NOTE WOR­THY MOVE

De­spite the con­sid­er­able pain, Modi’s de­mon­eti­sa­tion drive has res­onated with the peo­ple as a mea­sure that will bring eco­nomic gain

India Today - - ECONOMY - By M.G. Arun

NO POL­ICY DE­CI­SION CAST as far-reach­ing an im­pact on the In­dian econ­omy as the de­mon­eti­sa­tion of high-value cur­ren­cies by the gov­ern­ment in Novem­ber last year. In an ad­dress to the na­tion on Novem­ber 8, Prime Min­is­ter Naren­dra Modi said Rs 500 and Rs 1,000 notes would lose their le­gal ten­der from mid­night. In his words, it was sup­posed to be the big­gest crack­down ever on black money hoard­ers. But the move also threat­ened to suck out 86 per cent of the money in cir­cu­la­tion, with notes worth Rs 15.4 lakh crore be­com­ing re­dun­dant overnight. That hit sev­eral busi­ness sec­tors hard, es­pe­cially the in­for­mal sec­tor that pro­vides jobs to over 80 per cent of the pop­u­la­tion.

Con­ser­va­tive es­ti­mates sug­gest the econ­omy will slow down by 1 per­cent­age point (Crisil says In­dia’s GDP growth for 2016-17 will drop from the ear­lier es­ti­mated 7.6 per cent to 6.6 per cent). Data from the Cen­tre for Mon­i­tor­ing In­dian Econ­omy (CMIE) pre­dicts a 1.6 per­cent­age point fall in GDP growth. The eco­nomic pain is over and above the other hard­ships from the cash crunch, which saw ser­pen­tine queues of peo­ple at banks to deposit or ex­change old notes and at ATMs to with­draw money.

De­spite all the pain it brought, Modi seems to have made big gains with the de­mon­eti­sa­tion move. The medium-term ben­e­fit is the in­roads he has made among the

DO YOU THINK DE­MON­ETI­SA­TION

HAS CAUSED MORE PAIN THAN GAIN FOR THE MASSES?

DE­MON­E­TISED! A farmer rests on sacks of paddy at the Chandi­garh whole­sale grain mar­ket

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