Former RBI chief Rajan says had cautioned government on demonetization

At no point was RBI asked on demonetisation decision says former RBI governor Raghuram Rajan

In his interview with Times of India, Rajan pointed out that at no point during his tenure, RBI was asked to make a decision on demonetisation although it was consulted on the issue.

Kaushik Basu, another prominent economist wrote in New York Times, "Demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation".

Rajan's new book titled, "I Do What I Do: On Reforms Rhetoric and Resolve" is all set release next week. He clearly said, "I made these views known in no uncertain terms".

He also added that the central bank had handed over a note to the government outlining the potential cost and benefits of scrapping the higher denomination currency as well as alternatives that can be taken to achieve similar aims.

The Modi government withdrew the ₹500 and ₹1,000 notes from circulation on November 8, 2016, claiming that it would cut out black money, curb tax evasion and put the country on the path to digital transactions.

The Modi government's game changing economic policy squeezed the economy from 7% in October-December quarter to 6.1% in January-March and 5.7% in April-June.

Former Reserve Bank of India (RBI) governor Raghuram Rajan has finally broken silence, as he completed one year of his exit today.

Challenger Fails To Take Down Merkel In Only Debate Before Election
However, Mrs Merkel returned to the issue later on in the debate, making a u-turn by promising to end the negotiations. But Merkel countered that: "In the life of a chancellor, there comes a time when you have to make a quick decision".

Since demitting office on September 3 last year, this is the first time the former RBI governor has spoken on demonetisation; he explained that he chose not to speak on India for a year because he didn't want to "intrude on his successor's initial engagement with the public". He also alleged that RBI had even published a note calculating the costs and benefits.

What irked people the most was the way the RBI made a mess of the currency exchange which was inevitable in the absence of any preparation either on the part of the government or the central bank.

In his book, Rajan wrote, "The RBI flagged what would happen if preparation was inadequate".

The current leadership of the central bank could not be reached for comments on Rajan's acount.

However, the government noted that the economic downturn has not affected by demonetization. Modi's radical move was slammed by the opposition as ill-conceived and poorly executed. Frequent changes in cash withdrawal rules added to chaos and inconvenience that lasted far longer than the 50 days the PM had sought to restore normalcy.

"I think the people who mooted this must have thought that some of it would be compensated if money didn't come back into the system". Data released by RBI earlier this week showed that 99% of these notes were deposited in bank accounts.

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