The roll-out of the goods and services tax (GST) combined with the resolution of banks' bad asset problem would give a big push to the economy and lift GDP growth rate from the fourth quarter lows of 6.1 per cent, finance minister Arun Jaitley said today.
Speaking a day after data showed that annual economic growth unexpectedly slipped to 6.1 per cent in the January-March quarter, its lowest in more than two years, Jaitly refused to accept the theory that the slip owed to the demonetisation exercise.
Prime Minister Narendra Modi's shock decision last November to scrap high value banknotes, in the government's hunt for black money. took 86 per cent of currency out of circulation virtually overnight, nearly freezing economic activity.
The move aimed at flushing out illicit wealth, however, pounded consumer demand in the cash economy.
"There are several factors which can contribute to GDP in a particular quarter," Jaitley told a news conference. "There was some slowdown visible, given the global and domestic situation, even prior to demonetisation."
The economy had recorded annual growth of 7.5 per cent in July-September before Modi removed the high cash.
However, despite the cash crunch at its peak in the October-December quarter, growth was 7 per cent, letting India remain the fastest growing major economy.
Economic expansion in the latest quarter, lower than China's 6.9 per cent, was hurt by a slowdown in farming, manufacturing, services and construction activity.
Addressing the media, the finance minister said the new federal taxation, which is now at the last stage of its implementation, will bring transparency, simplicity and efficiency in the tax administration.
Jaitley said that while the blip in economic growth is short-term, the NDA government has been able to restore the credibility of the Indian economy and the phasing out of corruption and indecisiveness would itself give a further fillip to economic growth.
Jaitley also pointed to other initiatives of the government, such as the implementation of JAM (Jandhan, Aadhar Mobile) trinity based financial inclusion system under which a law relating to Aadhar was enacted so that resources are optimally utilised by plugging the leakages and eliminating the underserved category of beneficiaries.
On demonetisation, Jaitley said, the decision has helped the government in three ways, first by having greater movement towards digitisation of transactions, second, in widening of the tax payers base which contributed to increase in the revenue collections by more than 18 per cent during 2016-17 and third, by sending a strong message that it is no longer safe to deal in cash.
The finance minister said that demonetisation has established a 'new normal'.
He also highlighted the government's achievements in the financial sector, including policies for resolution of banks' bad debt, boosting private sector investment, the Make in India initiative etc.