Demonetisation pain is real. End it soon for better economy: Former RBI-chief Dr Rangarajan

HYDERABAD: Shortage of new currency post demonetisation of high value currency has affected many small businesses to have an immediate adverse effect on economy, said former governor of Reserve Bank of India Dr C. Rangarajan.

Addressing a conference of RBI employees in Hyderabad on Friday evening, Rangarajan, who was also former chairman of Economic Advisory Council to the Prime Minister, advised the NDA government to end the pain in the interest of economy.

“The immediate pain is real and tangible and sooner the phase comes to an end, the better for the economy,” he said, viewing that much of the controversy over demonetisation could have been avoided had the authorities been better prepared. “It is the inadequate supply of new currency to replace old that has caused much of the storm."

According to Rangarajan, demonetisation was always regarded as one of the possible instruments to neutralise the black money or unaccounted income held in the form of cash but demonetisation cannot be a standalone measure.

“It does not address the issue of how to prevent further accumulation of unaccounted income. It aims at neutralising only the existing stock and that too held only in the form of cash,” he said.

Rangarajan advised the government to improve transparency in governance, revise tax structure, improve tax administration and take up electoral reforms in funding of political parties to prevent further accumulation of unaccounted income.

“The demonetisation measure this time is far deeper than what was done on two earlier occasions. The measure has no doubt sent shivers down the spine of some,” he said.