‘It Is Just A Slowdown, Along With A Global Slowdown'

Demonetisation and the Goods and Services Tax led to a greater formalization of the economy, says Niti Aayog Vice Chairman Rajiv Kumar in a conversation with BW Businessworld’s Suman K. Jha

- Suman K. Jha

Do you think the economic slowdown that we are witnessing here is an India-specific phenomenon, or is it part of a global phenomenon?

I would say it is part of a global phenomenon. Even the IMF has brought down its estimate of global growth from 3.6 to 3.2 percent. We are beginning to see a substantial slowdown in the European region as also in Japan. It is also to be noticed that the effect of fiscal measures taken by President Trump for boosting growth in the US has started to wear off. In our case, the slowdown is a result perhaps, because of global factors and the inevitable uncertainty caused before the elections. Also, there is a lingering impact of the problems in the financial sector.

Do you think that demonetization and an imperfect rollout of GST have also contributed to the slowdown, especially a contraction of the informal sector?

I have been a strong supporter of demonetization and I don’t attribute any causation to it. If, however, you mean that demonetization and GST have led to a greater formalization of the economy, I would agree because that is what is required, and it results in more sustainable economic growth. So, the informal economy has contracted and that also means that the nature of economic activity in the country is changing. Therefore, we need more liquidity and facilitation to support the emergence of the formal sector of the economy and in a more robust manner.

There is a school which says that there is less demand in the economy and the government has failed to create demand…