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Ex-PM Dr Manmohan Singh’s views on demonetization: a critical analysis

Point to point analysis of the ex-PM’s view as delivered in the Parliament:

  1. He talked about “monumental mismanagement”, however
  • He failed to provide any solution, if he considered the demonetization necessary.
  • He also skipped away if he was against demonetization or not. If he was against demonetization, he should not talk about black money. If he is in favour of demonetization, he should have suggested the measures how it would have yielded best result, without making any chaos.
  1. He quoted John Keynes statement “In the long run we are all dead” against the government’s appeal to the public “to bear with short-term pain for long- term gains”. Did Keynes mean that one should not work as “DEATH is the real truth of life”? Does MMS mean that everyone should be relaxed and do not work as “UPARWALA will do everything” for them and ultimately life will end.
  2. According to Manmohan Singh, demonetization will propel 2% decline in GDP. He may be true in this regard.
  • However, the first 50-60 years of independence have seen a development model that resulted in the accumulation of 58.4% of wealth in the hands of 1% of Indian population.

If demonetization rectifies such distorted economy, with a shift from large to small sections and it takes a “pause” as predicted by Dr. Singh, what is wrong in it?

  • Moreover, ones masses comes under the “growth model” of Indian economy, it will accelerate the GDP at comparatively much faster rate, with expanded and real market driven economy.
  1. The 4th point raised by Singh was that demonetization will weaken and erode people’s confidence in the Indian currency system.
  • This has never happened in the past anywhere in the world. Governments have resorted to such steps to stabilize the economy and people have accepted them in the past also.
  • I also wonder such comments by an Ex-RBI Governor like Manmohan Singh. He must be knowing about such provisions in the RBI Act as well as in the Banking Regulation Act. If such an act erodes currency’s reliability, there provision would not have been made in the Acts. Such power has been given to the RBI only to increase currency’s acceptability, rather than as predicted by Dr. Singh.
  • Inflated Economy, with inflated rupee and inflation have made it impossible for the common man to have an asset in their hand, if demonetization gives them a chance at the cost of BIG PLAYERS, what is wrong in it?
  1. The last point raised by Manmohan Singh was the “Organized loot and legalized plunder” of the common man. However,
  • Does he mean that masses are the hoarders of black money and higher denomination currencies? If so, demonetization has definitely looted the masses.

But this is not the reality. Reality is that maximum of 500 and 1000 currency notes were held by upper 10% and so demonetization resulted in  the “Organized loot and legalized plunder” of the higher sections of the society, that too who held illegal black money.

So, it should be termed as the “organized and legalized snatching of illegally stashed black money”.

Conclusion

Speech given by Dr. Manmohan Singh in the Parliament on demonetization seems more a political lecture than an academic lecture.

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