Manmohan Singh: Accept demonetization was a blunder, let's rebuild economy
In an interview to BloombergQuint, former PM Manmohan Singh said that demonetization's impact on the weaker sections is "more damaging" than is indicated by economic indicators. With demonetization's anniversary coming up, Singh stressed that the biggest drawback was that demonetization may aggravate the economic inequality that already exists in our society. What was Singh's advice to PM Narendra Modi for corrective action? Read on!
"Demonetization has turned out to be a monumental blunder indeed"
Singh said demonetization has caused "economic, social, reputational and institutional" damage. Further, jobs have been lost, and no new jobs are being created. He declared that GDP will improve. However, he was worried about demonetization's long-term impact. "Rising inequality is a constant threat" as India develops economically. He lamented that demonetization will intensify the inequality "which can be harder to rectify in the future."
"The means is as important as the end"
Singh asserted that India "is a nation of small and medium enterprises (SMEs)." He stated that SMEs are unorganized, informal and use cash as the dominant mode of transaction. Moreover, though cash less economy and digital economy are "laudable pursuits," India's priority should be SMEs' growth. He said that though GST helps in lifting governance standards, it can't derail the entire SME sector.
'Independence and credibility of institutions should be preserved'
Singh affirmed that foreign investments continued to flow into the economy because India was an attractive destination due to its political stability. This stability is due to strong institutions, which should be safeguarded. Citing demonetization as attacking RBI's independence and EC not announcing Gujarat election's dates as troubling incidents, he urged these institutions' leaders to safeguard credibility and independence of their institutions.
'Presently, economics should take precedence over politics'
Singh contended that there are times when "economics should take precedence over politics." India is presently facing that moment. He advised PM Narendra Modi to "graciously acknowledge the blunder (of demonetization) and seek support from all to rebuild our economy." He said unanimous policy decisions were required for addressing joblessness and unequal economic growth, which are India's biggest twin economic challenges.
Meanwhile, Singh will campaign in Gujarat
Meanwhile, in a bid to up the ante in poll-bound Gujarat, Congress has roped in Singh to hold a public meeting addressing representatives of the SME sector. Singh will probably speak on the "ill-effects of a flawed GST" and an "ill-advised demonetization."
