Lashing out at Narendra Modi government over impromptu implementation of demonetisation former finance minister P Chidambaram said, “Immediate fear may dent black money for some time, but it won’t curb the unaccounted currency because despite the ban on high denomination notes the sectors that generate unaccounted transactions are free to do it.”
Speaking to ET Now in an interview he said, “Both black and white economies co-exist in all countries across the world. Though it is not a good thing but you can’t avoid it and in India, it will co-exist because several transactions happen only in cash. For instance, agriculture income in cash legitimates but not taxed, temple income legitimates but not taxed and same happens with organisation like NGOs’ funding legitimates but not taxed. So, you can’t avoid it.”
Saying demonetisation has been badly implemented, he said, “No major economy in the world in last 50 years has taken this kind of so-called demonetisation.”
On the question, how would you have implemented demonetisation drive, he said, “I would never do this.” Thereafter, he said,”If I would do that, there would be three things….First, My goal would be to move high denominations transaction in digital and keep cash transaction only in the lower denomination. And, print Rs1000 notes from today and we will phase out Rs 500 notes in about two years.
Second thing, that government can still do, they should reintroduce the banking cash transaction tax, that will keep a trail of large withdrawal and deposits of cash.
And finally, certain transaction should not be done in cash, they should be through cheques, espacially large value transations.”
Chidambaram also expressed fear that government may reject this suggestion only because it is coming from him.
He further said, “In a large economy where the 98 per cent of monetary transactions are cash you cannot move to a so-called cashless society by a midnight announcement. Even America and Japan are not cashless society. The only near cashless society in the world is Sweden.”
Fearing low GDP growth he said, “the move will also impact the GDP growth and government’s expectation of 8.1 per cent growth in H2 won’t be met. Adverse to government’s expectation he assessed about 5-6 per cent GDP growth this year.