Demonetisation was a misguided concept which along with the poorly implemented GST badly hit the Indian economy, former RBI Governor Raghuram Rajan said.
Demonetisation was a misguided concept which along with the poorly implemented GST badly hit the Indian economy, former RBI Governor Raghuram Rajan said during a lecture at the Watson Institute for International and Public Affairs, Brown University, the US on October 16, 2019. The global slowdown may have a role in bringing growth down but the government should also look inwards to analyse why the economy is currently struggling, BloombergQuint reported the noted economist as saying at the event. Blaming the global factors entirely for recent weakness in the economy is not totally justified, he added. The twin-strike of noteban and GST hit the economy which was already facing the underlying problem of lack of investment, Professor of Finance at Chicago Booth noted. In terms of investments, India now lags behind the peers and fresh NBFC crisis further hit the growth.
Demonetisation created a lot of pain in a very short period of time especially for the poorer segments of the economy, he added. Similarly, GST was brought about in haste, Raghuram Rajan added. It was the UPA that pushed the GST, even as the BJP had opposed it then, he said. The credit for the indirect tax reform was taken by the BJP after it launched it through a constitutional amendment. Even though it was a robust reform, inadequate preparation caught the government on the wrong foot as the computers weren’t ready for the volume of transactions, he claimed. While demonetisation was introduced in November 2016, GST came into effect in 2017.
Meanwhile, last month, Raghuram Rajan had taken on the Modi government arguing that suppressing criticism is a “sure-fire recipe” for policy mistakes and said that the authority should tolerate criticism. Rajan also said it is only criticism that prompts the government to take period policy course correction. His observations came in the backdrop of the Modi government removing Rathin Roy and Shamika Ravi from the Economic Advisory Council to the Prime Minister as they were critical of the government’s policies. Raghuram Rajan who left the RBI in 2016 has criticised the Modi government over a range of issues in the past couple of years.