Source: News Bharati English25 Nov 2016 17:00:58

New Delhi, Nov. 25: Four out of five former governors of Reserve Bank of India (RBI) have praised the Narendra Modi government’s decision to scrap high-value currency notes of Rs 500 and Rs 1000 from circulation.

Former RBI Governors Y V Reddy, C Rangarajan, D Subbarao, and Bimal Jalan have hailed the demonetization decision taken as a step against corruption and to flush out black money and stop fake currency notes from circulation.

However, former RBI governor Raghuram Rajan has expressed his reservations about the efficacy and positive impact of this move in arresting corruption and black money.

Y V Reddy who served the central bank from 2003 to 2008, described this decision of the Modi government as ‘perfectly timed’ as it preceded the GST implementation. Terming this as a ‘historic moment’, Reddy said that this will bring in a paradigm shift in the economic and political system of the nation.

According to Economic Times, Reddy said that the system was ripe for a change when the country is readying for GST. Anticipating inconveniences, the former governor said that it was impossible to have a big change sans some inconveniences and temporary disruptions.

C Rangarajan who remained to the top post during the post-liberalisation period from 1992-1997 said that this move was ‘standard prescription’ and was tried in the past also. But this time the government was specifically targeting those who have stashed huge money, indulge in fake currency and funding terrorist activities.

He said that the government this time had the above mentioned three fixed targets and the last two were of different nature. He exuded confidence that this measure would reduce black money or unaccounted money from the economy of the country.

 D Subbarao, who headed the RBI during the 2008 financial crisis, asserted that the short-term difficulties notwithstanding, this positive and substantial measure would attract investments and encourage people to go in for electronic transactions instead of cash dealings.  

According to Livemint, Subbarao said that the positive effects of this decision outnumber the negative ones. The increase in bank deposits was a good sign he said adding that it will help banks to reduce lending rates and enable banks to give more credit which will have a positive effect on the economy.

Bimal Jalan, who was the RBI governor from 1997-2003, described this demonetization as a  positive and good intentioned move. ‘Economic Times’ quoted him as saying that it would take three to see how it would work.

Jalan said that increasing the extent of the banking network was the most crucial issue at present so that banks can be made accessible to those who do not have bank accounts as yet. The banking network needed to be spread in rural and semi-urban areas to facilitate banking operations.

However, Raghuram Rajan, the immediate past governor of RBI has not made any comments on the current move. But he had raised his doubts regarding the efficacy of demonetization decision to rid the economy of the black money.

According to Huffington Post, Rajan had expressed his reservations about the effectiveness of demonetization in flushing out black money as ‘clever’ people devise ways and means to hide their stashed money.

“You do find that people who haven’t thought of a way to convert black to white, throw it into the Hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money”, he said.

(With additional inputs from agencies)