Hyderabad, February 18: Former governor of Reserve Bank, Dr C Rangarajan on Friday said demonetisation per se cannot check black money while tax and electoral reforms may do.
Citing unprecedented cash crunch following demonetisation, Rangarajan said demonetisation affected many small businesses and had an immediate adverse effect on the economy.
Dr Rangarajan was addressing a press conference at 32nd Conference of All India Reserve Bank Employees in Hyderabad on Friday evening, when he cited out the impact of noteban on economy.
He said, “It is the inadequate supply of new currency to replace old that has caused much of the storm.”
Rangarajan, who is also former chairman of Economic Advisory Council to the Prime Minister, said the immediate pain of noteban is real and tangible. “The sooner the phase comes to an end, the better for the economy,” he added.
Taking on to NDA government, the RBI’s former governor said, “In short, much of the controversy over demonetisation could have been avoided, had the authorities been better prepared.”
He also revealed that demonetisation was always considered as one of the possible instruments to neutralise black money but “it cannot be a standalone measure” to hold unaccounted income.
As for the Modi government’s demonetisation drive, he added, “It does not address the issue of how to prevent further accumulation of unaccounted income which needs measures like improved transparency in governance, revised tax structure and improved tax administration.”
The former RBI chief highlighted how the hurt by demonetisation is far greater than earlier two occasions on economy.
Also on Friday, the food-and-beverage giant Pepsico’s India-born CEO Indra Nooyi said demonetisation has had “significant impact” on her business in the last quarter of 2016 in India, there are still “lingering effects” of demonetisation and she hopes normalcy may roll out by the end of second quarter this year.
Just a day before, Managing Director of two- and three-wheeler major, Bajaj Auto had also termed the demonetisation drive as a “wrong” idea and said it has caused double digit degrowth for the industry and job losses.