Jose K Joseph
Bhubaneswar: The currency ban decision of the Centre has worsened the economic situation as experts believe that it helped the corrupt to convert their unaccounted money into white.
Quoting known sources, Bloomberg has reported that the banks had received around 97 per cent of the demonetised currency (Rs 14.97 lakh crore) by December 30. Even, RBI’s deputy governnor R Gandhi has admitted that about Rs 12.4 lakh crore of demonetised currency got deposited in the banks by December 10.
“When the government demonetised Rs 15.4 lakh crore of Rs 1,000 and Rs 500 notes, it didn’t expect the entire black money to return back. It actually helped in converting the black money into white. This financial decision has put a burden of Rs 1.28 lakh crore on the government and banks,” said Santosh Kumar Mohapatra, an economist.
Experts opine that the remaining black money will be back into the banking system since the NRIs are allowed to deposit specified bank notes (SBN) till June 30, 2017.
Although the Modi dispensation claims long term benefits from the ‘financial masterstroke’, many leading economists differ in this respect.
“This decision has no long term benefits since only six percent of black money exists in cash. Now, this black money existed in the currency has returned back and turned white. So, the government which spends around Rs 17,000 crore for print and transportation of new currency received no benefits,” said SN Misra, another noted economist.
The November 8 demonetisation ambush, which claims to have closed the escape route for the tax evaders, has actually helped them. The hoarders have deposited money in Pradhan Mantri Jan Dhan Yojana accounts which received a whopping Rs 87,000 crore within 45 days of the note ban decision.
The decision will hit the GDP growth hard as the Finance Ministry has already predicted a deceleration in the growth – 7.1 per cent for 2016-2017 fiscal as against 7.6 per cent in the previous fiscal – which even does not reflect the impact of demonetisation.
Former finance minister and economist P Chidambaram predicts a 1 per cent fall in GDP in the next 12 months. So, the country may face a fall of Rs 1.5 lakh crore in terms of GDP over next 12 months and this will result in subsequent fall in per capita income.
However, renowned economist and formers prime minister Manmohan Singh opined that there would be at least 2 percent fall in GDP.
Since farm sector’s contribution to GDP stands around 14 per cent, any impact on agriculture would adversely affect the economy.
“The farmers are facing distress sale due to cash crunch. There may be improvement in future, but demonetisation will have a long term impact,” Mohapatra added.
Experts said instead of taking a hasty decision like this, the government should have declared a date well in advance to help people deposit the demonetised notes and made arrangement for adequate supply of new currency to the system. PNN
