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Chidambaram Says Growth Won't Exceed 6.5 Per Cent Next Two Fiscals Due To Note Ban
'If ten per cent of bank officers were dishonest earlier, thanks to demonetisation, 50 per cent of the bank officers became dishonest'
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Terming the demonetisation as "ill-conceived", former Finance Minister P Chidambaram on Monday said the economy won't grow at more than 6 to 6.5 per cent for the next two fiscals due to the damage caused by the move.
Former RBI Governor Raghuram Rajan had categorically rejected the idea of demonetisation, he claimed, adding that NDA government "must have consulted some RSS pracharak" before taking the decision.
Speaking at the second anniversary function of Telugu daily 'Mana Telangana' in Hyderabad, Chidambaram said the economy will suffer a setback of Rs 1.5 lakh crore as 80 per cent of the Small and Medium Enterprises had closed down.
"If ten per cent of bank officers were dishonest earlier, thanks to demonetisation, 50 per cent of the bank officers became dishonest. So the very exercise generated more corruption, not less corruption. So they changed the narration to cashless economy now," he said.
"...you take it from me, the economy will not grow at more than 6 and 6.5 per cent in 2017-18 and 2018-19. It will take two years for the economy to recover. People have lost confidence in currency. People are not spending.
"You have unnecessarily interrupted the economic story of this country by this thoughtless, ill-conceived demonetisation," Chidambaram said.
Earlier, addressing a meeting of Telangana Pradesh Congress Committee, the senior Congress leader said those who should have been consulted were not consulted before taking the decision.
"The finance secretary was not consulted, the banking secretary was not consulted and the Chief Economic Adviser was not consulted, and then who was consulted? They must have consulted some RSS pracharak," he alleged.
Several past RBI governors had disapproved of the idea, he said.
"We had Raghuram Rajan as Governor for three years, he did not think demonetisation was the answer and he categorically told the Government no, don't do demonetisation. Then a new Governor comes and in 64 days he agrees for demonetisation."
As much as 2,400 crore notes of Rs 500 and Rs 1,000, worth Rs 15.44 lakh crore, were rendered invalid, and with the capacity of all four printing facilities if they operated round-the-clock being 300 crore pieces a month, to replace all 2,400 crore notes, it will take eight months, he said.
ATMs Not Working
At the end of three months post-demonetisation, half of the ATMs were not working and "most ATMs don't have currency," Chidambaram alleged, adding that everyday 11 crore people were standing in queues for hours to withdraw their own money.
As to government's aim of having a 100 per cent cashless economy, he said 80 per cent of transactions in Germany and Austria still take place in cash, 60 per cent in Australia, 56 per cent in Canada and 46 per cent in the US.
"History books will record along with Zimbabwe, North Korea, Libya...India demonetised its currency...It is a shame...May be this government thought these are the most prosperous countries in the world," he added.
"First they talked about demonetisation and now they are saying remonetisation. Of the Rs 15.44 lakh crore worth of money demonetised every rupee has come back to RBI. Now you are remonetising....this is not 'notebandi' but 'notebadli'," Chidambaram said.
He said would have resigned as Finance Minister had the Prime Minister of the day insisted on demonetisation.
"They (Government) said this is to put an end to corruption. I looked at the new notes, has it been written (on them) not valid for bribe giving?" Chidambaram quipped.
"We delivered 7.5 per cent average growth over 10 years (during UPA rule). Here they (NDA) have impacted India's growth," the former finance minister said.