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DemonetisationeffectsinIndiatodisappearinmediumterm:
WorldBank
ByPTI|Updated:Jan11,2017,03.28PMIST PostaComment
WASHINGTON:TheWorldBanktodaysaidthatthe"adverseeffects"ofdemonetisationin
Indiawilldisappearinthemediumterm,sayinganyreformhasshorttermcosts.
"Anyreformhasshorttermcostsbutultimatelyreformswillbringlongtermgains.Inthe
caseofIndia,weexpectwhatevertheadverseeffectsofthesechangingofnotesto
basicallydisappearinthemediumterm,"AyhanKose,DirectorofDevelopmentProspects
GroupattheWorldBanktoldreportersduringaconferencecall.
Initslatestreport,theWorldBankreviseditsestimatesofIndia'sgrowthratein201617
fiscalyearfrompreviousprojectionof7.6percenttosevenpercent.
WorldBankreviseditsestimatesofIndia'sgrowthratein2016
17fiscalyearfrompreviousprojectionof7.6percenttoseven
But,KosesaidtheWorldBankisexpectinggrowthpickingupovertheperiodFY18and
percent.
FY19,supportedbyprivateconsumption,infrastructurespending,andareboundin
investmentgrowth.
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"So,Indiahasalreadyundertakenawiderangeofreforms.Thesereformsweareexpecting turmoilinTamilNaduhere
looseneddomesticsupplybottlenecksandincreasedproductivityand,inthecomingyears,
moderateinflationandcivilservicepayraiseshouldcontinuetosupportrealincomesand
consumption,"hesaidinresponsetoaquestion.
TheWorldBankexpectsprivateinvestmenttoaccelerateasfirmsandbanksundertakethenecessarymeasuresandtheeffectsof
importantstructuralreformsstartbeingfelt.
"Indiaisacashintensiveeconomy.Weknowthat.Thecashaccountsforover80percentofthetransactions,almosttwothirdsofthe
valueofalltransactions.TherehavebeenquestionsoverwhethertheReserveBankofIndiahasprintedsufficientnewcurrencytoreplace
theoldones,withdisruptions,ofcourse,affectingruralareasandurbanpoor,"Kosesaidinresponsetoanotherquestion.
"Buthavingsaidallofthis,weexpectthegrowthtoincreasein2017,afterthisbriefperiodassociatedwiththechangeinnotes.Andthe
effectsofthischangeinnotesareexpectedtoweighin,inthemediumterm,withgrowth,asImentioned,pickingupmomentuminFY18
FY19,supportedbyprivateconsumption,infrastructurespending,andareboundinprivateinvestment,"hesaid.
KosesaidtheIndianGovernmenthasmadeadecisionandimplementedthisdecisionswiftlywiththeobjectivethatthiscouldhelpreduce
informalthesizeoftheinformaleconomy.
"Wheneverthesetypesofpolicychangesareimplemented,theyhaveeffectsduringthetransition.Thepartofthereasonthegovernment
implementedtheschemewastocurbcorruption,taxevasion,andcounterfeiting.Ifthatwereexpected,thatbybroadeningthetaxbase,
revenueswilleventuallygoup,besidesreducingthesizeoftheinformaleconomy,"Kosesaid.
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2/16/2017 DemonetisationeffectsinIndiatodisappearinmediumterm:WorldBankTheEconomicTimes
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