Raghuram Rajan finally speaks, not favoured demonetisation

Lucknow: It is out..finally and officially ! As speculated, the previous Reserve Bank of India (RBI) governor Raghuram Rajan made it amply clear he did not favour the demonetisation announced on November 8, 2016 by Modi government at the Centre.

Rajan,who demitted his office on September 3, 2016 before joining back as Professor of economics in Chicago University, chose to come out with his compilation of speeches, in the form of a book 'I do what I do', he made on various occasions on wide-ranging issues as the RBI governor. His post-scripts, suggestions, opinions reveal his mind fully on demonetisation and other economic issues as well.

Former RBI governor may have not been elaborative on his rather uneasy relations with the Modi government but his tone and tenor had it all and that too in no uncertain terms.

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"The short term economic costs associated with such a disruptive decision (demonetisation) would outweigh any longer term benefits from it,'' was the the opinion of Rajan as the chief of the central bank when he was verbally asked about it making his discontent loud and clear.

Significantly, Raghu was of the opinion that there were alternatives to achieve the main goals which he did not divulge. He further clarified that there were no preparations for demonetisation months before it was implemented because the RBI , during his tenure, was not asked to make a decision on this. Rajan went on to mention that despite his reservation ,he was asked to make a note on demonetisation which was done and handed to the government which set up a committee to consider it further.

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The reaction of Raghuram Rajan came precisely a year after he demitted his office and has been timed with the fresh round of criticism over the decision specially following RBI's report that 99 per cent of banned currency was back in the banking system. In fact, the Gross Domestic Product (GDP) also witnessed a slowdown in the last quarter of 2016-17 and the first quarter of 2017-18 which is being attributed to demonetisation.

Rajan , in his book, has been clear on two counts - he was not in favour of demonetisation and in its note, the RBI had outlined all the preparations needed before the move.