Demonetisation is a disastrous and unilateral decision whose deleterious effects will linger till 2018-19 and restrict growth at 6%, according to former Finance Minister and Congress leader P. Chidambaram.
Delivering a lecture on the ‘‘Impact of demonetisation on Indian economy,’’ organised by the Rajiv Gandhi Institute for Development Studies here on Saturday, Mr. Chidambaram said the unilateral decision that was thrust on the nation by Prime Minister Narendra Modi without taking his Cabinet colleagues or top bureaucrats in the Finance Ministry into confidence would restrict growth at 6% and the second and third order issues such as joblessness and economic slowdown would start rearing its head in the coming months.
The reform had missed the targets such as eradication of black money, counterfeiting of currency and preventing black money for terror funding. It could neither efface corruption nor transform the nation into a cashless economy. The attempts for remonetisation had also failed, he said.
No major economy had ever made such a misadventure. The decision had virtually equated the nation with North Korea, Zimbabwe, and Libya. A nation resorted to demonetisation only when there was hyper inflation or its currency was volatile.
There was no such situation in the country on November 8 when Mr. Modi announced the decision. The process adopted by the Prime Minister by overlooking the Reserve Bank of India (RBI) and the Cabinet, which was not even served a note prior to the decision, was illegal ad against the provisions of the RBI Act.
Mr. Chidambaram said discussion and deliberation formed the essence of democracy. There were no consultation or forethought about its impact on the economy. Only four persons were privy to the decision. He could have confidentially shared it with former Prime Minister Manmohan Singh, or former Finance Ministers Yashwant Sinha or with myself, he said.
The nation cannot switch over to cashless economy soon. Germany still had 86%, Canada 56% and the United States 46% cash transactions. Cash transactions did not entail any hidden cost, but cashless transactions had 1.5% hidden cost. If the nation had transactions worth ₹1 lakh crore a day and on switching over to the digital mode, an unseen beneficiary would earn ₹1,500 crore a day as service charge, he said.
