Manmohan trashes PM Modi’s cash crackdown
Former Indian prime minister Manmohan Singh on Thursday tore into his successor Narendra Modi’s clampdown on the cash economy, calling it an “organised loot and legalised plunder” of the country.
Singh — the architect of economic reforms that led to years of rapid growth — dubbed Modi’s shock move to scrap 500 and 1,000 rupee banknotes a “monumental mismanagement” that could shave at least 2 percentage points off economic growth.
The so-called demonetisation drive is part of a crackdown on corruption, tax evasion and militant financing, but the decision to suck out 86 per cent of cash in circulation threatens to push Asia’s third-largest economy into a liquidity crisis.
Opposition parties led by Congress have stalled parliament, demanding a reply from Modi and compensation for the families of dozens of people reported to have died while queuing at banks to swap old money for new.
“What has been done can erode our people’s confidence in the currency and banking system,” said Singh. “In fact, it’s a case of organised loot and legalised plunder.”
Modi, citing a survey he launched via a smartphone app, says that 90 per cent of people expressed their support for the ban on old banknotes. The survey was not representative but drew half a million responses.
With a small stock of smaller notes available and people struggling to get hold of scarce new 500 and 2,000 rupee bills, consumers are holding back spending and businesses are suffering.
Delays in replacing cancelled notes and restrictions on cash withdrawals “reflect very poorly” on Modi’s team, the finance ministry and the Reserve Bank of India, Singh said.
“It is no good that everyday the banking system comes up with new rules. It reflects very poorly on the Prime Minister’s Office, the Finance Minister’s Office and the Reserve Bank of India.”
The Indian economy had expanded by 7.2 per cent during the third quarter ended December 31 of last fiscal year, and by 7.6 per cent for the year as a whole.
Manmohan Singh’s GDP estimate comes against the backdrop of a host of economists, experts and think tanks revising downward their growth outlook for India, with the most pessimistic forecast being a mere 0.5 per cent growth by Ambit Capital for the six-month period ending March 31, 2017.
The former prime minister wondered if the government was aware of the extent of hardship that demonetisation had caused small businesses, the common man and the rural economy.
Towards this, he reminded the government that 90 per cent of the work force is in the informal sector and 55 per cent of those in the agriculture sector are in distress.
“I would like to know from the prime minister the names of any country he may think of where people have deposited their money in their banks, but they are not allowed to withdraw,” Manmohan Singh queried. “In the process of demonetisation, monumental mismanagement has been undertaken about which there are no two opinions in country as a whole,” he said.
Manmohan Singh Former prime minister Those who say demonetisation is good in long run should recall the quote: ‘In the long run we are all dead’ It is a case of organised loot and legalised plunder