News Worms
News Worms

Takeaways From Raghuram Rajan's New Book

Takeaways From Raghuram Rajan's New Book

Slamming the government over the move, Raghuram Rajan said that he had already warned the government about the short-term costs of demonetisation outweighing the long-term profits.

Rajan's book gives a wonderful insight in form of various accounts reflecting his very unstable relationship with the present government.

"Although there may be long-term benefits, I felt the likely short-term economic costs would outweigh them, and felt there were potentially better alternatives to achieve the main goals", he wrote in the book.

What needs to be noted here is that this is for the first time Rajan has spoken about demonetisation since his exit from the post on September 3 past year. It contains Rajan's speeches on wide range of issues as RBI governor.

The Prime Minister Narendra Modi has scrapped Rs 1000 and Rs 500 notes overnight on November 8 a year ago terming it as a "surgical strike" against black money.

Days after the demonetisation, the former RBI governor had said: "My sense is the clever find ways around it".

Rajan, however, stated that the intent of the ruling Bharatiya Janata Party (BJP) regarding demonetisation was good.

In a recent interview with The Times of India, Raghuram Rajan, former governor of the Reserve Bank of India, said that it was important for India to get its citizens to pay tax, but that demonetisation had not proved to be a fruitful exercise.

He says, "As we found banks reluctant to recognize problems, we decided not just to end forbearance but also to force them to clean up their balance sheets".

Rajan's statement comes days after the central bank released data on demonetisation, according to which almost 99 per cent on the scrapped notes came back into the banking system.

Rajan opined that demonetisation has hit the country's poor the hardest. "Once again there were a bunch of critics who claimed that cleaning up the bad loan problem was what led to the slowing of credit by the public sector banks", Rajan writes in his forthcoming book "I Do What I Do: On Reforms, Rhetoric and Resolve". "The estimates I have seen range from 1 to 2 percentage points, and that's a lot of money - over Rs 2 lakh crore and maybe approaching Rs 2.5 lakh crore".

According to a report in the Reuters, Rajan had clearly said that demonetisation had a disruptive impact on the economy.

Kaushik Basu, another prominent economist wrote in New York Times, "Demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation".


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