Demonetisation & GST Role On GDP @4.5% – Free PDF Download

• The GDP numbers for the July-September  quarter come after 6 consecutive quarters  of falling GDP growth rate.

WHO WAS AFFECTED THE MOST FROM DEMO. & GST?

• It is obviously the informal sector and the people  employed in this sector.

WHY?

• Because they mainly deal in Cash.
• Like- purchasing of raw materials, giving wages to  employees etc.
• Since the cash was squeezed from the system, they  were badly affected.

IS THERE ANY PROOF?

INDIRECTLY, THIS BENEFITED FORMAL ECONOMY

• As the informal sector got affected, the supply of goods and services also reduced.
• But the demand more or less remained the same.
• Hence to match the demand, the informal sector benefited.

THIS LED TO INCREASE IN GDP IN SHORT RUN

• Since the GDP numbers more represents the  Formal Economy.

BUT IN THE LONG RUN IT ALSO AFFECTED THE  FORMAL ECONOMY.

HOW?

• The income of small businesses and people who lost jobs decreased
• Hence their demand also started decreasing.

• This finally led to cut in the production by formal sector economy specially the lower prices
• Hence the GDP @ 4.5%

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