Demonetisation to relegate growth to 6% - 6.5% for 2 years

The Dollar Business Bureau

Former Finance Minister P Chidambaram harshly criticised the demonetisation move, saying that the economy is stuck with a 6% to 6.5% growth rate in the next two years due to the 'ill-conceived' move.

"You take it from me, the economy will not grow at more than 6 and 6.5 percent in 2017-18 and 2018-19. It will take two years for the economy to recover. People have lost confidence in currency. People are not spending," he said.

Terming interference with the economy on such a large scale 'unnecessary', Chidambaram called the note-ban 'thoughtless' and 'ill-conceived', at the second anniversary celebration of Mana Telangana, a Telugu Daily.

Citing increased corruption among banking officials post demonetisation, he pointed out that the government had shrewdly changed the motive of the move from initially 'eradicating corruption' to 'making India cashless' later.

"If ten percent of bank officers were dishonest earlier, thanks to demonetisation, 50 percent of the bank officers became dishonest. So the very exercise generated more corruption, not less corruption," he said.

He also insinuated that RSS pulled all the strings while the Modi government simply danced to its tune, referring to the fact that none of the people who should have been consulted were involved. Adding to these caustic remarks, he said that former RBI Governor, Raghuram Rajan, had categorically rejected the idea of demonetisation, and most former RBI chiefs also disapprove of it.

"The finance secretary was not consulted, the banking secretary was not consulted and the Chief Economic Adviser was not consulted, and then who was consulted? They must have consulted some RSS pracharak," The senior Congress leader said. Earlier, in December, Chidambaram had called demonetisation the 'biggest scam of the year'.

Along with such acid attacks from the opposition, international institutions such as IMF have also downgraded growth expectations from this fiscal to 6.6%, which is one percentage point lower than earlier estimates. The cash crunch has harmed consumer sentiment and significantly damaged growth in this fiscal. But the Centre seems to have faith in its long term positive structural changes.