Pros & Cons: What Do Top Economists Think About Demonetisation?

What do the stalwarts of the field make of the sudden cash ban imposed on India by Narendra Modi? Is it sound?

More than a month has passed since demonetisation. What do the experts have to say till now? (Photo: iStock)

More than a month has passed since Prime Minister Narendra Modi demonetised Rs 500 and Rs 1,000 currency notes in one fell swoop. With that, the country stirred into action, with people either criticising the government for a poorly-planned policy which they say hurt only the poor, or others, lauding Modi, ready to deal with short-term discomfort for the long-term gains they have been promised by their leader.

As we approach the 50-day deadline set by the PM after which things will apparently be easier, let’s take a look at what experts from the field of economics have had to say.

Where do they weigh in, and where do they differ?

Against The Move

Professor Amartya Sen is a 1998 Nobel Prize winning economist. (Photo: The Quint)

Lawrence Summers is a former Secretary of Treasury of the US. (Photo: The Quint)

Lawrence Summers is a former Secretary of Treasury of the US. (Photo: The Quint)

Paul Krugman is a 2008 Nobel Prize winning economist and an author. (Photo: The Quint)

Paul Krugman is a 2008 Nobel Prize winning economist and an author. (Photo: The Quint)

Other economists believe that unless systematic changes are made to vulnerable points where corruption occurs, black money will persist, including Manmohan Singh (former RBI governor and prime minister), Kaushik Basu (Senior Vice-President, Chief Economist at World Bank), and Arun Shourie (former economist at World Bank). 

Also Read: At 45 mn Rs 500 Notes a Day, It Could Take Months For Normalcy

For the Move

Jagdish Bhagwati is University Professor at Columbia University. Pravin Krishna is Professor of International Economics at Johns Hopkins University. Suresh Sundaresan is Professor of Finance at Columbia Business School. (Photo: The Quint)

Jagdish Bhagwati replies to Amartya Sen’s objections to demonetisation.

Jagdish Bhagwati is University Professor at Columbia University. Pravin Krishna is Professor of International Economics at Johns Hopkins University. Suresh Sundaresan is Professor of Finance at Columbia Business School. (Photo: The Quint)

KV Kamath is the chief of the New Development Bank of all BRICS countries. (Photo: The Quint)

KV Kamath is the chief of the New Development Bank of all BRICS countries. (Photo: The Quint)

S Gurumurthy is a chartered-accountant-turned-Sangh-ideologue with a strong influence on economic policy making within the government. (Photo: The Quint)

S Gurumurthy is a chartered-accountant-turned-Sangh-ideologue with a strong influence on economic policy making within the government. (Photo: The Quint)

Ironically, Kenneth Rogoff, author of The Curse of Cash and a professor of economics at Harvard University also writes about how the goal is to become a “less-cash” society, while criticising the implementation of the "swift” move in India.

Other economists who believe that the move to demonetise currency had to be done with an element of surprise to succeed in its goals, despite short-term pain: Arun Jaitley (current finance minister), Bibek Debroy (leading economist, member of Niti Ayog), Arvind Virmani (former chief economic advisor to government of India).

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