“In the six quarters before demonetisation, growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four quarter window, the relevant numbers are 8.1 per cent before and 6.2 per cent after),” Subramanian wrote in chapter "The Two Puzzles of Demonetisation -- Political and Economic" of the book.
Subramanian stressed on the fact there is no dispute over the slowdown of growth post demonetisation but the debate has been about the size of the effect. “After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and oil prices,” he said.
“When a shock like demonetisation occurs, that primarily affects the informal sector, relying on formal indicators to measure overall activity will overstate GDP,” Subramanian wrote according to IANS. The economic expert also believes that any squeeze in informal sector incomes would depress demand in the formal sector and this effect should have been sizable.
Talking about the positive impacts of demonetisation, Subramanian said that the move may have enabled more people to shift from cash transactions to electronic payments such as through debit/ credit cards or electronic wallets.