The Congress on Wednesday said the demonetisation of Rs 500 and Rs 1000 notes will result in disruption of the economy and cautioned the government that the decision should not result in harassment of the people who go to banks to exchange their legit money.
“Immediately, there will be some contraction of the economy, there will be some disruption,” said senior party leader and former finance minister P. Chidambaram.
“The question is how quickly the old notes will be exchanged for new notes. If that process becomes cumbersome or harassment, it will have an impact on the economy,” he said.
Chidambaram said he was concerned about the 99 per cent of the people who are legitimately affected by it—people like students, housewives, daily wage labourers, carpenters and plumbers. “Their's is legitimate money. Rs 500 notes must be replaced without harassment and without inconvenience,” he said.
“I am cautioning the government. You have to handle it quickly, efficiently and don't inconvenience the people. Let us not call all the people of the country black money launderers,” he said and asked the government not to make it mandatory for people to fill up an RBI form in order to exchange notes.
In response to a question, he said a similar move has been considered by successive government at different times, but the consensus was that the economic gains may be very small and the disruption and inconvenience may be very large.
Chidambaram observed that there was no empirical evidence to show that unaccounted-for wealth and income is stashed away in the form of cash. “Most people hide it in real estate, construction, gold jewellery, bullion and securities,” he said.
The former finance minister said the introduction of Rs 2000 note was a puzzle. “How will this move help in preventing the generation of black money? If new income or wealth is unaccounted, will not that income or wealth be hidden in the Rs 2000 notes?” he asked.
He recalled the demonetisation of high denomination notes by the Janata government in 1978, saying that by all accounts, that action failed to achieve its objectives. “High denomination notes were re-introduced shortly afterwards and the volume of unaccounted wealth and income admittedly increased,” he said.
Chidambaram said he was a little worried about the timing of the move also, saying it has come in the middle of the wedding season. “There are going to be 40,000 marriages in Delhi over the next few days. In one month, between November 15 and December 15, five million marriages will take place all over the country. People will have to exchange notes and ask for withdrawal of money. How the government will handle it, I don’t know,” he said.
