Demonetisation update 41 – Mint Street Memos

BTW, Mint Street Memo Feb. 2018 –  read together with the latest one  gives us a picture of the impact of demonetisation and GST. The picture that emerges is that the effect of demonetisation was shortlived. GST appears to have had a greater impact on MSME exports and credit than demonetisation. Surely, bank NPA problem has compounded the credit flow.

But, to the extent that GST was responsible for the export slowdown, I would view it as a long-term positive and short-term pain for long-term gain.

Also, these are in line with the World Bank Study that used ‘night lights’ to assess the impact of demonetisation:

The study says there was a dip in nightlight intensity during the time of demonetisation but it only lasted for about two months. This showed that demonetisation had a small and short-lived effect on economic activity in India at the aggregate level….The study assumes such informality is higher in rural districts or those with low access to finance and where regular wage workers account for a lower share of total employment…. The results suggest the more informal districts performed worse. The difference in local growth relative to a normal year was very small in urban districts, as well as in those with greater access to finance and with more of regular wage employment. [Link]

The full World Bank paper is here but the portion dedicated to analysing demonetisation is relatively small.

Now, if only someone could explain me the difference between the right and left panel charts of Chart 5B in this Mint Street Memo!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.