Indian economy is showing signs of distress all around and economists are not off the mark in their assessment
When Prime Minister Narendra Modi addressed the nation on November 8 and announced his government’s big move to tackle black money, currency counterfeiting and terror funding by banning old currency notes of Rs 500 & Rs 1,000, there were murmurs of protest.
Since then, economists like Amartya Sen, Kaushik Basu and many others have expressed criticism of this move to demonetise old currency notes and replace them with new notes in due course of time. They have talked about how this is going to hurt the economy as it sucks out liquidity. The effect on the informal (not to be confused with black) economy have been talked about. The view from economists – barring few – has generally been bleak.
Not to say that the Modi government’s move has not found support. Economists like Bibek Debroy, Surjit Bhalla and celebrities like Aishwarya Rai, Baba Ramdev and Amitabh Bachchan have expressed their support for this audacious move.
Corporate figures have had different views but some have supported the move as transformational. HDFC Bank MD, Aditya Puri does not believe what economists are saying about the economic consequences of demonetisation. Puri is gung-ho about India going cashless as it would lead to higher levels of transparency he says. Read about it here
When asked whether the exercise has been executed well, he says, “I don’t have the guts to say there is no pain but then let’s look at it in two ways — transition and long run. Transition is 50 days when the currency has been pulled out and has to be put back.”
He adds how people were responsible for shortages, “Yes, there was a combination of issues such as people misusing the banking system and then creating shortages, people making a lot of noise and not creating normalcy and long queues etc, but the worst is behind us.”
While disagreeing with the general view held by economists, he asks how often they have been right. So, what does the news from around India say about the economy? Is it stuck or moving smoothly? Are economists wrong?
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