People queue up at an ATM in Kannur. Photo: VidhurajHarvard economist and Kerala government's financial adviser Gita Gopinath has said while the move to a cashless economy is "commendable," the current implementation of the demonetization scheme will create the hardships for the common man.
Gopinath, whose appointment had drawn flak from various quarters including some Left leaders, said in an email interview to Malayala Manorama that Kerala's economy could be hit if US president-elect Donald Trump actually follows through on his campaign rhetoric.
Q: What is your view on the demonetization of currency notes (Rs 500, Rs 1,000) by prime minister Narendra Modi? Was there a better way to do this?
A: The principle of moving towards a cashless economy is commendable and one to aspire to as it does help to curb black money and its misuse for illegal activities. However, the current announcement does not claim to get rid of cash and neither does it get rid of higher denomination notes permanently.
The fact that a new Rs 2,000 note will be issued goes counter to the principle being pushed here. While on the one hand reducing the role of black money in the economy is a good one, I am also very concerned about the disruptive effect this shock intervention will have on daily economic activity in a country where over 75 percent of transactions are done in cash and given that a large number of people function outside the banking system.
This announcement is the equivalent of a transactions-tax and a liquidity tightening, both of which will have negative consequences for the economy in the near term. Once again I am in favor of moving to a cashless economy and reining in the parallel economy but the particular implementation will create hardships for the common man.
Q: How will Trump's presidency impact the Indian economy and IT jobs?
If Trump follows through on his campaign promises it will be a large negative hit to global trade and the global economy. With most advanced economies growing at barely positive rates and most emerging markets experiencing slowing growth including in the Middle East, this will have negative consequences for the Indian economy and for Kerala.
It is however still highly uncertain whether he will do what he said during the campaign and so we must wait and watch. His anti-outsourcing rhetoric certainly does not behoove well for the Indian IT sector. Once again, we will have to wait and see what policies he actually decides to push.
