Demonetisation likely to fail, says Kaushik Basu

Mumbai: Former chief economic adviser to the erstwhile Congress-led Manmohan Singh government has said that the BJP-led Narendra Modi government’s move to ban the high value currency notes is "hurting people who aren’t its intended targets". 

Basu who advised the government of India on economic affairs during 2009-12 writes in his New York Times opinion piece ‘In India, black money makes for a bad policy’ that demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation.

“But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail,” Basu writes. 

Basu is of the opinion that more pain would be in offing for common man as a colossal Rs 14 lakh crore worth currency notes in circulation were suddenly withdrawn from the banking system.

“India’s economic growth is bound to nose-dive,” he mentions in his NYT piece. According to him, rupee could also depreciate as people and investors likely to move to more robust currencies.