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Parliament paralysed for seventh day as demonetization woes continue

 
Their problem is they couldn't prepare before demonetisation: PM Modi on critics
Parliament remained paralysed for the seventh day today and both Houses were adjourned without transacting any substantial business as the Opposition continued to create a ruckus over the Government's November 8 decision to demonetize Rs. 1000 and Rs. 500 notes and related issues.
 
Opposition parties continued to demand that Prime Minister Narendra Modi apologise for remarks he made against them earlier in the day.
 
They alleged that Mr. Modi had accused them, while speaking at a function, of holding black money.
 
Congress, Trinamool Congress, SP, BSP and Left in the Rajya Sabha and the Lok Sabha, took strong objection to Mr. Modi’s comments that “some people” were criticising demonetisation because “the government did not give any time to them to make any preparation (to convert black money into white).” 
 
In the Rajya Sabha, as soon as the House met for the day and mourned the death of its former member Dipen Ghosh, BSP leader Mayawati was on her feet saying the Prime Minister had this morning “wrongly accused opposition of holding black money” and demanded that he should apologize for his remarks.
 
Leader of Opposition Ghulam Nabi Azad asked how Mr. Modi could allege when former Prime Minister Manmohan Singh and others had clearly said that the Opposition was against black money. Opposition leaders said the Prime Minister was making allegations that the Opposition was against demonetization outside the house but did not have the courage to do so inside Parliament.
 
Lok Sabha Speaker Sumitra Mahajan adjourned the House twice following noisy scenes with Opposition members trooping into the well. The same scene prevailed in the Rajya Sabha which saw repeated adjournments.
 
The Opposition has been demanding the Prime Minister's presence in Parliament, besides admission of adjournment motions with voting to discuss demonetization. The Government has rejected the demands.
 
Meanwhile, the Government stopped the exchange of old Rs. 500 and Rs. 1000 notes across the counter at banks. People will now have to deposit these notes in their bank accounts before the deadline of December 30.
 
There have also been reports that the Government was considering amendments to the Income Tax Act in Parliament to allow people to deposit their unaccounted money in their bank accounts and pay 50% tax and penalty on it. There may also be a provision for lock-in of the funds for about five years, the reports said.
 
Meanwhile, reputed rating agency Fitch said demonetisation would have a negative impact on India's GDP growth in the short run but, on the positive side, it may improve the fiscal position. 
 
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Thomas Rookmaaker, Director in Fitch's Asia-Pacific Sovereigns Group, said macroeconomic effects of cash crunch due to demonetisation include a temporary delay of consumption and investment, disrupted supply chains, farmers being unable to buy inputs, and some loss in productivity due to time lost to deal with cash issues, according to media reports quoting him.
 
“There are many elements to demonetisation, which make it difficult to quantify the impact on real GDP growth and explains the wide range of forecasts by different analysts,“ he was quoted as saying. 
 
Fitch felt that the impact on GDP growth depended to a large extent on how long the cash crunch is going to take to ease. A significant decline in growth number for this quarter is highly likely, but for the fiscal year as a whole the decline may still be relatively moderate.
 
Despite demonetisation, Fitch still expects India’s GDP growth to trend higher than China’s in the medium term. In India it expects GDP growth to accelerate in FY2018 on the back of reform implementation, monetary easing of the past year and infrastructure spending, while in China a continued increase in leverage in the broader economy is more and more becoming a burden for growth.
 
The rating agency said beyond the immediate policy issues of managing the cash crunch as best as possible and trying to mitigate the worst side-effects, it would be interesting to see what further steps the government will take to formalize the economy and structurally generate higher government revenues, the reports added.
 
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