It may come as a severe embarrassment for incumbent central government as Arvind Subramanian, the former Chief Economic Adviser, came down heavily on the decision of demonetization.
He described the note ban as a massive, draconian, monetary shock that accelerated economic slide to 6.8 per cent in the seven quarters after the decision against the 8 per cent recorded prior to it.
Though Subramanian, who quit the post earlier this year after a four-year tenure, has devoted a chapter in the upcoming book “Of Counsel: The Challenges of the Modi-Jaitley Economy”, published by Penguin, has kept to himself on whether he was consulted in the decision-making process of demonetisation.
The detractors of the government had said that the Prime Minister had not consulted the CEA on the crucial decision.
The former CEA says he does not think anyone disputes that demonetisation slowed growth. Rather, the debate has been about the size of the effect — whether it was 2 per cent points, or much less.
Searching for other explanations, Subramanian says one possibility was that people found ways around the note ban with the possibility that the production was sustained by extending informal credit.
Finally, to a certain extent, people may have shifted from using cash to paying by electronic means such as debit cards and electronic wallets.>