NEW DELHI, India - The move dubbed to be one of the most successful ones under Indian Prime Minister Narendra Modi - Demonetisation - is now being criticised as the most "disruptive experiments" in recent economic history.
A report presented in the latest issue of 'Foreign Affairs' magazine said demonetisation made 'little sense' economically and proved enduringly popular.
It said that Modi's "grand gesture" of demonetization has proved to be one of the most "disruptive experiments" in recent economic history and it brought India's cash-dependent economy to a "standstill.”
The report authored by James Crabtree, published in the top U.S. magazine was extensively discussed in India’s economic and financial circles.
It noted, “This (demonetisation) has proved to be one of the most disruptive experiments in recent economic history, and one from which (PM) Modi's administration now risks learning all the wrong lessons.”
Crabtree, who is a senior visiting research fellow at the Lee Kuan Yew School of Public Policy NUS in Singapore and is currently on sabbatical from his previous position at the 'Financial Times', has been highly critical of the demonetization policy.
He wrote, “So far (PM) Modi's economic achievements are real, but his record on delivering growth-enhancing reforms, especially those that risk upsetting the public, is mixed.”
Adding, “Although his grand gesture of demonetization made little sense economically, it has proved enduringly popular, and it appears to have made only a minor dent in the GDP. As he approaches 2019, it is not hard to see the lesson that he might learn. The fact that demonetization has been bad for short-term growth is no longer in doubt. Last week, India released GDP figures for the first quarter of 2017, the period when (PM) Modi's demonetisation had its largest impact.”
According to the report, hundreds of millions of Indians were forced to line up at cash machines and bank counters to replace their old 500-rupee and 1000-rupee notes which made up about nine-tenths of the value of all currency in circulation.
Crabtree writes, “The crunch hit the poor particularly hard, and brought swaths of commercial activity in India's cash-dependent economy— and especially in its large semi-legal gray market— to a standstill.”
The biggest-ever demonetisation exercise that the country has ever witnessed was announced by Modi on November 8.