Bibek Debroy picks holes in Dr Singh's notes ban criticism

Singh, who had also served as Reserve bank governor, had lashed at the government on many aspects of the ongoing exercise, including making this charge. He’d said GDP growth would fall by at least two percentage points.

Economist and NITI Aayog member Bibek Debroy says ex-prime minister Manmohan Singh is mistaken in saying the ongoing demonetisation would hurt the nation’s gross domestic product (GDP) and its growth. 

Singh, who had also served as Reserve bank governor, had lashed at the government on many aspects of the ongoing exercise, including making this charge. He’d said GDP growth would fall by at least two percentage points.

He’d also termed the implementation of demonetisation a 'monumental management failure'. And, rapped the government for expecting poor people to wait even 50 days in the system rejig, adding many had already lost their lives.

Debroy, in an interview with India TV news anchor Karan Thapar, said there would be no shortage of currency notes and the demonetisation exercise was justified -- it would be a deterrent for future generations.

Questioning this, Thapar said only a small percentage of the total estimate of undisclosed (‘black’) money was held in the form of cash. The bulk was in the form of immovable assets like real estate. While former chief statistician Pranab Sen has pegged this figure at six per cent of GDP, former finance minister P Chidambaram had said it was near to 15 per cent.

Debroy said the gain was not limited to this, the large amount of revenue generated (with people returning their money, etc) would provide the government room to spend on public goods and services. The pain in the process of demonetisation was “a transfer from the relatively rich to the relatively poor”.

Debroy also clashed with Thapar over the amount of counterfeit currency in circulation, which demonetisation is expected to weed out. Thapar pointed to the government’s own affidavit to the Supreme Court a day before, that Rs 400 crore worth of counterfeit currency circulates in the economy at any point, quoting the National Investigative Agency. That, he noted, was a very low figure, given the amount in circulation.

Debroy said that figure was a low estimate and has shot up compared to those in 2011-12, necessitating demonetisation. “They are also deterrents to future generations,” he added.  

On the creation of more black income, Debroy said demonetisation was not meant to address that. It had, instead, been dealt with by other government initiatives such as the Income Declaration Scheme, the clamp on cash transactions and the coming national goods and services tax.