Even as the Narendra Modi-led government is facing a lot of backlash for the demonetisation move, JP Morgan’s CEO Jamie Dimon lauded the Prime Minister saying that it was a very bold move. In an interview to CNBC TV18, he said, “In my view, it (demonetisation) has created a lot of bank accounts. It has reduced corruption that you don’t know about; poured a lot of the things back into the real system; so it has all those benefits.”
The government’s move came under the scanner after RBI data revealed that nearly 99% of the discontinued notes came back into the system, by the end of 2017. The numbers drew strong criticism from the various quarters, and prompted P Chidambaram, the erstwhile Finance Minister to say that demonetisation provided the black money hoarders a very convenient mechanism to make their black money white. Responding to the statement, Finance Minister Arun Jaitley said that the fallout of demonetisation was on predicted lines and the economy will benefit in medium and long term. Jamie Dimon too believes that the move will certainly provide long-term benefits. India’s Apr-Jun GDP growth which fell to 5.7%, also drew flak from the opposition who blamed demonetisation for the rude shock.
Backing the government on the move, Jamie Dimon said that the falling GDP growth is not a worry. “Everyone is disappointed about (growth being) 5.7% and not 7%, but that’s still a lot of growth. Prime Minister has done some very smart and tough things to do.” Elaborating on the policy decisions so far he said, “ It’s amazing that he has created a majority — the tax he put in place, finishing the biometric, bankruptcy laws, real estate — these are the things that are setting the road to have better growth forever.”
Jamie Dimon is certainly bullish on the long-term payoffs of these policy decisions. In the same conversation he said, “What a country needs to do is set up the things that make a country grow: education, health, infrastructure, competitive tax system. I know that when I come in 10 years, India is going to be a lot bigger than it is today,” adding that the focus should be always on the long-term as even a wrong policy decision could lead to a bigger (GDP growth) number in the short-term.
According to news reports, the government is considering a Rs 40,000 crore fiscal stimulus to the economy to boost exports, support MSMEs, and expand bank credit, even at the cost of letting the fiscal deficit widen a little. Further, the government may also infuse Rs 25,000 crore more into recapitalising state-run banks, in addition to the Rs 15,000 crore already budgeted. This additional amount of Rs 25,000 crore is not a part of the Rs 40,000 core stimulus package calculation, an ET Now report said yesterday.