RBI Governor Raghuram Rajan has revealed his opinion about demonetization in his new Book

Raghuram Rajan, Former Reserve Bank of India (RBI) Governor had recommended the government that he did not support the demonetization. According to him, the long-term benefits of demonetization would be outweighed by the short-term economic costs.

Rajan included this opinion in his latest book – “I do what I do”, Rajan writes,” At no point in my term was the RBI asked to make a decision on demonetization.”  He said that the central bank had prepared a note including the costs and benefits and in February 2016, he orally offered his perspectives to the government. “There were alternatives to achieve the main goals,” he added.

Now, Rajan teaches economics at the University of Chicago and he is the first former RBI governor who has spoken on demonetization since resigning office on September 3 last year.

Rajan says, “The RBI risks becoming dangerously weakened as successive governments and finance ministers misunderstand its role.” He observed that there was a danger in keeping the position of RBI governor.

According to the latest government data, the November 8 decision leads to three major things-oddment Rs. 1,000 and Rs 500 notes, 86% of cash circulating in the system and lasting impact on the economy.

The GDP’s (Gross domestic product) growth was slowed from 7% in October-December quarter to 6.1% in January-March and 5.7 % in April-June; due to the cash squash that enfeebled clients disbursing and demoralized the businesses from making new investments.

However, the government noted that the economic downturn has not affected by demonetization.

Rajan stated in GDP as, “the costs of demonetization up front.”

 

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