New Delhi: In a scathing attack on India's central bank and the government over what he termed as an "ill-conceived" and "very badly planned" move to demonetise 86 per cent of currency in circulation, former finance minister P. Chidambaram today said that neither Prime Minister Narendra Modi nor Reserve Bank of India governor Urjit Patel have been able to justify the move.
In an interview to BTVI, the senior Congress leader said the decision to scrap notes of Rs 500 and Rs 1,000 denomination was an “ill-conceived move, not thought through, very badly planned and terribly implemented” leading to hardship across the Indian economy including in the farm sector as well as for casual labourers.
The Rajya Sabha member pointed out that the demonetisation agenda note taken up by the RBI board on November 8 did not mention any numbers, adding that the decision to print Rs 2,000 notes was out of touch with reality. “Remonetisation did not start at all until the Rs 500 note came to the market. A valuable 20 days were lost in printing the Rs 500 note,” he said.
He further said that the RBI has surrendered its autonomy and independence, adding that the central bank should have told the government that there is now an urgent need to "remonetise" the economy.
“In 25 years, no RBI governor thought that demonetisation was a way to turnaround the Indian economy,” the former FM said, adding that the present RBI governor Urjit Patel had only been in office for just over two months prior to the decision being taken. “Neither the PM, nor the RBI Governor have been able to justify the move since then,” he said.
Chidambaram said the RBI failed in the implementation of the move due to lack of advice from experts. “The move has failed because the RBI board has more vacancies than members. Only four directors are in place out of 14 on the RBI board. Only three directors attended the demonetisation meeting.”
“We need to know the agenda note that was placed before the RBI board. We need to know was there any dissent and were any questions asked,” Chidambaram said, adding the RBI's refusal to reveal the minutes of the November 8 meeting is “laughable”.
Chidambaram was unsparing in his criticism of the RBI's functioning in the context of demonetisation and termed the decision as "a pre-scripted, command performance”.
"The government has virtually taken over the RBI's functions. It is either speechless or stunned into silence. The government seems to be telling the RBI that I will walk and you will follow," he said, adding that the RBI's credibility has taken a hit.
“I don't think any monetary economist has a good word to say about the RBI’s conduct over the past two months. I have not heard any renowned economist say that demonetisation is the way forward,” the former finance minister said.
Chidambaram also took issue with PM Modi's announcement of economic measures on December 31, saying that he had never heard of even a finance minister announcing measures like working capital increases for companies.