Demonetisation is beginning of the end of India's economy, says Manmohan

Warns worse is to come as the full effects of demonetisation roll out

Warning of more suffering and adversity in the months to come because of the government's demonetisation move, former Prime Minister Manmohan Singh said India's economy was looking at “the beginning of the end”.

He said all rating agencies had revised India's growth figures, projected at 7.6 per cent just a few months ago, down to 7 per cent and some had had even said it could be as low as 6.3 per cent, adding: “Modi ji keeps saying he's out to transform the economy. His claims are hollow.” 

Spelling out the effects of the precipitous fall in national income, Singh said: “Employment will fall , growth in agriculture, industry and services will fall. Production, especially in the informal sector of India's economy, which accounts for 45 per cent of India's national income, will fall.”  Singh was speaking at the Congress's Jan Vedna convention in the capital on the effects of demonetisation. 

Interestingly, speaking at the same convention, former finance minister P Chidambaram sought to tweak Singh's earlier assessment of two per cent hit to growth (made during a speech in the winter session of the Rajya Sabha). Chidambaram said the demonetisation could shave off “one per cent or more” of gross domestic product (GDP) growth, but added that even that was substantial: “One per cent reduction means a loss of Rs 1,50,000 crore to the economy.” Neither Singh nor any member of the Congress made even an oblique reference to Prime Minister Modi's charge that those who were criticising the currency move were effectively protecting the corrupt. 

The Congress's attack on the government had three arguments: That it would have no effect on reducing corruption; that it was a decision that undermined the Cabinet and spelt political capture of the central bank, weakening the institution; and that it struck at the right of people to exercise their will about the way they chose to spend the money they had earned.

Throwing a challenge to Prime Minister Narendra Modi over his aggressive campaign for a cashless economy, Chidambaram asked if the PM could promise that no capitation fee would be paid by parents for their children's admission into medical and engineering colleges, a process that will begin in a few months.

“I am throwing another challenge to the PM. In the months of May and June, engineering, medical colleges will open and capitation fee will be taken. Can the Prime Minister assure that the parents need not worry? That no capitation fee will be asked or taken. Can he give that promise?”

The Prime Minister is talking of cashless society, which has never happened anywhere. “He has no right to decide that. He should look into global phenomenon also. In the US, cash flow is around 42 per cent, in France it is 56 per cent. It's people's choice to use cash or card,” Chidambaram said at the event.

“In this country, farmers, salary-class workers need cash to meet their daily needs. Three objective was told by the PM on 8 November: Counterfeit currency, black money and corruption. I challenge the PM to put all those promises to test.” He asked the government to compensate the families of those daily wage earners who had lost their lives because of demonetisation.

Pointing to the fact that Cabinet ministers were virtually kept prisoner when the decision was taken, no records were kept and the central bank was ordered to take the decision, Chidambaram said: “Demonetisation was the decision of one person. I am the Führer. I am the leader. I must decide.” 

Congress Vice-President Rahul Gandhi said: “Demonetisation is just an excuse. PM Modi knows that he won't be able to hide under the garb of yoga and Make in India. When he got worried, he broke the backbone of the Indian economy (through demonetisation). Almost every economist of repute has criticised demonetisation.”