Demonetisation likely to have short-term effect on economy: Sinha

Our Bureau Kolkata | Updated on January 12, 2018 Published on January 17, 2017

U. K. Sinha, Chairman, Securities and Exchange Board of India, addressing a seminar on ‘Developing the Indian Capital Markets – SEBI’s Role, Issues and Challenges’ at the Bharat Chamber of Commerce in Kolkata on Tuesday. - Ashoke Chakrabarty

Demonetisation is likely to have a short-term effect on the economy, U.K. Sinha, Chairman, Securities and Exchange Board of India (SEBI), said here on Tuesday.

Quoting data from the International Monetary Fund (IMF), Sinha said although the international organisation has scaled down its growth projection by 100 basis points to 6.6 per cent for the current fiscal, growth for 2017 is pegged at to 7.2 per cent and the projection for the year is intact at 7.7 per cent.

“If these projections are anything to go by, then you will see that GDP is steadily growing. Hence, the impact of demonetisation will be short-term,” he said during an interactive session organised by the Bharat Chamber of Commerce.

Demonetisation, from the academic point of view, would lead to more money coming into the formal system. This would be good for the economy. And IMF’s projections show just that, he pointed out.

According to Sinha, there has been a $11-billion foreign portfolio investment outflow in the October-December period of this year. However, to what extent demonetisation was the reason behind this outflow was yet to be analysed.

“It will take three to four months time," he said, adding that there were a few other global developments, including the US Presidential election results and a hike in Fed rates, which coincided with India’s decision to demonetise Rs 500 and Rs 1,000 currency notes.

Pointing out that the Indian capital market is more resilient, with its dependence on foreign flows getting lowered, Sinha said the Indian rupee was still stable despite the capital outflows. Had it been three to four years earlier, the situation would have been different.

Published on January 17, 2017
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