At a time Prime Minister Narendra Modi has been facing all-out criticism over his demonetization move, former chief economic advisor Arvind Subramanian joined to add salt to injury stating that note-ban was a massive, draconian, monetary shock that accelerated economic slide to 6.8 per cent in the seven quarters.
He asserted that the real GDP growth was affected by the demonetisation. Growth had been slowing even before, but after demonetisation, the slide accelerated, he added.
In one of the chapters from his book, “Of Counsel: The Challenges of the Modi-Jaitley Economy”, Subramanian said, “In the six quarters before demonetization, growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four quarter window, the relevant numbers are 8.1 per cent before and 6.2 per cent after).”
In his book, the former economic advisor hinted that he was not consulted before announcing demonetization. The former CEA said he does not think anyone disputes that demonetization slowed growth. Rather, the debate has been about the size of the effect — whether it was 2 per cent points, or much less. “After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and oil prices.”