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People rushed to petrol pumps in Chandigarh on the night of November 8, 2016, after Prime Minister Narendra Modi announced demonetisation of ₹500 and ₹1,000 notes. Petrol pumps were temporarily allowed to accept the old notes

50 days of Note Ban: Get ready for recession, warns Arun Kumar

Increased consumption of petroleum products since demonetisation proved nothing, asserts the expert on black money, but reflected consumers’ anxiety to use old currency notes allowed at petrol pumps

Professor Arun Kumar, noted expert on Black Money and former Professor of Economics at Jawaharlal Nehru University (JNU), on Friday scoffed at Finance Minister Arun Jaitley’s claim that contrary to doomsday prediction by critics, consumption had actually gone up. The FM had cited the increased consumption of petroleum products since November 8 to claim that the impact of Demonetisation had not been as bad as was predicted.


Consumption of petroleum had gone up because people were allowed to use old currency notes to purchase fuel, pointed out Prof Kumar who was speaking at the Gandhi Peace Foundation on Friday afternoon. This, he said, in no way indicated that the economy was not hit by demonetisation.


Maintaining that Demonetisation had hit the economy hard and there was no wishing away recessionary trends, Prof Kumar said that he believed it would derail the Prime Minister’s much vaunted “Make In India” programme. Both consumption and investment will be hit, he asserted, leading to a fall in production and consequently employment.


In the coming days, he warned, the banking system should be ready for even greater stress as NPAs were bound to increase. The Prime Minister sought to use demonetisation as a ‘Ram-baan’ or panacea for all ills but playing ‘Robin Hood’ was not how economies work, he added.

Consumption of petroleum had gone up because people were allowed to use old currency notes to purchase fuel, pointed out Prof Kumar who was speaking at the Gandhi Peace Foundation on Friday afternoon. This, he said, in no way indicated that the economy was not hit by demonetisation.


The economy, he asserted, might recover in a year from now but people ought to be prepared for suffering hardship over a longer period of time.


Meanwhile experts scoffed at other claims made by the Finance Minister yesterday in support of his contention that the currency ban did not have much of an impact. While the FM cited an increase of 14% in Direct Taxes, critics held that this was because people rushed to pay their Advance Tax in old notes so that they could claim refund in new notes. Similarly the increase of 26% in Indirect Taxes cited by Jaitley, critics said, pertained to a period that included merely 24 days after Demonetisation but 276 days before demonetisation.


They wondered if claiming Advance Tax collection as a vindication of Demonetisation showed a certain degree of desperation on the part of the FM.

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