Wednesday, September 22, 2021
HomeBusinessBanning high value notes dragged India's economic growth down: Rajan

Banning high value notes dragged India’s economic growth down: Rajan

Demonetisation slowed down India’s economic growth at a time when the world economy was growing and it impacted the GDP significantly, former RBI Governor Raghuram Rajan said.

Rajan said he has seen studies which reaffirm that banning of high value currency notes in late 2016 impacted India’s growth significantly.

“I think the net impression is that it (demonetisation) had a significant effect on our growth. And now, I have seen studies which reaffirm that. It has slowed down (our growth).

“…the world (economy) was growing faster in 2017, we slowed down,” Rajan told NDTV news channel in an interview.

The growth was not only impacted due to demonetisation but also because of implementation of Goods and Services Tax (GST), he said.

In 2017-18, the Indian economy grew by 6.7 per cent.

“That was the twin blow of demonetisation and GST (that impacted India’s growth). And before anybody accuses (me) of being anti-GST, it’s a good idea in the longer run, but it has short term teething effect,” Rajan noted.

When asked if he was asked to implement demonetisation during his tenure as the RBI Governor, Rajan said he was asked for his opinion on banning high value currency notes from the system, which he thought was a “bad idea”.

Expressing his views further on the GST, the former RBI Governor said that the reformist tax system could have been implemented in a much better manner.

On whether GST should have one rate rather than five different slabs, he said it is a matter of debate.

“In my view, which is an alternative view, once you do it, you find out the problem then you start fixing it one by one. So, this (teething problem) was inevitable,” Rajan said.

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