The real challenge now is short term growth and how we need to respond to that. We need to bring to bare all the policy tools we have to revive it
Indian economy has seen an across-the-board deceleration in economic activity that requires policy makers to come out with all possible tools to revive growth, Chief Economic Advisor Arvind Subramanian said on Friday.
This fiscal the growth is likely to be towards the lower end of the 6.75-7.5 per cent band suggested in January-end mainly because of downside effects of factors like appreciation of the rupee, farm loan waivers, and transition challenges from implementing GST. "It is less likely than before that we will reach the upper end of the range," he said.
The only upside possibility is exports growth."Farm loan waivers will be deflationary, exerting a drag on growth in the short run... We are not changing the growth forecast, but we are saying that because of all these risks it is less likely that we will see outcomes towards the upper end of the forecast," Subramanian said after the Economic Survey-2 was tabled in Parliament.
"There are very favourable medium term developments. The real challenge now is short term growth and how we need to respond to that. We need to bring to bare all the policy tools we have to revive it," Subramanian said.
"End March inflation is going to be well within the target and average inflation for the year as a whole is going to be well below the target. Average inflation for the year will be closer to 3 per cent," he said.
"Has cash come down in the economy? We seem to have achieved a 20 per cent reduction in the equilibrium cash holding, which means that the cash-GDP ratio has come down by about 1.6 per cent points and this was one of the objectives of the demo," he said.
Post demonetization, about 5.4 lakh taxpayers were added. "It represents about 1 per cent of the taxpayers. The taxable income has not gone up by as much because many of these new filers are reporting a taxable income around the threshold. So, whether this increase in taxpayer will lead to increased taxes remains to be seen," Subramanian said.
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