Former governor of Reserve Bank Yaga Venugopal Reddy said there has been only negligible impact of the note-ban on black money and corruption.
Former governor of Reserve Bank Yaga Venugopal Reddy said there has been only negligible impact of the note-ban on black money and corruption. Reddy also said the unintended and incidental consequence of the demonetisation drive is the new-age digital economy of the country. “Short-term economic impact of demonetisation has been negligible as per data available so far. It’s direct and immediate impact on black money and corruption is similarly negligible as per available data. Yet, it is not a mere shock akin to a truckers’ strike but has systemic implications for the future,” Reddy said in a lecture at the University of Hyderabad today.
The November 8, 2016 note-ban, he said, has helped a quantum jump in digitisation and the follow-up provisions in the Budget have strengthened the regulatory powers of tax administration. He said there is strong and massive support from the public for reforms that address systemic problems that were once considered intractable.
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“You have a situation where a billion people have been put to inconvenience for over nearly two months for no fault of their’s. It never happened in any country. Despite the collateral damage to innocent people of that magnitude, the public kept quite. That means people were disgusted with the system,” he said. The former governor said though there are downsides to digitisation, which demands higher degree of vigilance, they do not deter its benign impact on modernisation of the economy mainly by formalising semi-informal sector and reducing transaction cost.
On the banking sector which is saddled with high bad loans, he said capital infusion of public sector banks should not be done by government alone as it may give windfall gains to private shareholders. “Taxpayers’ interests are thus involved in any recapitalisation… it appears that major private sector banks do not have problem of capital adequacy despite non-performing Assets,” Reddy said.