Duvvuri disagrees with Manmohan’s take on GDP

‘Demonetisation effort successful only if there is rise in tax revenues’

January 05, 2017 01:25 am | Updated 07:24 am IST

Former RBI Governor D. Subbarao addressing a panel discussion organised at Navyandhra Pustaka Sambaralu, in Vijayawada on Wednesday.

Former RBI Governor D. Subbarao addressing a panel discussion organised at Navyandhra Pustaka Sambaralu, in Vijayawada on Wednesday.

VIJAYAWADA: Former Reserve Bank (RBI) Governor Duvvuri Subbarao here on Wednesday disagreed with the former Prime Minister, Manmohan Singh’s assessment that the gross domestic product (GDP) could fall by about 2 per cent in the aftermath of the demonetisation exercise.

“I don’t think this will happen. It is too early to predict that the ‘delegalisation of Rs. 500 and Rs. 1,000’ will cut two per cent GDP,” he said at a panel discussion on ‘Reserve Bank of India (RBI) making difference to everyday life’ organised by the Navyandhra Pustaka Sambaralu.

Demonetisation may impact growth rate but not to the extent of two per cent, he said. He, however, was quick to add that the Government’s finances would improve as the tax had been levied and collected on the disclosed wealth which was reckoned as unaccounted. How big this would be was a matter of debate, he added.

“One would have to wait until Union Finance Minister presents his annual Budget. We can say that the government’s efforts are successful only if there is an increase in tax revenues,” he said.

Stressing on the importance of tougher follow up measures on currency management and not to allow the build up of black money again, he said this exercise should create an awareness and fear among public that the government would not tolerate tax evasion or black money. Unless it was achieved, black money would continue to haunt the economy, he said.

Referring to the criticism on demonetisation, Dr. Subbarao said: “None have experience in handling demonetisation. One should understand that it was implemented purely on the judgment.”

Answering a volley of questions, he said, “Complete preparedness such as recalibration of ATMs, printing of enough new currency notes is not possible. The RBI has to maintain secrecy to achieve the objective. A small whiff that the RBI was printing more currency notes was enough to play a spoilsport. The people are more intelligent to guess that some policy change was on cards.”

It would take at least two to three years to see the results of demonetisation. The government would have to map it and tell the people the achievements. The digital transactions, efficiency, savings and investments would improve significantly. Tax revenues would go up and corruption was expected to slide down, he added.

Senior Journalist S. Nagesh Kumar highlighted hardships faced by the common man due to the demonetisation. AP Planning Board Vice Chairman, Kutumba Rao, senior journalists G. Valleswar and Tummala Kishore, NTR Trust CEO T. Vishnu and others spoke.

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