The impact of demonetisation “on the weaker sections of our society and business is far more damaging than any economic indicator can reveal,” said former Prime Minister of India Manmohan Singh in an exclusive interview on the first anniversary of the Narendra Modi government’s move to declare all five-hundred and thousand rupee currency notes invalid.
In a rare interview to Praveen Chakravarty, contributing editor at BloombergQuint, Singh expressed concern regarding the loss of jobs in the small and medium enterprises sector and also emphasised the exacerbating impact that may have on inequality.
...rising inequality has been a constant threat to our nature of economic development. Demonetisation may exacerbate such inequalities which can be harder to rectify in the future. In such a diverse country such as ours, inequality can prove to be a far greater social malaise than in other homogeneous nations.Manmohan Singh, Former Prime Minister, India
The Modi government has often explained the demonetisation move as an effort to reduce cash-based transactions and nudge the economy towards digital payments. Singh agrees that these objectives are “laudable pursuits”.
But, he adds:
...we also need to get our economic priorities right. It is unclear that these goals of cashless economy will indeed help small enterprises become larger and achieve scale efficiencies. That should be our priority.
The former prime minister, also a noted economist, struck a similar note regarding the need to formalise the Indian economy. Commenting on whether efforts to bring the country’s vast informal economy, by some estimates at 40 percent of gross domestic product, into the tax net via demonetisation and the Goods and Services Tax, Singh said “the means is as important as the ends” and the ends cannot be achieved “through coercion or threats or raids which can be counter-productive”.
Singh called on his successor and current Prime Minister Narendra Modi to work towards consensual policy solutions to rebuild the Indian economy.
I strongly feel the time for politicking over demonetisation is over. It is time the Prime Minister graciously acknowledges the blunder and seeks support from all to rebuild our economy.Manmohan Singh, Former Prime Minister, India
(For more on Singh’s views on GST, RBI and challenges facing the economy read the full interview on BloombergQuint.)
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