Rajan's policies, not note ban, slowed growth: NITI Aayog's Rajiv Kumar

NITI Aayog Vice Chairman Rajiv Kumar on Monday said the economic slowdown in the immediate six quarters in the aftermath of demonetisation was because of the revised scheme for identifying banking non-performing assets (NPAs), initiated by Raghuram Rajan when he was the governor of the Reserve Bank of India (RBI).

Kumar accused former prime minister Manmohan Singh and senior Congress leader P Chidambaram of creating a “false narrative” that demonetisation led to the economic slowdown. 

The Narendra Modi government has faced much flak from the Opposition after the RBI’s annual report for 2016-17 revealed that 99.3 per cent of the demonetised currency came back to the banking system. In an interview to ANI, Kumar said: “The declining trend for the last six quarters starting 2015-16, when the growth rate was as high was 9.2 per cent, was not a result of demonetisation. 

The growth was declining because of the rising NPAs in the banking sector. Kumar said: “When this (Narendra Modi) government came to office, that figure was about Rs 4 trillion. It rose to Rs 10.5 trillion by the middle of 2017, because under the previous RBI governor Mr Raghuram Rajan, they had instituted a new mechanism to identify stressed NPAs. This continuously began to rise, after which the banking sector stalled credit disbursal to the industry. In some cases like that of the MSME (micro, small and medium enterprises) industry, credit actually shrank. It was a negative growth in some years.”   

On Sunday, Congress leader P Chidambaram had countered the PM’s statement that loans given under UPA have turned bad. “How many of those loans (given under UPA) were renewed or rolled over (that is 'evergreened') under NDA? Why were those loans not recalled,” Chidamabaram had asked. On Monday, Kumar said there was “no evidence” to show direct link between economic slowdown and demonetisation, and the decline being simply in continuation of a trend and not because of the shock of demonetisation as has been claimed.