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Banning high value notes dragged India's economic growth down: Raghuram Rajan

Tuesday, December 18, 2018

Demonetisation slowed down India's economic growth at a time when the world economy was growing and it impacted the GDP significantly, former RBI Governor Raghuram Rajan said. Rajan said he has seen studies which reaffirm that banning of high value currency notes in late 2016 impacted India's growth significantly.

"I think the net impression is that it (demonetisation) had a significant effect on our growth. And now, I have seen studies which reaffirm that. It has slowed down (our growth).

"...The world (economy) was growing faster in 2017, we slowed down," Rajan told a news channel in an interview. The growth was not only impacted due to demonetisation but also because of implementation of Goods and Services Tax (GST), he said.

In 2017-18, the Indian economy grew by 6.7%. "That was the twin blow of demonetisation and GST (that impacted India's growth). And before anybody accuses (me) of being anti-GST, it's a good idea in the longer run, but it has short term teething effect," Rajan noted.

When asked if he was asked to implement demonetisation during his tenure as the RBI Governor, Rajan said he was asked for his opinion on banning high value currency notes from the system, which he thought was a "bad idea".

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