Demonetisation cannot be a “standalone measure” to check black money as others like tax and electoral reforms are needed to tackle this menace, former RBI Governor C Rangarajan said in Hyderabad on Friday.
He maintained that the authorities should have been well prepared for the note ban exercise.
“The demonetisation measure has no doubt sent shivers down the spine of some. However, because of the shortage of new currency to replace the old many have suffered.
“All this will have an immediate effect on the economy which will be adverse. The long-term gains are in terms of reduction in the proportion of pure cash transactions, and a shift to digital mode of payment leading to the recording of all transactions and thereby helping to widen tax net,” Rangarajan said.
He was delivering inaugural address at 32nd Conference of All India Reserve Bank Employees Association. “In short, much of the controversy over demonetisation could have been avoided, had the authorities been better prepared,” he further said.
The former RBI governor felt that the note ban cannot be a standalone measure to prevent further accumulation of black money as it depends on future policies of the government such as improved transparency in governance, revised tax structures and administration and also electoral reforms including funding for political parties.