Manmohan Singh speaks: It’s a mess, loot, will cut GDP by 2 per cent points

Arun Jaitley expressed confidence that the measures taken would have a positive impact on the economy in the long and medium term.

By: Express News Service | New Delhi | Updated: November 25, 2016 12:41 pm
 manmohan singh, demonetisation, manmohan speaks, parliament, demonetisation debate, black money, winter session, narendra modi, new notes, arun jaitley, indian express news, india news Former Prime Minister Manmohan Singh. (File Photo)

In first remarks on the demonetisation of notes of higher denomination, former prime minister Manmohan Singh Thursday tore into the government, calling the entire process a “monumental mismanagement”, an “organised loot” and “legalised plunder” of the common people. He warned of a drop in national income “by about 2 percentage points… an underestimate”.

Prime Minister Narendra Modi, who was present in Rajya Sabha when Singh spoke, later walked up to his predecessor and shook hands. But the government struck back at the former prime minister.

Finance Minister Arun Jaitley said he was “not surprised” that “those who ran the government between 2004 and 2014” never considered the “biggest corruption scandals” during their rule a “blunder” but were calling “steps to curb corruption and black money… a blunder” — records show Singh mentioned plunder which Jaitley may have heard as blunder.

WATCH VIDEO: Here’s How You Can Use Your Old Rs 500 Notes Till December 15

Making it clear that he did not disagree with his successor’s objective of curbing black money, Singh said, “Prime Minister has been arguing that this is the way to curb black money, to prevent growth of counterfeit currency notes and also to help in control of terrorist finance activities. I do not disagree with these objectives. But I do want to point out that in the process of demonetisation, monumental mismanagement has been undertaken about which today there is no two opinion in the country as a whole.”

Quoting economist John Maynard Keynes — like Keynes, he too attended Cambridge many years later — Singh said: “Even those who say that this measure will do harm or cause distress in the short term but will be in the interest of the country in the long run should be reminded of what John Keynes said once, ‘In the long run all of us are dead’.”

“I would like to know from the Prime Minister the names of any countries he may think where people have deposited their money in banks but are not allowed to withdraw their money. This alone, I think, is enough to condemn what has been done in the name of greater good of the people of the country.”

Highlighting the cash crunch, Singh said: “Prime Minister has said that we should wait for 50 days. Well, 50 days is a short period. But for those who are poor and from the deprived sections of the society, even 50 days torture can bring about disastrous effects. And that’s why about 60-65 people have lost their lives.”

“In my opinion, the way the scheme has been implemented will hurt agricultural growth in our country, will hurt small industry, will hurt all those people who are in the informal sectors of the economy. And my own feeling is that the national income, that is the GDP, can decline by about 2 percentage points as a result of what has been done.”

“This is an underestimate, not an overestimate. Therefore, I feel that the Prime Minister must come up with some constructive proposal on how we can implement this scheme and, at the same time, prevent this distress that has been caused to the common people.”

A former RBI governor, Singh took a swipe at the Finance Ministry and the central bank: “It is no good that everyday the banking system comes with modification of the rules, the conditions under which people can withdraw money. That reflects very poorly on the Prime Minister’s office, on the Finance Minister’s office and on the Reserve Bank of India. I am very sorry that the Reserve Bank of India has been exposed to this sort of criticism which I think is fully justified.”

He referred to more than 20 modifications and changes in rules in the fortnight since the November 8 demonetisation announcement. He urged the Prime Minister to find “practical, pragmatic ways and means to relieve the distress of the people who happen to be a great majority”.

“After all, 90 per cent of our people work in the informal sector, 55 per cent of our workers in agriculture are reeling in distress. The cooperative banking system, which serves large number of people in the rural areas, is non-functional and has been prevented from handling cash… all these measures convince me that the way this scheme has been implemented is a monumental management failure, and in fact, it is a case of organised loot, legalised plunder of the common people,” Singh said.

The former Prime Minister’s estimate of a 2 percentage point drop in GDP growth rate is because of a massive disruption in economic activity. Poor sales due to weaker consumption will show up as lower revenues for corporates, with those exposed to retail sales being the most affected, said Moody’s Investor Services.

The worst hit will be the MSME (micro, small and medium enterprises) segment, that accounts for roughly 40-45 per cent of manufacturing, and 40 per cent of exports. A break in supply chain has already started hurting SMEs, and the currency withdrawal will have “serious supply-side effects” for the informal sector, said Pronab Sen, Director, International Growth Centre. Ambit Capital, in fact, estimated the GDP growth in the next two quarters to just 0.5 per cent or even negative, dragging down the full year growth rate to 3.5 per cent.

The government, meanwhile, hit back at Singh. Defending the demonetisation of Rs 500 and Rs 1,000 notes, which he called “remonetisation”, Jaitley told reporters outside Parliament House: “We were not surprised when we heard those who ran the government between 2004 and 2014 that they did not like anti-black money steps. The maximum black money was generated in the country between 2004 and 2014. The biggest corruption scandals — from the Commonwealth Games to 2G scams to coal block scandal — all took place during this period.”

“Those who never considered these scandals to be a blunder are now considering these steps to curb corruption and black money to be a blunder.” He said this would be the “exact rationale and argument” that the treasury benches will put forward in Parliament. “It’s obvious that the Opposition is uncomfortable with the debate… They are inventing and manufacturing reasons to run away from Parliament,” he said.

“It was very clear that the Opposition was not prepared for the debate. They were all taken by surprise (when the government said the Prime Minister will intervene). The very basic of their condition got knocked off. They brought in three speakers and it was clear that not many were fully prepared.”

Jaitley expressed confidence that the measures taken would have a positive impact on the economy in the long and medium term. “A lot of money that operates in the shadow economy will now become a part of the banking structure itself. Banks will have a lot more money to support the economy. Private sector investment, which was so far lacking, will now get back into the economy. The banks which were struggling because of the NPA problem will have a lot more money to lend for agriculture, infrastructure sector, social sector, trade and industry.”

“The possibility of banks having low-cost funds being available now to lend at lower cost also rises. Additionally, when more and more transactions will come into the banking network, in the long run, you will find the taxation, both direct and indirect, improving,” he said.

“Therefore, over medium and long term, there will be a positive impact on the economy. I think it would be prudent for any economist to really look beyond the immediate impact when the remonetisation process is on and look at India post remonetisation,” he said.

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First Published on: November 25, 2016 5:30 am
  1. B
    Bonney
    Nov 25, 2016 at 2:14 am
    Mytake alias Vijay has been trolling w day as a loyal BJP agentr. People are smart and no longer fall in bJP tricks
    Reply
    1. R
      Rogue
      Nov 25, 2016 at 12:58 am
      I think MM spoke more in this ten minutes than in his entire life. lt;br/gt;lt;br/gt;Notice how even his positions were always negative even when positive. lt;br/gt;lt;br/gt;Ex: I do not disagree ..lt;br/gt;lt;br/gt;Why not say - I agree ..lt;br/gt;lt;br/gt;Looks like his masters (if he knows who they are) have trained his m well. lt;br/gt;lt;br/gt;Article mentions a "former" RBI governor. Why is he anonymous?
      Reply
      1. J
        joginder
        Nov 25, 2016 at 3:33 am
        What Dritarashtra did for kauravas, MMS did for congress.....
        Reply
        1. K
          Kav
          Nov 25, 2016 at 7:22 am
          Only the corrupt paid mainstream media and criminals listen to this shameless man, who bartered his economist qualifications to become the slave dog of the Italian mafia lady. He is the spokesperson and mask for these thieves. People do not listen to him. People are angry with this man, because he facilitated and was part of the mega robberies 2G, Coalgate, CWG, National Herald, Augutha, etc.
          Reply
          1. P
            Priyank
            Nov 25, 2016 at 3:04 am
            ManMute singh has been speaking a lot after being released as a puppet of the hi family
            Reply
            1. M
              MyTake
              Nov 25, 2016 at 1:40 am
              (Quoting economist John Maynard Keynes — like Keynes, he too attended Cambridge many years later — Singh said: “Even those who say that this measure will do harm or cause distress in the short term but will be in the interest of the country in the long run should be reminded of what John Keynes said once, ‘In the long run all of us are dead’.”)lt;br/gt;lt;br/gt;Give an Indian example in Indian context to be more relevant!
              Reply
              1. M
                MyTake
                Nov 25, 2016 at 1:43 am
                He used to be like a statue and now he atleast is talking! One wishes if he could talk like this during his time! He could not even override what crooks in 2G, 3G, Coal scam wanted! Try that while Modi is at the helm!
                Reply
                1. M
                  MyTake
                  Nov 25, 2016 at 1:26 am
                  There will be some short term affect as already known but it will have good long term affect. lt;br/gt;Affect on GDP 2% is too much of fantasy!
                  Reply
                  1. M
                    Mytake
                    Nov 25, 2016 at 2:06 am
                    (“I would like to know from the Prime Minister the names of any countries he may think where people have deposited their money in banks but are not allowed to withdraw their money. This alone, I think, is enough to condemn what has been done in the name of greater good of the people of the country.”)lt;br/gt;lt;br/gt;Don't talk like so naive that you don't know how to eat a fried fish!! Don't prove you lost all ba-lls UPA spell!
                    Reply
                    1. N
                      Neil
                      Nov 25, 2016 at 12:56 am
                      with due respect Mr singh you have lost your right to speak. you had plenty time to speak and we never heard you, we rather go hungry than go back to congress raj. now it is best for you to retire and mourn over lost opportunity.
                      Reply
                      1. R
                        ravi
                        Nov 25, 2016 at 3:16 am
                        Biggest traitor of India.... let soniya n co. send money out of India...lt;br/gt;Copied ideas of Madhu Dandawate in 1991 and then Yashwant sinha's but could not implement them....due to corruption.lt;br/gt;When Anna was on fast for about 5-6 days, this guy was busy in iftaar party.... so callous.lt;br/gt;He was the person who said a man in india can comfortably leave with 12 rupees meal.lt;br/gt;And who thinks Rahul hi is so fit to become PM of India...... which means he is telling us to make a donkey our PM for succeeding in his chamchagiri.....lt;br/gt;I never had any respect for this person
                        Reply
                        1. S
                          Shailendra sapra
                          Nov 25, 2016 at 2:36 am
                          Do nothing, say nothing PM speaks out. Amazing!!!!
                          Reply
                          1. S
                            Sharan
                            Nov 25, 2016 at 2:53 pm
                            MMS did Papu talk nothing else.
                            Reply
                            1. V
                              Vijay Khilnani
                              Nov 25, 2016 at 3:08 am
                              GDP will not drop from 7 to 5lt;br/gt;It will drop from 7 to - 5
                              Reply
                              1. A
                                Apr
                                Nov 25, 2016 at 1:37 am
                                Disgusting MMS
                                Reply
                                1. A
                                  Ajit
                                  Nov 25, 2016 at 3:49 am
                                  A bit of respect i had for this individual is completely lost with his view.
                                  Reply
                                  1. A
                                    akshay patil
                                    Nov 25, 2016 at 3:02 am
                                    demonetisation is welcome move . And we can not expect it to be smoother than Modi Govt did.lt;br/gt;Because it is habit of our country people that are causing issues . lt;br/gt;Even a rise in petrol by 50paise creates queues and traffic jam,lt;br/gt;So it creates troubles for people who need it most. lt;br/gt;There is no easy solutions for black money , because still people are not going cashless in Metro Cities for House rent also.lt;br/gt;The UPI introduced by govt we are not utilizing, if our news channels would have shown tutorials on use of paytm, UPI instead of oppostions news it would have eased the problem a lot
                                    Reply
                                    1. A
                                      ALOK MISHRA.
                                      Nov 26, 2016 at 6:58 am
                                      Truth is. Bitter..... But GDP is really falling every ping day.....
                                      Reply
                                      1. G
                                        G V
                                        Nov 25, 2016 at 9:39 am
                                        Let us see what miracle Modi performs in next 7 years !! Having done what he meant (in absence of any LoP), he won't be granted any excuse. lt;br/gt; lt;br/gt;Distressed nation deserves a return.
                                        Reply
                                        1. S
                                          Sujahath
                                          Nov 25, 2016 at 1:12 am
                                          Former RBI governor here mean MMS himself, MMS was RBI governor b4 becoming a finance minister and that is why he always takes Rajya Shaba route as he is not mainstream politician
                                          Reply
                                          1. S
                                            Shekhar
                                            Nov 25, 2016 at 1:31 pm
                                            MMS didnt talk when required and now opening his mouth. He finally opened his mouth but for a wrong cause.
                                            Reply
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