Stopping just short of saying that demonetisation could have been better planned, former RBI governor Raghuram Rajan called for strong measures to tackle bad loans and debts in the banking sector which are holding back economic growth.
Rajan also said that "double-digit economic growth" would be "hard to achieve" without considerable efforts to improve quality of country's education system and skill-building initiatives.
The former RBI governors' remark came at a time when India's Gross Domestic Product (GDP) growth during the first quarter (April-June) of financial year 2017-18 was recorded at 5.7 per cent. The GDP growth rate for the same quarter last year was 7.9 per cent.
He said the GST would yield positive results in the long run.
"I think on the positive side, a number of reforms have been undertaken, some of which, like GST, may have a short-term negative effect, but hopefully in the longer run, will have a very positive effect," he said in an interview to HT.
"We have undertaken reforms. We have established a little bit of a reputation for doing the reforms," he added.
Speaking on the demonetisation, Rajan said the process of introducing new notes to replace the withdrawn currency had begun in May.
" We had started the process of designing the new notes. The new notes - 2000, 500 and a new 1,000 - had been approved in May. To say none was done would be incorrect. But a monetary economist would've liked for all the notes to replaced at one go," he said in an interview to NDTV.
When asked if the government should have gone ahead with the note ban, he said, "We don't yet know the full effects of demonetisation. Based on information that we have now, ignoring future dividends, the answer is fairly obvious."
He also said businesses which were predominantly cash dependent and operating on thin profit margins took a major hit due to the note ban.
"If you're not prepared on Day 1 with all the currency that's being replaced - currency is important for economic activity - you will have a chilling of economic activity. You would see a dramatic slowdown of economic activity," he told NDTV..
"A second factor that you to worry about is putting some companies that operate on thin margins out of business. Sales plummet, they can't ride out the storm, they go out of business. Third element is effects on investor sentiment. If there is a concern it is long-drawn out process, there can be concerns of how it will affect consumption," he added.
On his two-year extension as the RBI governor, Rajan said that the government did not offer him a new contract. He also denied rumours that he refused to continue as RBI Governor because the Chicago University had denied him more leaves.