Notes Ban 'Adventure' Wasn't Necessary, Says Former PM Manmohan Singh

Mohali: Former Prime Minister Manmohan Singh today said the economy is on a "downhill path" because of the "adventure" of demonetisation last year, which was not required at all, either technically or economically. Mr Singh, an economist and architect of the reforms in the early 1990s, said demonetisation has not been successful in any civilised country, except some Latin American nations.

"I don't think demonetisation was at all required... I don't think it was technically, economically necessary to launch this adventure," he said at the Indian School of Business Leadership Summit in Mohali when asked if the notes ban was a right decision.

Prime Minister Narendra Modi on November 8 last year scrapped Rs 500 and Rs 1,000 notes.

Mr Singh said the process involved withdrawing almost 86 per cent of currency from circulation and "there was bound to be fallout which we are all seeing."

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Mr Singh made a speech before answering a few questions at the event. "The economy has slowed down as I had projected a few months ago as a result of demonetisation and also the fact that demonetisation has been accompanied by the GST (Goods and Services Tas), which is a good thing that we have done in the long term. But in the short term, there are glitches that need to be resolved. Therefore, the economy has experienced a downhill path," the former prime minister said.

Mr Singh said gross domestic product or GDP growth was much higher in the last quarter of 2016-17 than the first quarter of this fiscal. There are certain things that need to be done immediately, Mr Singh said.

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"When we were in office, investment rate in the economy was 35-37 per cent but now it is less than 30 per cent. Private investment in particular is not growing," he said.

He added India needs much more investment in public sector "but we cannot rely exclusively on public sector to realise our development initiatives. We must also simultaneously work on a foreign exchange situation."

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Mr Singh, who served as the country's finance minister over two decades ago, said growth cannot take place at a high rate if banking system is not performing its task of providing money to entrepreneurs and to others who need to invest in the economy.

Responding to a question on healthcare, he said it is one area where the country is not spending enough.

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The former prime minister said public sector spending is only 30 per cent of the GDP, which is not too big compared to many other nations. Infrastructure, public healthcare and agriculture are the areas where the government will remain important, he said.

Responding to a question on globalisation, Mr Singh said it is here to stay. Despite what US President Donald Trump said in his election campaign, the American public opinion will prevail, he said.

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"Also, I feel in Europe too there is today recognition of multilateral trading system. China today has become a great champion of globalisation," Mr Singh said.

On whether Donald Trump was a protectionist, the former prime minister said, "I am quite confident the US president's current thinking will not last more than a year or so."