Published On : Fri, Dec 23rd, 2016

Economists paint a grim demonetisation future

12bse1Demonetisation is expected to negatively impact the overall economy and job generation, a number of economists told Parliament’s standing committee on finance. Reserve Bank governor Urjit Patel was to come but could not; he will do so on January 18.

The panel heard four economists — former chief statistician Pronab Sen; Mahesh Vyas, head of the Centre for Monitoring Indian Economy; Rajiv Kumar, senior fellow at the Centre for Policy Research; and Kavita Rao of the National Institute of Public Finance and Policy.

It said it wished to assess the impact on the economy, including growth and inflation.

The demonetisation drive will hit job creation, beside adding to the stress on banks, the economists are learnt to have told the panel, chaired by M Veerappa Moily.

There was a view that the banks were unprepared. “Banks are facing an increase in liabilities without any commensurate increase in income and RBI needs to look into that,” added a source. Banks have seen a flood of deposits since November 8.

One of the economists told the panel a clearer picture would emerge only by mid-January, when the industrial production numbers for November would be released. Three economists said that the impact would be largely negative. The panel will send a questionnaire for economists, to arrive at an action plan that could be suggested to the government.