With the latest GDP data indicating that demonetisation did not affect growth rate to the extent it was expected, Finance Minister Arun Jaitley today said a 7 per cent expansion in third quarter belies exaggerated claims of note ban impact on rural economy.
Jaitley echoed Reserve Bank of India (RBI) Governor Urjit Patel's assertion of a sharp V-shaped recovery as remonetisation picks up.
"Demonetisation, admittedly, had led to the squeeze of currency because this was the period during which the replacement of high denomination currencies was taking place and many people were apprehensive to what its impact on overall growth would be," Jaitley, who returned from his UK visit this morning, said.
But, with a 7 per cent growth in gross domestic product (GDP) the worst fears for the economy have been put behind, Jaitley added.
The October-December quarter of 2016 was "substantially impacted by demonetisation (of higher denomination currency)," the finance minister said.
"I had consistently maintained that the revenue (tax collection) figures, which actually show the real level of growth, indicated that the growth was there, and some areas could be adversely impacted, particularly those which were cash dominated and also a part of the shadow economy and even constituted parts of the informal economy," he said.
The minister said demonetisation has helped integration of informal with the formal economy, adding the money that was deposited in the banks is now being spent through a system which is being recorded.
Agriculture growth, he said, this year is at a record high.
"And I think, the GDP data for Q3 really reflects that position," he said. "First of all it belies exaggerated claims made by many that the rural sector was heavily in distress."
"Obviously, high rate of agriculture growth has contributed to Q3 GDP. Also, manufacturing increase has contributed to the Q3 GDP and this was already reflected in the VAT data of the states and also the excise data of the Central revenue collection," he said.
The Central Statistical Organisation (CSO) yesterday projected a 7.1 per cent economic growth in the year ending March 31, the slowest since 2014 but still the fastest among major economies.
"Now that we are in the month of March, remonetisation has picked up substantially. I think a combination of remonetisation, resilience of Indian economy and some signs of growth returning back to the world, are evident and therefore I do expect in the future quarters this figure itself will grow further," he said.
"With remonetisation at an advanced stage, today money is in the market, demand is also increasing, economic activity is picking up... Economic reforms undertaken by the government will help propel GDP growth in coming quarters," he added.
Jaitley further said during his recent visit to the UK he held detailed discussions with different groups of investors.
"Now, the UK investors, whom I interacted, are extremely buoyant and positive about India. They see India as a bright spot in today's global economy and are extremely appreciative of the fact that even in the present global situation, India is one of the few economies which has consistently in one direction been able to bring about reforms and maintain a reasonably higher rate of growth as far as economy is concerned," he said.
The finance minister said he also had a series of meetings with members of the British government at highest level.
"They are extremely keen, particularly post Brexit, to expand their relationship with India. They have attached very high importance to the relationship with India and they already are major investors in India and they want to expand this and also expand mutual investments in both countries.
"Overall, I would say both the government and the private sector investors in the UK are extremely buoyant as far as India is concerned," he said.
The GDP data, released by the Central Statistics Office (CSO) yesterday, took economists by surprise who expcted the note ban to affect the economy.
The Congress has dubbed the GDP numbers as "surprising" and "highly suspect" that could dent India's global credibility and accused the prime minister and the finance minister of "misleading" the public.
Congress spokesperson Anand Sharma said the GDP numbers released are "misleading" as these do not factor in the adverse impact of demonetisation, including losses in jobs and production.
(With PTI inputs)