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Never backed demonetisation, warned of damage: Raghuram Rajan in his book

Raghuram Rajan who was the governor of RBI from September 2, 2013 to September 4, 2016 said that the government only asked him to give his views and that the central bank was not asked to take a stand on junking of old 500 and 1000 rupee notes during his term.

By: Express Web Desk | New Delhi | Updated: September 4, 2017 7:47 pm
raghuram rajan, demonetisation, raghuram rajan on demonetisation, note ban, rbi demonetisation report, raghuram rajan book Former RBI Governor Raghuram Rajan (Express photo by Nirmal Harindran/Files)

Former RBI governor Raghuram Rajan, in his book, ‘I do what I do’ has revealed that he was never in favour of demonetisation and had warned the government about the ramifications of pulling out 86 per cent of cash from the economy.

Rajan who was the governor of RBI from September 2, 2013 to September 4, 2016 said that the government only asked him to give his views and that the central bank was not asked to take a stand on junking of old 500 and 1000 rupee notes during his term.

“I was asked by the government in February 2016 for my views on demonetisation, which I gave orally. Although there might be long-term benefits, I felt the likely short-term economic costs would outweigh them and there were potentially better alternatives to achieve the main goals. I made these views known in uncertain terms,” he wrote.

He also added that the central bank had handed over a note to the government outlining the potential cost and benefits of scrapping the higher denomination currency as well as alternatives that can be taken to achieve similar aims. It also emphasised that preparation would be required to do such an exercise. “The RBI flagged what would happen if preparation was inadequate,” said Rajan.

The government then set up a committee to consider the issues, Rajan said, adding that “the deputy governor in charge of currency attended these meetings and at no point during my term was the RBI asked to make a decision on demonetisation”.

Just two months after his departure, the government on November 8, demonetised Rs 500 and Rs 1,000 notes, with an aim to curb black money and corruption. The RBI, in its report released last week stated that 99 per cent of the currency that was invalidated had returned. The monetary cost of printing new currency for the central bank has more than doubled to Rs 7,965 crore while the number of counterfeit notes or fake notes detected during the exercise is only minuscule — just about 7.6 lakh pieces.

Rajan, who had predicted the 2008 global financial crisis, had not commented on demonetisation until now. He is presently the professor of finance at the University of Chicago. He was succeeded by Urjit Patel as the central bank chief.

(With inputs from PTI)

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  1. R
    Ramu
    Sep 8, 2017 at 9:58 pm
    Mr modi destroyed middle level people they are struggling day to day affair for life by proving aadhar card bank transection paying with out any income earning development serviving their life by extra tax payment with out lively wood infrastructure changed good iron man
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    1. Z
      zaibudeen
      Sep 6, 2017 at 7:24 pm
      Talented guy. Since we don't like talented person to hold right position, he was forced to find his ways where his talent is being respected. It is very true although little bitter that demoralized politicians never let a talented person to do a good job. If he continued as RBI governor, i hope our GDP would not have gone down.
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      1. F
        FRANCIS COUTINHO
        Sep 6, 2017 at 1:05 pm
        when these intellectuals from our country shine in USA we are proud of them and we take the initiative of using their calibre for our nation wherever suitable.and when they are put in their specific position our great politicians will enforce their ways on these intellectuals when their expertise is ignored the only solution they have is go back to USA WHERE THEIR TALENT OR EXPERTISE IS RESPECTED OR IMPLEMENTED.(ONLY FOR MEDIA TO BE PROUD OF INDIAN IN OTHER COUNTRY)
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        1. Ram
          Sep 5, 2017 at 7:44 pm
          This fellow is number one chamcha of Corrupt gandhiiii Congess and rogue chidu
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          1. Ravi Seshadri
            Sep 5, 2017 at 6:43 pm
            Rajan was correct. Nepotism populist nationalism will not improve GDP, contain inflation. When 99 junk notes recd.back. by RBI, where is the question of black.
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            1. Ram
              Sep 5, 2017 at 7:45 pm
              It will be known from IT returns.
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