PM Modi accepts demonetisation is a blunder in meeting with Telangana CM KCR
The Prime Minister said things should improve soon, he asked KCR to support the move at least in public
Prime Minister Narendra Modi has said that he blundered by demonetising Rs 1000 and Rs 500 notes without much thought. The Prime Minister made this admission to Telangana Chief Minister K. Chandrasekhar Rao (KCR) when the latter met him on November 19.
KCR had met the PM to say he was in deep trouble after demonetisation as Telangana didn't have new notes and said the situation was very bad in Hyderabad and the rest of the state. He had said people were standing in queues to deposit their old money for new notes, which were fast running out.
The meeting between Modi and KCR, which was to be for 25 minutes initially, went on for a full one-and-a-half hours. KCR said the situation in industrial and agricultural sectors were badly impacted with entire industrial work grinding to a screeching halt and farmers unable to hire labourers since they were either in queues for the new currency or the farmers couldn't pay labourers their wages.
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KCR is said to have told the PM that given such a precarious position in Telangana, the state will not be able to pay its share of taxes and other revenue to the Centre.
Once KCR listed his many grievances, the Prime Minister admitted demonetisation was itself a blunder and that he should have paid much more attention to it before introducing it, said a source who knew about the meeting. Though the Prime Minister said things should improve soon, he asked KCR to support the move at least in public. Modi is said to have assured KCR that Nitin Gadkari, the road transport and highways minister, and Piyush Goyal, the power minister, will announce new projects in the state to help tide over the crisis.
The Modi-KCR meeting lasted so long that Army chief General Dalbir Suhag, who was waiting to meet the PM, was told the meeting was not possible due to some urgent circumstances, after which the General left.
This is the first reported occasion of Modi admitting the blunder in demonetising old high-value currency, which constituted 86 per cent of the currency in the country. Otherwise, the Prime Minister has defended demonetisation tooth and nail in public, calling opposition leaders, who protested against his move, corrupt as well.How Can People Come Out On Streets To Protest Demonetisation If Modi Knocks Out Cash From Under Them: Sharad Yadav
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A top economist from Israel, who is among the Prime Minister's economic advisers, has also told Modi that the decision was enormously wrong. Several experts, both in India and abroad, have decried the decision. These include Nobel Economic laureates Amartya Sen and Paul Krugman, who was in Delhi for the Hindustan Times Leadership Summit. But the PM hasn't acknowledged his error.
Till date, 83 people have died either because they were turned away since they didn't have new notes, or committee suicide fearing their entire life savings have been blown away by demonetisation, or died in queues either to withdraw money from the ATM or from the bank, or exchange money, which has since stopped at banks despite the prime minister assuring the citizens of India that they could do so until December 30.
Modi had announced the demonetisation on November 8. He has made several speeches after the meeting at Agra on November 21, Delhi on November 22, Punjab on November 25 and the Mann ki Baat on November 27. He repeatedly said that the demonetisation would make India shine like gold, that the poor will get benefits et al. But in all these speeches, Modi did not admit to what he told KCR on November 19, that he had blundered with demonetisation. Nor has he uttered a word in a discussion in Parliament's winter session, leading to the opposition forcing adjournments demanding his presence and his statement.
Here's what leading magazines and newspapers of the world had to say about demonetisation:
The Economist: India's "demonetisation" is a cautionary tale of the reckless misuse of one of the most potent of policy tools: control over an economy's money. Demonetisation will probably make only limited strides in shrinking the black economy while affecting all of India's 1.3bn citizens, the poorest most of all. (December 3)
The Financial Times: Will this demonetisation move sound the death knell for dirty money?
On its own, not a chance. Indian authorities have already released new high-denomination notes to replace the obsolete ones. This new currency, while harder to counterfeit, will soon become a vehicle for new undocumented transactions. As one commentator noted, demonetisation is like liposuction: it represents a one-time reduction in body fat. But if the body wishes to maintain its new physique, a healthy diet and regular exercise are required. (November 28)
The Wall Street Journal: Cash is vital to the Indian economy because it allows people to escape the crushing weight of state bureaucracy. Reduced reliance on cash could be a useful indicator that Mr Modi's reforms are succeeding. But punishing Indians for their rational preferences will only backfire economically and politically. (November 16)
The Guardian: The scale and speed of Mr Modi's scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. While Mr Modi campaigned to end corruption, it would have been better if the government had updated its antiquated tax system to realise such a task. (November 17)
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The New York Times: Demonetization was ostensibly implemented to combat corruption, terrorism financing and inflation. But it was poorly designed, with scant attention paid to the laws of the market, and it is likely to fail. So far its effects have been disastrous for the middle- and lower-middle classes, as well as the poor. And the worst may be yet to come (November 27)
China Daily: India's sudden move of scrapping currency notes of higher denominations to curb the menace of black money seems to be a nightmare for the country's poor and the middle class. (November 13)
Former US treasury secretary Larry Summers in the Washington Post: We strongly suspect that those with the largest amount of ill-gotten gain do not hold their wealth in cash but instead have long since converted it into foreign exchange, gold, bitcoin or some other store of value. So it is petty fortunes, not the hugest and most problematic ones, that are being targeted.