Noted economist and Nobel laureate Paul Krugman on Wednesday blamed the Narendra Modi government’s decision to demonetise high-vale currency notes and the Reserve Bank of India’s tight monetary policy for India’s “disappointing” Gross Domestic Product, PTI reported.
“Your 6% growth is actually disappointing,” the American economist said at the State Bank of India’s Mega Conclave in Mumbai. “You probably should be doing 8% to 9%.”
Krugman suggested that the RBI “loosen” its monetary policies because of inflation. “If advanced countries saw the inflation trends that you see here, you would be talking of substantial loosening of your monetary policy,” he said, adding that a strong rupee had made exports “uncompetitive” in the country.
However, in an interview with The Economic Times, Krugman said the damage demonetisation caused to the economy was “not as bad as some of us feared”.
“It was shock therapy that was not well advised,” the economist said. “It is not going to make any lasting dent in corruption, and it could do a significant amount of damage to the economy.”
In November 8, 2016, the Centre had scrapped Rs 500 and Rs 1,000 notes in a bid to tackle the circulation of black money. Businesses and banking operations were affected because of a severe cash crunch in the country.
India’s GDP growth declined to 6.1% year-on-year for the April-June 2017 quarter. It was 7% in the January-March quarter the same year.