the deterioration in the employment scenario, price level and income.
18. Households’ current perceptions on the general economic situation remained in the pessimistic zone for four successive quarters.
19. More than 150 people died due to demonetisation.
20. Unemployment increased to 7 per cent in the weeks following demonetisation: 25 crore daily wage workers lost employment.
21. In the micro, small and medium enterprises (MSME) sector there was a 50 per cent decline in revenue and 35 per cent of job loss.
22. If demonetisation was a surgical strike, the victim was the Indian economy.