A former chief economic adviser (CEA) to the Indian government has finally broken his silence on the controversial move in 2016 to demonetize nearly 86% of cash in circulation, and said it resulted in an economic slowdown.
Arvind Subramanian, who quit the post this year after a four-year tenure, has devoted a chapter in the upcoming book Of Counsel: The Challenges of the Modi-Jaitley Economy, to be published by Penguin, Indo Asian News Service reports.
However, he did not reveal whether he was consulted in the decision-making process of demonetization, which was announced on November 8, 2016.
Terming it “one of the unlikeliest economic experiments in modern Indian history,” the former CEA said he did not think anyone disputed that demonetization slowed growth, but that the debate has been about the size of the effect on economic growth – whether it was 2 percentage points, or less.
He claimed that demonetization dragged down the growth rate to 6.8% in seven quarters after its imposition, against the 8% growth recorded prior to the ban on high-denomination banknotes.
Interestingly, this revelation comes a day after the Central Statistics Office came out with official back-series data that show economic growth has been higher under Prime Minister Narendra Modi’s government than in the previous Congress-led United Progressive Alliance (UPA) regime.
According to CSO data, India’s gross domestic product grew at an average of 6.7% in nine years of the UPA regime, 2005-06 to 2013-14, while under the current regime it stands at 7.3%.