Recession is likely: Prof Arun Kumar on demonetisation

“The slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months.”

jasleen

Jasleen Kaur | November 22, 2016 | New Delhi


#recession   #Demonetisation   #scrapped currency   #black money  


 Demonetisation is not the way to tackle black economy and it will in fact affect the white economy, believes Arun Kumar, a former professor of economics at the Jawaharlal Nehru University (JNU) who has authored The Black Economy in India (Penguin, 1999). 

Kumar says that the common people are adversely affected. And as demand falls, production falls and this would ultimately result in fall of employment. “This will affect people at large. And the slowdown in demand will last for 1-2 years. Money supply will not be restored for another 7-8 months. Because of this difficulty in circulation, the demand will slow down for the coming 8-10 months. And therefore recession is very likely.” 
 
He also adds that the move is affecting agriculture, industry and services. Black money would be just 1-2 percent of the total money and and most of this money would also be recycled. “So if you are able to demobilise this income, this would hardly create any difference,” he adds. 
 
Kumar says, “Black income is generated through a variety of means – in spurious drugs, in under or over invoicing in trade and business. There are as many ways of generating black income as there are number of sectors in the economy. So even if you are able to demobilise some amount of black money this year, it would be again generated next year.”
 
Instead of going for demonetisation, Kumar adds, that the government could have tracked the hawala houses, ended banking secrecy and formed the Lokpal to bring in accountability. He also says demonetisation of currency will not tackle the black economy problem and will just hurt the white economy and small traders and workers. 
 
“If this could have solved the black economy problem, then it does not matter even if we have to suffer some pain. If it is not solving the problem and causing a lot of problem to people who are innocent or workers who are not generating black income, then why do it?” 
 

Comments

 

Other News

PPP model in metro rail may not be a good idea

The PPP model has been made mandatory in metro rail projects, but it has not been successful in at least three cities – Delhi, Mumbai and Hyderabad.  The cabinet chaired by prime minister Narendra Modi approved a new Metro Rail Policy that m

India must have a cyber security framework: Deloitte

In absence of proper regulatory and supervisory capabilities, some regulators in Asia-Pacific region believe the next financial crisis might be triggered by a cyber attack, said a new report on cyber security. According to Deloitte`s ‘cyber regulation in Asia Pacific’ report, cyber at

Industrial performance has weakened: RBI panel

There is a need for speedier clearance of projects by states, RBI’s monetary policy committee said and added that there is an urgent need to reinvigorate private investment, remove infrastructure bottlenecks and provide a major thrust to the Pradhan Mantri Awas Yojana for housing needs of all.

“Parents need to be taught that each child is special”

It has been a year since you took charge of the new ministry. What is your biggest worry as in charge of education in India? My first priority – and that reflects my worry as well – is to improve the quality of government schools. It’s a tough job. Unfortunately,

Should National List of Essential Medicines be expanded?

Should National List of Essential Medicines be expanded?

First cargo of IndianOil’s crude oil imports from US shipped

 In a big leap aimed at diversifying its crude oil sources and boosting the country’s energy security, IndianOil Corporation has begun crude oil imports from the US. The first cargo of high-sulphur ‘Mars’ crude oil was loaded recently from St. James Port on ‘Bergitta`



Video

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter