ISAS Insights

Official data released a few weeks ago have indicated that the negative impact of the Modi government's decision to demonetize high value currency has not been as heavy as feared. Notwithstanding this better than expected growth estimate, demonetization has taken a heavy toll. Output of as much as one percent of GDP may have been lost. Besides, hundreds of millions of people, especially low income households, suffered pain and hardship. To compensate for that, the government will have to show benefits by way of a sustainable increase in the tax to GDP ratio and enduring improvement in the investment climate.