Economic experts from India and abroad have offered varying, insightful views on demonetization. Let’s get some Indian perspectives first. Raghuram Rajan, Former Reserve Bank of India governor doesn’t approve of demonetization. Rajan went on record at a recent lecture stating that people will find a way around demonetization. Many would divide the money into smaller units or turn it to gold, he said. Rajan recommended tax incentives for black money instead.Another former RBI Governor, D Subbarao, gave a thumbs up to the move. He encouraged banks to reduce lending rates. Real estate will be hit, while government finances will escalate. Offenders will be mercilessly dealt with, said Subbarao in a recent article.
Economist Arvind Virmani, also a former Indian IMF representative called demonetization a useful method to pull out black money. Virmani expressed no surprise at the manner of the announcement. Such actions are meant to be secret, that insiders do not take advantage of the information. Finance expert Nitin Salve spoke at a recent lecture on demonetization. national daily quoted him rubbishing the move. Salve mentioned how 40% of India’s economy is in rural areas. He stressed on the adverse impact demonetizationhas had on cooperative banks. “A death blow to the economy” is how Salve summed it up.
Bankers, though caught unawares, largely welcomed the move. Arundhati Bhattacharya, SBI Chairperson promised to keep ATMs operational, while Chanda Kochhar, ICICI chief, called it “the most significant step to curtail the parallel economy.”
Narendra Modi’s November 8th shocker decision is still creating ripples all over the country. Opinions continue to vary, from some calling it Modi’s big failure to Confederation of Indian Industry (CII) calling it a ‘masterstroke’. It will remain Modi’s government’s most significant decision. Or are we speaking too soon? Even as tangible changes will soon be visible, experts will be keeping a close watch on the repercussions.