The fall in GDP growth to a three-year low of 7.1 per cent in 2016-17 could be attributed to several factors and not the note-ban exercise alone, Finance Minister Arun Jaitley said on Thursday.

Even a growth rate of 7-8 per cent — now seen as the ‘Indian normal’ — in the current situation is “very good by global standards” and “fairly reasonable by our own standards of growth,” Jaitley said at a press conference to address the ‘achievements’ of the Finance Ministry over the past three years.

Asserting that the note-ban exercise had brought three distinct advantages and helped create a “new normal” in the economy, he dismissed the view that the demonetisation exercise had crippled economic activity, leading to a sharp fall in output in the fourth quarter, when GDP declined to 6.1 per cent. Jaitley said typically several factors determine GDP movements in a quarter, and the “cumulative” factors may have impacted growth in 2016-17.

“There was some slowdown visible even prior to demonetisation last year. There was also impact of global factors. Even services, where we regularly see 9-10 per cent growth, had seen some slowdown,” Jaitley said.

The Finance Minister also allayed apprehensions that economic growth would be adversely impacted by the introduction of the goods and services tax (GST) just as demonetisation had weighed on economic growth in 2016-17.

It would be erroneous to draw any analogy between demonetisation and GST implementation as regards their impact on economic growth, he said.

“I see no adverse impact of GST on GDP. GST, by itself, should add to growth. As the impact of our policies hold out, it will be beneficial to the economy,” he said, adding that GST would get implemented from July 1 and that the Centre was in a state of preparedness.

3 pluses from note ban The Finance Minister said the note-ban exercise has led to three positives — greater movement towards digitisation; increase in taxpayer base (revenue was up 18 per cent in 2016-17 despite challenges to the economy); and the message that it is no longer safe to deal in cash.

He, however, refrained from disclosing the quantum of money that returned to the banking system after demonetisation.

“Now that the demonetisation exercise has been completed, the Reserve Bank of India as an important institution cannot give approximation. Every note has to be counted and counterfeits eliminated. The exercise is on. The figure is with the RBI and not with the government.”

On the Pradhan Mantri Garib Kalyan Yojana (PMGKY), Revenue Secretary Hasmukh Adhia said the response had not been good, with collections at only ₹5,000 crore.

“There are two main reasons for this not-so-good response. Many people had already deposited their undeclared cash in bank accounts, while others found the tax rate (50 per cent plus 25 per cent) quite steep.

Jaitley said the PMGKY was not an isolated scheme. There were other schemes, such as the IDS, that year.

On Air India On the proposed privatisation of Air India, the Finance Minister said it was for the Civil Aviation Ministry to decide on the mechanism. The aspects of foreign direct investment would also have to be looked into by the department concerned in the Civil Aviation Ministry, he added.

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