The UN does not see a demonetisation as a long-term threat to India’s economy. Although it will have a short-term effect due to shrinking consumer spending, as per an official monitoring the global economy. The UN World Economic Situation and Prospects Report released on Tuesday forecasts 7.6 percent growth rate in 2018. The International Monetary Fund World Economic Outlook Update released on Monday cut India’s growth rate for the current year by 1 different from the estimation made last year to 6.6%. The World Bank has trimmed its projection for the current fiscal year by only 0.6 percent to 7 percent. The UN report, however, had the 2016 growth projection for India at 7.6 for 2016 and 7.7 for 2017. It is also to be marked that the global economy is expected to grow by just 2.2 percent in 2016 and 2.7 percent in 2017.
“We don’t think it should have a long-term impact,” Dawn Holland, a senior economic affairs officer with the UN Global Economic Monitoring Unit said, as per News18 reports. “We expect the economy to return to the rates of growth we have in our current forecast.”
“We don’t expect the country to be in a recession,” Holland said. “That’s not the level of impact we expected. But that will definitely slow the rate of consumer spending in the short term.”
Holland explained the situation by saying that, it was because the report was finalized around early November 2016, post the announcement of the withdrawal of the Rs 500 and Rs 1,000 notes. “It hasn’t been revised to take into account the impact that might be expected from that,” she said, adding: “We will be looking to revise that down somewhat” when the report is updated in April.
“We do expect is that as we have seen from the first signs that the cash shortages that have resulted in will have significant impact on consumer spending in the short term,” she said, “in the fourth quarter of 2016 and also following into the first quarter of this year.”
