Demonetisation slowed down India’s economic growth at a time when the world economy was growing and it impacted the GDP significantly, former RBI governor Raghuram Rajan said.
Rajan said he has seen studies which reaffirm that banning of high-value currency notes in late 2016 impacted India’s growth significantly. “I think the net impression is that it (demonetisation) had a significant effect on our growth. And now, I have seen studies which reaffirm that. It has slowed down (our growth)… the world (economy) was growing faster in 2017, we slowed down,” Rajan told NDTV news channel in an interview.
The growth was not only impacted due to demonetisation but also because of implementation of Goods and Services Tax (GST), he said. In 2017-18, the Indian economy grew 6.7%. “That was the twin blow of demonetisation and GST (that impacted India’s growth). And before anybody accuses (me) of being anti-GST, it’s a good idea in the longer run, but it has short-term teething effect,” Rajan noted.
When asked if he was asked to implement demonetisation during his tenure as the RBI governor, Rajan said he was asked for his opinion on banning high-value currency notes from the system, which he thought was a “bad idea”.
Expressing his views further on the GST, the former RBI governor said that the reformist tax system could have been implemented in a much better manner. On whether GST should have one rate rather than five different slabs, he said it is a matter of debate. “In my view, which is an alternative view, once you do it, you find out the problem then you start fixing it one by one. So, this (teething problem) was inevitable,” Rajan said.
On fraudsters list, Rajan said that it (report) had a list of the largest frauds. “I’m unaware of where those cases stand… The reason I’m worried is if one gets away with immunity, then others may follow,” he said on the list of fraud cases he had flagged to the PMO. He also said that a defaulter is different from a fraudster. “If you start putting defaulters in jail then nobody will take any risk,” Rajan added.
In September this year, Rajan, in a note to a Parliamentary panel, had said that a list of high profile case related to banking frauds was sent by him to the PMO for a coordinated action.