India has seen transformational reforms in the past year, said Finance Minister Arun Jaitley while presenting Budget 2017. Two tectonic changes -- the implementation of the Goods and Services Tax (GST) and the demonetisation of high-value currency notes -- have been undertaken by the government, said Jaitley.
Demonetisation is a bold and decisive measure which will lead to a GDP, which would be bigger, cleaner and real, said Jaitley. Demonetisation will help transfer resources and allow banks to lend at a reduced interest rate, he added.
On November 8, the government had scrapped notes of Rs 500 and Rs 1,000 denomination. This led to a severe cash crunch as 86 percent of the currency in circulation was withdrawn. According to the Economic Survey released on Tuesday, GDP growth in fiscal 2017 could be down by a quarter to half a percentage point.
The drop in economic activity, if any, is expected to have only a transient impact, said Jailtey while presenting Budget 2017.
Invoking the Father of the Nation Mahatma Gandhi, Jaitley said “a right cause never fails.”
Commenting on the global economy, Jaitley said that this budget is being presented when the world economy faces significant uncertainty in the aftermath of global economic and political developments. World GDP is seen growing at 3.4 percent in 2017, according to IMF.
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- Still there are three major challenges for emerging markets:
- Federal Reserve rates hikes may lead to higher outflows and lower inflows
- Uncertainty on crude oil prices to impact fiscal position of emerging economies
- Rise in protectionism could impact exports from emerging markets, including India
Against that difficult backdrop, India stands out as a bright spot, said Jaitley. Consumer inflation is down to 3.4 percent in December 2016 and is expected to remain within RBI's mandated range of 2-6 percent.
The current account deficit has declined to 0.3 percent of GDP in the first half of FY17, while the government has continued on the path of fiscal consolidation.
India is set to be one of the fastest growing major economies this year, said Jaitley.
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