1. Modi’s war on cash has pushed Indian economy into contraction, says American economist Steve Hanke

Modi’s war on cash has pushed Indian economy into contraction, says American economist Steve Hanke

Criticising Prime Minister Narendra Modi's decision to demonetise higher value currency notes, noted American economist Steve H Hanke today said India's "war on cash" has pushed its economy into contraction as anticipated.

By: | Washington | Published: January 4, 2017 4:20 PM
"Manufacturing takes the hit as the war on cash in #India adversely impacts the economy. #Modi," he added. (Twitter) “Manufacturing takes the hit as the war on cash in #India adversely impacts the economy. #Modi,” he added. (Twitter)

Criticising Prime Minister Narendra Modi’s decision to demonetise higher value currency notes, noted American economist Steve H Hanke today said India’s “war on cash” has pushed its economy into contraction as anticipated. “#Modi has officially steered #India’s economy into contraction as a result of his war on cash. Just what I anticipated would happen,” Hanke, an American applied economist at the Johns Hopkins University in Baltimore, Maryland said in a series of tweets.

“Manufacturing takes the hit as the war on cash in #India adversely impacts the economy. #Modi,” he added.

Hanke, who is also a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute in Washington, DC further said, “Demonetization will cause #India to slip from the leaders board for economic growth in #2017.”

Referring to interest rate cut by some Indian banks post demonetisation, the eminent economist said,’Indian #banks have slashed interest rates to stave off economic decline and to spark investment. A #demonetization disaster @zerohedge.”

Prime Minister Narendra Modi on Novermber 8 had announced demonetisation of Rs 1,000 and Rs 500 notes making them invalid in a major assault on black money, fake currency and corruption.

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Following demonetisation, the manufacturing sector contracted in December as new work orders and output took a knock for the first time in 2016.

The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — an indicator of manufacturing activity — fell to 49.6, down from 52.3 in November.

The index came in below the crucial 50 threshold — which separates contraction from expansion — for the first time in 2016 in December.

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    laxmiram
    Jan 5, 2017 at 3:16 am
    any government which sits on ego is bound to face the consequences. political parties may taste temporary success but in the long run will face the music . As rightly said, India does not have bandwidth nor literacy nor speed nor infrastructure like fibre obtic cables. emails take eternity to load, credit card swipe takes time, call drops a nuisance. how india will go cashless or digitalized is not clear. it is like putting cart before horse. hope is eternal
    Reply
    1. p
      p.Raghu Ram
      Jan 4, 2017 at 4:09 pm
      without increasing bandwidth and connectivity it is very difficult to go for digital economy.
      Reply
      1. S
        Sangeeta
        Jan 4, 2017 at 11:26 am
        Well said, the demonetisation has lead to contraction of the demand. Politicians in India tend to do for getting political mileage and many times which lead to weakening of the economy. The demonetisation and reduced cash supply has forced people to stock cash instead deposits in the Bank. People would end up keeping more low denomination cash. Payment in other than cash for goods and services may take time to accept and practice in rural areas due to literacy.
        Reply

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