Professor Narendra Jadhav, the former member of the Planning Commission considers Dr Manmohan Singh as his mentor - both academics and politics. The former Vice-Chancellor of Pune University has been a distinguished economists and educationist who was nominated to the Rajya Sabha by the BJP government earlier this year. In an interview to Sumit Pande, Jadhav differs with his mentor on the impact of demonitisation on economy.
Q: The former PM has called the demonetisation a monumental mismanagement. Do you agree?
A: I am not as pessimistic about the future as Dr Manmohan Singh is. My prediction is that the economic growth will dip for only one quarter and then we will bounce back. And the extent of the dip will not be as high or as large as Dr Singh is saying. He is saying it will be 2 percentage point, I am saying it will dip by only one percentage point for just one quarter. After that we will bounce back.
Q: What is the reason behind this optimism?
A: Demonetisation will lead to quantum jump in financial inclusion. There would be a transition from economy based on cash to credit. It will lead to large increase in revenues by the government. Our tax GDP ratio is lowest in the world. Incidents of large amount of black money is associated with inflationary tendencies. After demonetisation, banks would be flush with funds, interest rates will be lowered substantially in two quarters. And there will be large increase in government revenues. It will come handy in investments in education, health, social sector and also for SC/ST sub-plan. It can also be used for covering the shortfall in the revenues due to the implementation of the GST.
Q: But worst hit in this exercise would be the weaker sections of the society?
A: Vulnerable strata is hardest hit already. Farmers, SC, ST everybody is hurt but this is temporary problem. There are lots of queues that we notice. What is the reason for that? There are three categories of people who are swelling the queues. Some people are afraid and they think it is gone. Particularly the senior citizens. My sympathies are with them. The second category is that of people who are honest tax payers, but they need money for day to day transaction and they don’t have that. This is entirely legitimate.
However, what is really swelling the crowd are the people who are now being called cash-coolies. Panting people in the line on payment. And people putting money in other people’s account, 30% is said to be kept by the recipient and 70% is returned.
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