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Interview Niti Aayog’s Bibek Debroy: Demonetisation was for institutional cleansing

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Bibek Debroy
Bibek Debroy during an interview with IANS in New Delhi. (Photo: Bidesh Manna/IANS)

New Delhi, Nov 9: NITI Ayog member Bibek Debroy admits that demonetisation was a temporary shock on growth but asserts that the economy has now climbed back. One year into the disruptive note ban, Prime Minister Narendra Modi’s economic policy adviser says the worst is over and there are signs that things are improving now.

He also says demonetisation should not be seen through a narrow cost-benefit calculus but as a move aimed at “institutional cleansing”.

“Yes, there has been a dip, but followed by a climb back. If you look at the data, there has been a slowdown in the growth rate continuously. I have not seen any data, even remotely statistical, which suggests that demonetisation has led to a more than temporary shock in terms of growth or employment,” Debroy, who heads the Economic Advisory Council revived recently by the Prime Minister, told IANS in an interview.

Debroy said demonetisation should not be looked at only from an economic perspective.

“If I evaluate it with a narrow economic cost-benefit calculus, I think that would be unfair, because the intention (behind the move) was not narrow economics,” Debroy said. The decision was aimed at institutional cleansing. “How do I even quantify and measure it?”

“If I look at it only with that economic lens, I will evaluate the costs and the benefits in a certain way. If I look at it with a political-economic kind of lens of cleansing up the system, I will evaluate it in a slightly different way.”

Debroy said that purely in terms of economics, one will not have to wait too long as some data, like that of direct tax collections, would come out soon which would reflect demonetisation and help understand its implications.

There was “excessively high” prevalence of cash in the system till last year and cash-to-GDP ratio has now sharply declined by almost one-third post-demonetisation, he said.

Debroy said that before demonetisation, the cash-to-GDP ratio in India was almost 13 per cent. “That’s excessive. It has now come down to a little over nine per cent,” Debroy noted.

“A lot of the cash in India was excessive and was not yielding returns to the person who held the cash, nor was it performing the role that money performs as a multiplier.”

“I’m not comparing with developed countries but even if you compare with other countries in South Asia, India had too much cash,” he said.

As per estimates, the cash-to-GDP ratio was 5.8 per cent in Bangladesh, 3.5 per cent in Sri Lanka and 9.3 per cent in Pakistan in 2015, whereas in India it was 13 per cent.

“That excessive cash has now vanished. The money has now come into the banking system. But that does not necessarily legitimise that money. You have to subject yourself to further scrutiny,” Debroy said.

Debroy has come out with a compilation, “On the Trail of the Black”, along with his colleague Kishore Arun Desai, with contributions from several writers tracing the prevalence of corruption and evaluating its impact on society and the economy.

He admitted that every decision related to the demonetisation exercise might not have been perfect.

“But we know that with the benefit of hindsight…. and this kind of thing had never been attempted before,” he said.

Read more…Bollywood’s organised sections escaped impact, but daily wagers suffered

He said the biggest challenge in implementing the demonetisation decision was to maintain the surprise element which was crucial.

Kishore Arun Desai, who edited the book along with Debroy, said the war against corruption was a work in progress and November 8, 2016, should not be looked at in isolation.

“We’re talking a lot about November 8, but there are a series of actions that the government has been taking ever since coming to power, starting with setting up an SIT on black money, followed by the Benami Transactions Act, an act for transparent auction of coal mines, the Income Declaration Scheme, the RERA Act and the Jan Dhan Yojana.

“We have been witnessing the overall intent of the government of cleaning up the economy across various sectors and demonetisation was just a trigger and one of the boldest steps,” Desai told IANS.

IANS

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Saab is interested in Indian fighter jet deal: Swedish official

The Saab Gripen will be contesting with the likes of the Russian MiG 35, Dassault Rafale, Eurofighter Typhoon, Boeing F/A 18 and Lockheed Martin F-16 for the upcoming deal.

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Rafale deal scam

Amid the raging controversy over the Defence Ministry’s procurement of the Rafale fighter aircraft from French firm Dassault Aviation, a senior Swedish official has said that his country’s firm Saab, in its Gripen aircraft, has the requisite experience to contest for the upcoming Indian deal for manufacturing 110 new fighter jets under the Make in India programme.

“I know that Saab is interested, they want to be a part of this procurement,” Teppo Tauriainen, Director General for Trade in the Swedish Foreign Ministry, told IANS in an interview here.

“They think they have something good to offer that will be of interest to India,” Tauriainen said.

“They, of course, know what the expectations of the government is in terms of local production and cooperation with a local partner.”

India is expected to select by the end of this year one fighter aircraft that will be manufactured by the private sector under the Make in India programme for supply to the Indian Air Force.

The Saab Gripen will be contesting with the likes of the Russian MiG 35, Dassault Rafale, Eurofighter Typhoon, Boeing F/A 18 and Lockheed Martin F-16 for the upcoming deal.

While MiG has already said that it will have state-owned Hindustan Aeronautic Limited (HAL) as its local partner, Indian companies like Tata, Reliance Defence, Mahindra and Adani are in the fray for local partners in the project that is expected to be worth over $20 billion (Rs 1.44 lakh crore).

Tauriainen said that for Saab, contesting for the deal will be nothing new as it has signed a similar deal for Gripen with the Brazilian government with Embraer as its local partner.

“I have myself visited the Brazilian partner, Embraer, and seen there are a lot of spin-offs locally in the Brazilian economy from this fighter jet deal,” he said.

“So, I think for Saab, as a company, it won’t be unusual to do it the way the Indian government wants it to happen.”

During his visit to Sweden in April this year, Prime Minister Narendra Modi had said that defence and security have emerged as an important pillar of the India-Sweden bilateral partnership.

“Sweden has been a partner of India in the defence sector for a long time. I am confident new opportunities for cooperation in this sector will arise in the future, especially in defence production,” Modi said.

During that visit, an India-Sweden Partnership was also announced with a fund of 50 million Swedish kronor (around $5.6 million) for innovation cooperation in the fields of smart cities and sustainability.

Asked what steps have been taken in this connection, Tauriainen said that the dialogue for these projects has started though none of these projects have started operating.

“But we have come quite far to identify areas where we think there is a potential to do cooperation,” he said.

He said that sustainable technology is a broad area and is very much related to how cities are built in terms of transport, energy, waste and waste water.

“There we have some interesting experiences and I hope that is of relevance to India,” Tauriainen said.

“Some technologies we have already tested in Sweden. Other technologies will have to be adapted to Indian conditions,” he added.

In Sweden, waste is actually used to generate power and only one per cent of the waste goes to the landfill.

Asked about the presence of around 180 Swedish companies in India and their role in the Indian economy, Tauriainen said these are doing good business despite “some limitations”.

“They wouldn’t mind if those limitations are taken away. But they are interested in the Indian market and most of them are interested in expanding,” he said.

(Aroonim Bhuyan can be contacted at [email protected])

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Now Congress calls Arun Jaitley ‘court jester’

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Randdeep Surjewala

New Delhi, Sep 20: Hitting back at Arun Jaitley, the Congress on Thursday dubbed the Finance Minister a “court jester” who is “desperate to stay relevant”.

Amid the relentless trading of charges between the Congress and Bharatiya Janata Party (BJP) over the Rafale deal, Jaitley on the day took to social media to accuse Gandhi of “concocting lies” on the deal for the France made fighter jets and the bad loans of banks.

He said the Congress leader was “polluting” public discourse.

Hitting back, Congress spokesperson Randeep Singh Surjewala, in a tweet, called the BJP leader a “court jester” and demanded answers on the Rs 41,000 crore Rafale “scam”.

“And yes ‘Jait-LIE’ ji (sic), the desperate quest to stay relevant of a ‘court jester’ by wasteful blogs continues.

“Please reply: Why hide behind abuse when trapped in Rafale maze? Why supersede HAL for Rs 30,000 crore contract? Why no answer on Rs 41,000 crore loss in Rafale Scam,” said Surjewala in his response to Jaitley’s tweets.

The Congress has been gunning for the Narendra Modi-led government over the Rafale deal. Besides approaching Comptroller and Auditor General of India (CAG) Rajiv Mehrishi for a special and forensic audit and demanding a Joint Parliamentary Committee (JPC) probe into the deal, the party has also sought the resignation of Defence Minister Nirmala Sitharaman over the issue.

The Modi-led government and the BJP have been dismissive of all the charges by the Congress.

IANS

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Rahul Gandhi concocting lies on Rafale, NPAs: Arun Jaitley

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Arun Jaitley

New Delhi, Sep 20: Calling him a “clown prince”, Finance Minister Arun Jaitley on Thursday accused Congress President Rahul Gandhi of “concocting lies” on the Rafale fighter jets deal and the bad loans of banks. The Congress leader was “polluting” public discourse, Jaitley said.

In a Facebook post, he said Gandhi first “lied” on the Rafale deal and was now lying on the non-performing assets (NPAs) claiming that the BJP government had waived loans of 15 industrialists amounting to Rs 2.5 lakh crore. Not a single rupee of any debtor had been waived, he said.

“His (Gandhi’s) strategy is simple, concoct a lie and repeat it as many times” as possible, Jaitley said and wondered whether a person with a “temperament to concoct facts” deserved to be a part of the public discourse.

“The world’s largest democracy must seriously introspect whether public discourse should be allowed to be polluted by the falsehood of a ‘clown prince’,” he added.

Referring to Gandhi winking at his party men after hugging Prime Minister Narendra Modi in the parliament, the BJP leader said the public discourse was a serious activity, not a laughter challenge, and that it could not be reduced to a “hug, a wink or repetition of falsehood”.

“In mature democracies those who rely on falsehood are considered unfit for public life. Many have been banished from political activity because they were caught lying. But this rule obviously can’t apply to a dynastic organisation like Congress party,” he said.

“If the Rafale concoctions were the first big lie, the second one stated repeatedly is that Modi waived of Rs 2.5 lakh crore of 15 industrialists. Every word of that sentence repeatedly uttered by Rahul Gandhi is false,” he added.

Jaitley said the amount being referred to by Gandhi were lent by the banks prior to 2014 when the UPA government was in power, which then “kept rolling over the loans to conceal them (as) loans despite the default”.

“The truth, Mr. Rahul Gandhi, is that your government allowed the banks to be looted. The loans were inadequately securitized. Your government was in complicity… By repeating a lie on several occasions, you can’t change that reality,” he said.

The Finance Minister said while the UPA leaders claimed that when they went out of power, the NPAs were only Rs 2.5 lakh crore. The truth was that NPAs were actually Rs 8.96 lakh crore and were hidden under the carpet as revealed by an asset quality review conducted by the Reserve Bank of India.

He said no effective steps were taken by the UPA to recover or reduce the NPAs and post 2014-15, they increased not because more money was lent but because interest was mounting on the overdue amounts.

“The only effective move which has taken place in this regard is the Insolvency and Bankruptcy Code (IBC). It has changed the debtor-creditor relationship in India.”

He said the Reserve Bank of India had identified the twelve major defaulters who jointly owed about Rs 3 lakh crore to various banks.

“The banks under UPA took no steps to recover these loans. They did not prosecute a single major debtor who had siphoned off money. It is the NDA government which through IBC, changed the debtor-creditor relationship and enabled the banks to effectively pursue the recovery,” Jaitley said.

IANS

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