Three days after the results of the UP elections were declared, markets at Bombay Stock Exchange(BSE) and National Stock Exchange (NSE) have reacted with a bumper opening today. Christopher Wood, the Managing Director and equity analyst at the brokerage and investment firm, Credit Lyonnais Securities Asia(CLSA) came down heavily on the critics of PM Modi’s note ban shock therapy saying the results of Uttar Pradesh elections had made a mockery of the criticism that demonetisation got. Soon after demonetisation was announced, the award winning equity analyst Woods had lauded the move but said it was a massive political risk by the Indian PM.
Now that results of UP elections have delivered a crucial victory to the PM, the time is ripe to analyze if note ban has had any impact on the elections or not. The question here is not how the economy was impacted or if note ban could curb generation of counterfeit currencies, black money and halt cross border terrorism. These are the questions many an economists have discussed at different fora. Some like Nobel laureate Amartya Sen, former RBI Chief Raghuram Rajan and former Chief Economic Adviser Kaushik Basu have launched blistering attack on the move saying it was a despotic act by the Government and demonetisation went against trust of the economy. Kaushik Basu went to the extent of saying note ban was bound to fail as its effects had been disastrous for the poor, middle classes and lower middle classes.
Those who favoured currency ban were no less eminent people either. Whether he’s former Indian representative to IMF Arvind Virmani or NITI Ayog member Bibek Debroy, many distinguished economists and financial institutions have come out in support of the move. Arvind Virmani opined that note ban was a useful tool to flush out black money from the system. Bibek Debroy hailed the move as bold and said the criticism to the move was not based on facts.
The UP election results have settled the issue for now in favour of demonetisation. My concern is how on such a critical issue like demonetisation, our economists hold such divergent views. Had the move adversely impacted common man, it would have caused widespread disenchantment with the government and the fate of BJP in the elections would have been dreadful. In contrast, the emphatic victory which the UP electorate gave to the BJP suggested that people overwhelmingly favoured the scheme of note ban.The critics of note ban had to eat humble pie. The doomsday prophets like former PM Manmohan Singh and former Finance Minister P Chidambaram were proved dead wrong after the release of latest estimates of GDP by the CSO.
It is sheer misfortune of this country that a scheme such as note ban which provides direction to the economy and gives hope to millions of people is viewed through political prism and every step that the government takes is evaluated in terms of political and personal gains. When economic forecasts so lavishly differ from the political realities and people like Amartya Sen, Kaushik Basu and Raghuram Rajan are suspected of taking political positions, the respect that is reserved for Nobel, Harvard and other economic institutions are bound to be undermined.
Pramod Krshnapita Jamujoria
Email: pramodkrshnapitaa@gmail.com