Indian finance minister plays down demonetisation growth hit

India's economy should get a lift from the launch of a new sales tax, Finance Minister Arun Jaitley said on Thursday, putting a courageous face on a slowdown in growth that followed a government crackdown on "black money". "We have shown decisiveness, even the ability to take hard decisions", he said. There was some slowdown visible even before demonetisation in the previous year.

Even in the October-December quarter, when the cash crunch was at its peak, growth was 7 percent, letting India remain the fastest growing major economy.

Jaitley said that several factors including the global situation were responsible for decline in GDP growth to 6.1 per cent in the fourth quarter of 2016-17, Finance Minister Arun Jaitley said today, dismissing suggestions that it was on account of demonetisation.

Regarding requests from the various sectors towards a change in the proposed GST, he said that using media propaganda for getting the rates varied will not make any significant impact.

He focused, however, on the growth figure of 7.1 percent in the 2016/17 fiscal year to March.

Supporting Prime Minister Narendra Modi's move, Jaitley said that demonetisation led to more digitisation, taxpayer base and did not have much impact on GDP numbers.

The Minister said the Indian armed forces, which include the Army and the BSF, have been dominating the LoC - the de facto border with Pakistan - for the "past few weeks" to curb the cross-border militant incursion.

"Each one of these was responded by Pakistan with, let's say, a Pathankot or an Uri or even the mutilation of two of our soldiers".

The minister added that Pakistan avoided India's peace initiatives successfully.

He was replying to a question on three Chief Ministers, including from Kerala and West Bengal, writing to the Centre opposing the order issued by the Union Environment Ministry regulating cattle trade in which animals can not be sold for slaughter.

He said the order had nothing do with the slaughter of cattle which is governed by respective state laws.

Looking ahead to the planned launch of a new Goods and Services Tax (GST) from July 1, Jaitley said the government was "in a state of preparedness" for the rollout.

Chief Economic Advisor (CEA) Arvind Subramanian intervened here to say that the GST could actually result in decreasing price inflation and increase spending.

  • Zachary Reyes