PM Modi Should Accept Note Ban Blunder, Rebuild Economy: Manmohan Singh

New Delhi: Former Prime Minister Manmohan Singh on Monday said the impact of demonetisation on the weaker sections of our society and business is far more damaging than any economic indicator can reveal and called on his successor, PM Narendra Modi, to acknowledge the blunder, just two days before the demonetisation anniversary on November 8.

Singh, a renowned economist, in an interview to BloombergQuint said the government must get its priorities right and work towards rebuilding the economy now. “The time for politicking is over,” he said.

Terming demonetisation as an attack on the independence and credibility of RBI as an institution, he also expressed fears that it pointed to a larger trend of erosion of institutions in other spheres as well.

He said that the effort to reduce cash-based transactions and curbing black money may have been “laudable pursuits,” but said that the means to this end are as important as the end itself. Singh said these goals cannot be achieved “through coercion or threats or raids which can be counter-productive”.

“It is unclear that these goals of cashless economy will indeed help small enterprises become larger and achieve scale efficiencies. That should be our priority,” he told BloombergQuint.

On the government’s efforts to formalise the informal economy through measures such as Goods and Services Tax, he said that any move to widen the tax base should be welcomed but warned that in its current implementation, GST threatens to derail the informal sector entirely.

According to estimates, the informal sector contributes as much as 40 per cent to the Indian economy.

“We need to be able to achieve these objectives without any disruption to these small enterprises in their current form,” Singh told the news website, adding that the value created by the informal sector will be captured in the form of income, wealth or consumption effects.

“Hence, we must be cautious about sweeping generalisations about the informal economy and passing moral judgments about the entire sector,” he said.