The International Monetary Fund (IMF) said demonetization in India will slow down the country’s growth in 2016-17 to 6.6 percent.
The organization further mentioned in its annual country report on India released that even though the growth will slow down due to demonetization, but in long run the growth rate will bounce back to the expected growth of over 8 percent.
The currency exchange initiative kicked off last year on November 8 led to cash shortages and payment disruptions. This undermined consumption as well as business activity in the country and has resulted with a new challenge to sustain the growth momentum.
Released on February 22, the report added the Indian growth is projected to slow to 6.6 percent in the FY2016/17 and in the FY201/18 it will rebound to 7.2 percent.
The near-term growth will be supported by low oil prices, favorable monsoon, robust consumer confidence and continued progress in resolving supply-side bottlenecks.
IMF continued the investment recovery will remain modest across sectors.
However, above all these the first and foremost required for the country is to quickly restore the availability of cash to reduce further payment disruptions to as much as possible.
Above all such initiatives, the government should also encourage prudent monitoring of the potential side-effects of financial initiatives.