“It is a created myth that all cash is black money and all black money is cash. Whoever implemented demonetisation, did not know elementary economics,” said P Chidambaram, former Finance Minister of India. He spoke at the Mumbai University on Tuesday to mark 25 years of economic reforms in India and the challenges that lie ahead. While his lecture highlighted eleven decisions by successive governments since 1991, students in the audience demanded his opinion on the recent demonetisation of Rs500 and Rs1,000 notes.
“Demonetisation is a monumental tragedy which is anti-poor and has crippled the economy. The government’s aim to capture all black money doesn’t hold ground because black money is not a stock, it’s a constant flow,” said Chidambaram. He added that government’s move was the worst thing ever happened to a growing economy and it would not bring any economic reform.
Not only did he dismiss the move for demonetization, calling it a “bad judgment”, he also blamed the government for not making an informed decision. “Until recently, the government was not even aware of how much black money is flowing in and out of the country. What’s worse is that a recent figure showed that only 6% of black money is in cash, so banning currency was the worst decision,” he said. He added that in the last 50 years, no major economy has resorted to demonetisation. “We are now in the distinguished company of Zimbabwe, North Korea, Libya and Venezuela, all smaller economies compared to India, thanks to the government’s move.”
While the audience attentively held on to every word coming from Chidambaram, some also asked for an alternative that could have been a better means to get rid of black money in the country, to which Chidambaram said the same is not possible. “Everything depends on demand and supply — as long as people demand for unaccounted money, it will be generated. The government should focus on stamping out corruption from various sectors that run on unaccounted money. Demonetisation is not the answer to black money,” he concluded.