Chief Economic Advisor Arvind Subramanian on Thursday made a statement on demonetisation which can be interpreted in many ways! Speaking on demonetisation he said, “I am glad I was silent (on note ban) for a very long time, because God knows what I might have said & regretted later on,” he told CNBC TV 18. He further said that “demonetisation was a decision taken by a select group of people & we all had to follow up & analyze it”. Talking about GST he said, the goods and services tax (GST) rates must be as low as possible, while the new tax must have a broad base and a simple structure. The GST Council had earlier decided that the proposed comprehensive indirect tax will have a four-rate (5%, 12%, 18% and 28%) structure. A panel headed by the CEA had estimated the revenue-neutral rate for GST — on a tax base it assumed — would be 15-15.5%.
As a result of demonetisation, bad loan crisis of state-owned banks surged 56.4 per cent in the 12-month period ending December 2016. It is set to rise further in the next two-quarters with the small and medium sectors struggling to repay the loans after the NDA government’s demonetisation move. Despite the Reserve Bank of India (RBI) announcing numerous restructuring schemes, the bad loans have risen up from Rs 261,843cr by 135 per cent in last two years. They now constitute 11 per cent of the gross advances of Public Sector Unit (PSU) banks. In all, the total NPAs including both the public and private sector banks were Rs 697,409cr in December 2016. These figures were compiled by Care Ratings.
Meanwhile, Subramanian again hit out at the rating agencies and said that we cannot base our policies on what rating agencies say. In a conversation with ET Now he said, “Banks’ credit operations could have been partly hurt due to demonetisation. The government and RBI have taken up the issue of bad loans as their highest priority”.