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India acknowledged rupee withdrawal was bad

India acknowledged rupee withdrawal was badIndia's government has admitted controversial withdrawal of high value banknotes late last year has had an "adverse impact" on the economy, according to BBC on Tuesday.

The country's Economic Survey, released on the eve of the national budget, said the measures had slowed growth.

The dramatic move to scrap 500 ($7.60) and 1,000 rupee notes was intended to crack down on corruption and so-called black money or illegal cash holdings. But it also led to a cash shortage, hurting individuals and businesses.

The report forecast that India's economy would grow 6.5% in the year to March 2017, down from 7.6% the previous financial year.

But it also stressed that the estimate was based "mainly" on data from before the note withdrawal kicked in - causing some to suspect growth may be lower still.

India's Finance minister Arun Jaitley who will deliver the Union budget in Delhi on Wednesday, said he expected the economy to "revert to normal" from March onwards after supplies of cash in the economy were replenished.

"The adverse impact... on GDP will be transitional", the government's chief economic adviser, Arvind Subramanian, wrote in the report.

"Growth slowed as demonetisation reduced demand ... and increased uncertainty," he added, saying negative impacts included including job losses and falling income for farmers.

However the report said the scheme could be "beneficial in the long-run" if corruption fell and there were fewer cash transactions - many of which are done to dodge taxes.

Prime Minister Narendra Modi announced the so-called "demonetisation" policy on November 8 last year. Within hours the two notes were no longer accepted as legal tender - taking the equivalent of about 86% of India's cash supplies out of circulation and sparking scenes of chaos outside banks and cash machines.

The government has previously said the move was a success with the banks flush with cash and significant increases in tax collection.
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