The former head of India’s central bank, Raghuram Rajan, received an entry in Time’s list of “100 Most Influential People in the World.” He is now breaking silence claiming that he did issue demonetization warnings to the Indian government. He referred to the negative long-term effects of a ban of high-value currencies.
Prime Minister Modi Banned High-Value Currency in an Effort to Curb Shadow Activities
On Sunday, Indian publications released reports according to which Rajan did caution the government of the negative impact their decisions would have. Back on November 8, 2016, Prime Minister Narendra Modi shocked the entire world with his decision to order a ban on notes featuring 500 and 1,000 rupees. The pretext behind this move regarded stopping numerous shadow activities that brought the national economy down.
While the positive outcomes revealed themselves in modest sizes, the ban has also removed 86% of the currency in circulation. However, Raghuram Rajan did inform the government on demonetization warnings on February 2016, before the ban took effect. He is going to release soon a new book where he talks about his job at the Reserve Bank of India with the title of “I Do What I Do: On Reforms Rhetoric and Resolve.”
Rajan Did Report Demonetization Warnings for the Government
Media took a look at Rajan’s upcoming publication and found that the RBI did caution the government that there would be the dire consequence if they don’t plan the change thoroughly. Afterwards, Rajan openly claimed that the move impacted the national economy heavily.
“I think all said and done, it would be fair to say the intent was good.”
On Wednesday, the RBI reported that Indian people did manage to return most of the banned rupee notes which were then removed from circulation in 2016. However, most of the good citizens were individuals. These circumstances defeated the purpose of the whole reform.
Modi intended to push law breakers to replace their undeclared wealth with legal currencies. Therefore, the change didn’t yield the desired results. Instead, it harmed an economy where most consumers use cash to do their shopping.
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