November 10, 2017

Viewpoint: Modi's Currency Gamble Damaged Indian Economy

Visiting Senior Fellow at IDFC Institute, Praveen Chakravarty, writes for BBC News about the impact of demonetisation on the three most important sectors in India; agriculture, manufacturing and construction, one year post Demonetisation.


"Using sectoral Gross Value Added (GVA) data, my analysis shows that these sectors were growing at a steady state of 8% nominal rate in the four quarters before demonetisation. After demonetisation, this growth slipped to an average 4.6% in the subsequent two quarters."


"Using this fall in growth, one can estimate the potential impact of demonetisation on economic output in these three sectors. This works out to roughly $15bn (£11bn) or 1.5% of GDP. This is still a very rough estimate but places in context the narrative of job losses post demonetisation as these are the most employment-intensive sectors."


"Overall, India's grand demonetisation saga is not done yet. It has caused tremendous tangible and intangible damage that will take a long time to unravel. Worse, we still do not know the precise reasons or the modus operandi of this massive decision."


Read the full article here.

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