Demonetisation was not required at all, says Manmohan Singh, defiant Jaitley claims achieved principal objectives

Former Prime Minister Manmohan Singh on Friday said the economy is on a “downhill path” because of the “adventure” of demonetisation undertaken last year which was not required at all, either technically or economically.

Singh, a renowned economist considered to be the architect of the reforms of the early 1990s, said demonetisation has not been successful in any civilised country, except some of the Latin American nation.

“I don’t think demonetization was at all required... I don’t think it was technically, economically necessary to launch this adventure,” he said at the Indian School of Business (ISB) Leadership Summit here when asked if the note ban decision was the right one.

However, Finance Minister Arun Jaitley defended the move and said demonetisation was a shake-up which achieved its “principal objectives” of decreasing cash transactions, expanding the tax base and increasing digitisation.

“I think the demonetisation debate in India actually is being held at two different levels. The first level was ‘there’s an inconvenience caused, there are queues which have come up’.

“(The second argument being) ‘Oh the money has come back into the system’. But that was the whole idea. The idea is not to confiscate money,” the finance minister said.

“The idea is to make sure that this anonymous cash operating in the system itself becomes a part of the system,” he said.

“There were three principal objectives besides the big picture that we wanted to shake and break the Indian normal.  We wanted to create a new Indian normal,” he said.

While announcing the decision to ban Rs 500 and Rs 1,000 notes on November 8 last year, Prime Minister Narendra Modi had said the move was aimed at reducing black money, checking counterfeiting and curbing extremism.