Chief Economic Adviser Arvind Subramanian has said that it may take few months to evaluate the real fallout of Modi government's decision to withdraw high-denomination currency notes from circulation. He also pointed out that India's high GDP growth rate in the previous financial year may not reflect the actual impact of note ban mainly on the informal sector.
However, Subramanian has stated that the impact of the sudden withdrawal of over 86 per cent of Indian currency is pretty much over as the newly- printed Rs 500 and Rs 2,000 notes hit the banking system, replacing the old Rs 500 and Rs 1,000 notes that were cancelled overnight on November 8, last year. On the GDP front, he said that the country is projected to have clocked a surprising 7.1 per cent growth in the financial year 2016-17 with a 7 per cent growth rate in the October-December quarter, notwithstanding demonetization.
He further said that the informal sector, which does the bulk of its transactions in cash, had borne the biggest brunt of demonetization. He also said that the full impact of demonetization will only be known over the course of the next few months, except for the impact on the informal sector, which they do not think that they are really going to get a handle on at all. He also conceded that the government's decision to demonetize high-denomination notes was a step towards digitization and broadening of the tax base. Adding further, he said that it is really about creating an infrastructure, using technology to better deliver government services in the long run.