Former Reserve Bank of India Governor Raghuram Rajan on Thursday said that demonetisation was not a good idea and was not a well-planned and well thought-out exercise. According to a report in indianexpress.com, while addressing students of Harvard Kennedy School, Rajan, however, clarified that RBI was consulted before demonetisation .
He said, “We (the RBI) were consulted. We felt it was not a good idea, and told the government. It seemed to me people will find a way around it.”
Post demonetisation India’s growth rate slowed down. In the last fiscal the economy grew by just 6.6 per cent as it took time to recover from the impact of demontisation of high-value currency notes . Rajan said “I don’t think there is a huge amount of dispute around it. I don’t even think the government challenges it. It was not a policy that was useful.”
During demonetisation people easily converted their black money into white by paying some premium. People rushed to buy gold to exchange their old notes, as sellers too sold gold at higher rates. Rajan said, “Anybody who knows India knows that we quickly find ways to get around. Many turned to brokers, and converted the black money to white for a price. It did not have the direct effect as was expected.”
Separately, he also said that it is unfair to compare China and India, as China is five times the size of India. China has an edge over India in terms of construction and infrastructure. According to statistics, India loses 14 per cent of its gross domestic product (GDP) due to inefficient logistics.
Meanwhile, the latest report by the Asian Development Bank (ADB) states India’s GDP is expected to grow at 7.3 per cent in 2018-19 and 7.6 per cent in 2019-20. The growth should come on the back of implementation of GST and various banking reforms.