Published: Wed, September 06, 2017
Money | By Oscar Reynolds

Raghuram Rajan breaks silence, says he wasn't on board for demonetisation

Raghuram Rajan breaks silence, says he wasn't on board for demonetisation

Rajan's book gives a wonderful insight in form of various accounts reflecting his very unstable relationship with the present government.

What needs to be noted here is that this is for the first time Rajan has spoken about demonetisation since his exit from the post on September 3 previous year. In his new book, Rajan has pointedly said that the RBI governor can not be a "cheerleader for the government".

The government then set up a committee to consider the issues, Rajan said, adding that "the deputy governor in charge of currency attended these meetings and at no point during my term was the RBI asked to make a decision on demonetisation". He said that the central bank had prepared a note including the costs and benefits and in February 2016, he orally offered his perspectives to the government.

Former Prime Minister Dr. Manmohan Singh, who had earlier been RBI governor and country's Finance Minister, said, "In my opinion that the way the scheme has been implemented will hurt agricultural growth in our country, will hurt small industry, will hurt all those people who are in the informal sector of the economy". He also says though the intent behind the move was good, it had come at substantial costs.

Finally, the former Reserve Bank of India (RBI) governor, Raghuram Rajan, one of the best economists in the world, has spoken eloquently about demonetisation and its impact on the economy in an interview to The Times of India.

"It is probably fair to say that demonetisation has had the largest impact on the people who transact informally, of which many might be very poor", he said.

Rajan pointed out in one of his speeches that the credit growth by public sector banks had been slowing down since 2014, way before the strong balance sheet clean-up was initiated, and this because banks were seeing the problem on their balance sheets.

Rajan's, latest book, I Do What I Do, published by HarperCollins will be launched on Monday.

This wasn't the first time that Rajan had warned against demonetization. Frequent changes in cash withdrawal rules added to chaos and inconvenience that lasted far longer than the 50 days the PM had sought to restore normalcy. "The estimates I have seen range from 1 to 2 percentage points, and that's a lot of money - over Rs 2 lakh crore and may be approaching Rs 2.5 lakh crore", he said.

Indians returned most of the estimated Rs 15.4 trillion ($242 billion) in high-currency bills removed from circulation past year, the RBI said in its annual report on Wednesday.

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