Manmohan’s prediction on adverse impact of Modi’s demonetisation on GDP is bang on
New Delhi, Sep 1: It is not for anything that we are asked to listen to well-meaning and wise advises from elderly and educated people. Perhaps, Prime Minister Narendra Modi too should have listened to his predecessor and well-known economist Manmohan Singh regarding demonetisation and its impact on the Gross Domestic Product (GDP) of the country.
In November last year, Modi in a televised address to the nation announced the demonetisation of high-value currency notes of Rs 500 and Rs 1,000. The immediate impact of the highly controversial move by the National Democratic Alliance (NDA) government at the Centre was the long queues of people outside banks and ATM kiosks as cash went missing from the market.
It caused a lot of pain to the public as they went panic to exchange their old and invalid notes from banks. A lot of trouble was also caused as banks and ATMs hardly had enough new currency notes to give to the customers who were queuing up in front of them.
Modi told India that the demonetisation was a step to curb black money, corruption and terror funding. However, not all agreed with him.
After witnessing the trauma of the people, Modi's predecessor Singh, after a few days of demonetisation, spoke on the adverse impact of note ban on the Indian economy in the Rajya Sabha.
Singh, during his stints as the PM, was criticised for maintaining a "stoic silence" on various scams that hit the United Progressive Alliance (UPA) governments. The opposition parties, especially the BJP, said Singh was turning a blind eye on the corruption scandals.
However, at that time when people on the streets were complaining about the difficulties they were facing due to cash crunch in the wake of scrapping of Rs 500 and Rs 1,000 currency notes by Modi regime, Singh decided to come out from his self-imposed exile and spoke eloquently on the subject.
His take on demonetisation hit the bull's eyes, helped by the fact that Singh is a renowned economist, who also headed the Reserve Bank of India (RBI) and Finance Ministry earlier.
Demonetisation, hailed as Modi's "masterstroke" by his supporters, was labelled as an "organised loot and legalised plunder" and "monumental mismanagement" by Singh.
The former PM's criticism on demonetisation was not to target the Modi government, but to tell the voters of India that how a "hasty and unplanned" economic decision could directly hit the GDP.
Singh predicted that GDP will slow down by at least two per cent which will hurt the people in agriculture, small industries and in the informal sectors.
Nine months after Singh's prediction on demonetisation and its impact on the GDP, on Thursday, when the figures of country's GDP for the first quarter of the current fiscal that ended in June were declared, the former PM and the economist was proved right about his assessment on the whole issue.
It showed that India's economic growth has slid to a three-year low, partly due to demonetisation. India's GDP growth has sharply dipped to 5.7 per cent in Q1 Of 2017-18.
After the GDP figures were out, twitterati were quick to recall what Singh had said and how his prophecy has come true to the horror of all.
So Manmohan Singh was not Absolutely wrong when he said that GDP likely to go down 2% after demonetization.Its down exactly 2% Now— Narendra nath mishra (@iamnarendranath) August 31, 2017
Dr Manmohan Singh called #DemonetisationDisaster "organised loot and plunder" & said it would hit GDP by 2 percent. He was spot on.— Swati Chaturvedi (@bainjal) August 31, 2017
So much maligned Dr Manmohan Singh was not quite wrong. 2 per cent plus negative impact on GDP growth post DeMo! #DeMo— Rajdeep Sardesai (@sardesairajdeep) August 31, 2017
Turns out Dr Manmohan Singh was right about demonetisation. India's GDP shrunk by a staggering 2.2%. After all, he was PM, FM & RBI Governor pic.twitter.com/GgMPivjUYq— Milind Deora (@milinddeora) August 31, 2017
GDP and GVA figures are more evidence of Dr Manmohan Singh's indictment of 'monumental mismanagement'.— P. Chidambaram (@PChidambaram_IN) August 31, 2017
Exactly. When Dr Manmohan Singh said that demonetisation would cost us 2% in GDP growth he had no clue what he was talking about! https://t.co/TBDiiepsMa— Omar Abdullah (@OmarAbdullah) August 31, 2017
After Singh's warnings, even BJP's ally, Shiv Sena, asked Modi government to listen to the former PM's suggestions as he was a renowned economist. The pundits hailed Singh's analysis on demonetisation as "matured" observations.
However, Modi did not take the advice of Singh in the right manner. Rather, the PM sounded angry over the message in Singh's speech.
At a rally after demonetisation, Modi indirectly targeted Singh and other critics.
"Kya kya bole. Parliament me bola, gaon, galliyon me jaakar chillaya, Bharat barbaad ho jayega. GDP 2 per cent kam ho jayega, koi kehta kisan barbaad, fasal barbaad, berozgaari aajayegi. Daily ek jhoot. (They've spoken in Parliament (referring to Singh's speech), they've shouted in the villages and streets that India will be destroyed, GDP will dip by 2 per cent, they have said farmers and crops will be destroyed and unemployment will rise. Daily one lie)," Modi said.
Even now, Modi government is not ready to admit its fault about how the note ban has pushed back the economy of the country in several fronts, causing harm to the people, espcially the poor and those employed in unorganised sectors.
Finance Minister Arun Jaitley on Wednesday said, "Some people had expected a very large shock to economic growth on account of demonetisation. Their expectations have been belied."
Along with Singh, several other economists like Nobel laureate Amartya Sen too had warned about the pitfalls of the note ban.