1. Mark Mobius worried that demonetisation may hurt Narendra Modi government politically

Mark Mobius worried that demonetisation may hurt Narendra Modi government politically

Mark Mobius, Executive chairman of Templeton Emerging Markets Group doesn't think that the Narendra Modi government's demonetisation move is the right way to attack corruption.

By: | Updated: November 24, 2016 6:31 PM
Mark Mobius, Mark Mobius news, demonetisation, demonetisation updates Mobius is worried that the demonetisation step may hurt Modi’s election prospects. “His (Modi’s) party may be hurt. (Reuters file photo)

Mark Mobius, Executive chairman of Templeton Emerging Markets Group doesn’t think that the Narendra Modi government’s demonetisation move is the right way to attack corruption. “I think the purpose is very noble. They want to attack corruption and that is fine, but I am afraid this is not the way to do it. The big fish usually know what is coming and they can get away, and if you look at all the ways people are getting around this, you will find that it is not going to be that effective at the end of the day,” Mobius told CNBC-TV 18. Mobius is worried that the demonetisation step may hurt Modi’s election prospects. “His (Modi’s) party may be hurt. I really hope that does not happen because we believe that the Modi government’s efforts at reforms are very very good,” he said.

According to Mobius, the demonetisation move inconveniences a lot of very small shopkeepers and other people. “It is really unfortunate that they (government) took this route, I think it would have been better to take another route to attack corruption. But, in any case it is done and I think it will have an impact on economic growth, maybe half a percent less than what you would expect,” he cautioned. “It will tie up businesses for quite a while now. At least till the end of the year,” he added. Mobius is of the view that the impact of demonetisation will be over in a quarter or two. “I believe people would have adjusted by that time,” he said.

Also read: Mark Mobius: One of the most exciting things about India is Narendra Modi’s reforms

The market guru expects to see a fall in interest rates going ahead. “I am seeing a fall in interest rates mainly because the Modi government wants that to happen. They want lower interest rates and I believe that the inflation picture is not that dire. Inflation is pretty steady and I think they could afford another interest rate cut, despite what is happening in the US. I think there is going to be improvement next year, better consumption and lower interest rates and of course these two are in line, each one will affect the other and I believe that the prime rate has to come down,” he said.

 

Mobius is a buyer of the argument that demonetisation will allow the government to provide a fiscal stimulus to the economy. “I think it would be very positive going forward for the economy if the government is able to effectively invest in infrastructure and accelerate all the infrastructure projects, this would be very very good for the economy. This is one of the big barriers that India faces to accelerate growth,” he said.

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