NEW DELHI: Almost five months after he prematurely ended his tenure as Chief Economic Advisor, Arvind Subramanian finally broke his silence on demonetisation calling it “a massive, draconian, monetary shock” and “one of the unlikeliest economic experiments in modern Indian history”.
Arvind Subramanian has put his views on urbanisation in his forthcoming book called ‘Of Counsel: The Challenges of the Modi-Jaitley Economy’, where Arvind Subramanian provides an inside account of his rollercoaster journey as the chief economic advisor to the Government of India from 2014-18. The book is due to release on December 5, as tweeted by Subramanian himself.
“Demonetization was a massive, draconian, monetary shock: in one fell swoop 86 per cent of the currency in circulation was withdrawn,” Subramanian said in his book.
Subramanian also added that growth had been already sliding but after demonetization the slide accelerated.
“I don’t think anyone disputes that demonetization slowed growth. Rather, the debate has been about the size of the effect, whether it was 2 percentage points, or much less,” He goes on.
Subramanian also posed a question “Why didn’t the draconian 86 per cent reduction in the cash supply have bigger effects on overall economic growth,” which he explained by saying because GDP indicators rely so much on formal indicators.
“But when a shock like demonetization occurs that primarily affects the informal sector, relying on formal indicators to measure overall activity will overstate GDP,” Subramanian explained.
His words must have surprised for most but not many top officials in North Block, who have closely worked with him. Sources in North Blocks tell his premature exit had already set the tongues wagging in the North Block, which had anticipated such reaction.
“He was on the verge of resigning but it was only on the behest of the Finance Minister that he stayed back. Such move was anticipated as internally everyone knew his views. Only the damaging part is it came just ahead of elections,” said one of the top officials from the finance ministry who has closely worked with him.
While the centre had been tight-lipped over the book, congress president Rahul Gandhi called it an attempt to distance with demonetisation.
“ Demo like Rafale was a crime against India & a huge scam. Parrikar distanced himself from Rafale to save his skin. Mr Subramanian is doing the same with Demo. I wonder why he didn’t resign when he disagreed so much? Don’t worry India, the guilty will be investigated and punished,” Gandhi tweeted.