Mitron, stop politicking, rebuild economy, Manmohan Singh’s advice to Modi

New Delhi: Former Prime Minister Manmohan Singh on Monday gave a sagacious advice to PM Modi: “Rebuild economy, stop politicking.” The advice came in an interview to Bloomberg Quint news agency. Singh underlined that the impact of demonetisation “on the weaker sections of our society and business is far more damaging than any economic indicator can reveal.”

His interview comes two days ahead of the first anniversary of demonetisation that the Congress and other opposition parties are to observe as a “Black Day.”  He further asked his successor to work towards consensual policy solutions to rebuild the Indian

economy. “I strongly feel the time for politicking over demonetisation is over. It is time the Prime Minister graciously acknowledges the blunder and seeks support from all to rebuild our economy.” Singh expressed concern regarding the loss of jobs in the small and medium enterprises sector and also emphasised the exacerbating impact that it may have on inequality.

He said demonetisation may exacerbate such inequalities which will be harder to rectify in the future. In such a diverse country such as ours, inequality can prove to be a far greater social malaise than in other homogeneous nations.

The Modi government has often explained the demonetisation move as an effort to reduce cash-based transactions and nudge the economy towards digital payments. Singh agrees that these objectives are certainly “laudable pursuits,” but “we also need to get our economic priorities right.” He said:  “It is unclear that these goals of cashless economy will indeed help small enterprises become larger and achieve scale efficiencies. That should be our priority.”

The former prime minister, also a noted economist, struck a similar note regarding the need to formalise the Indian economy. Commenting on whether efforts to bring the country’s vast informal economy, by some estimates at 40% of gross domestic product, into the tax net via demonetisation and the Goods and Services Tax (GHST), Singh said: “The means is as important as the ends” and the ends cannot be achieved “through coercion or threats or raids which can be counter-productive.”

“The value created by the informal sector will be captured in the form of income, wealth or consumption effects. Hence, we must be cautious about sweeping generalisations about the informal economy and passing moral judgments about the entire sector,” the former PM said.

He also referred to the role of the Reserve Bank of India in facilitating the demonetisation that has come under sharp criticism. Singh termed demonetisation as “an attack on the independence and credibility of the RBI as an institution” and expressed fears regarding a “creeping culture of erosion of institutions in other spheres” as well.