Chidambaram Says No Major Economist Supports Demonetisation. Well, Here Are Seven Who Do.

“This is an absurd, thoughtless move, and no one in the world has a good word for it. Every major newspaper and economist has condemned it,” the Indian Express quoted former finance minister Palaniappan Chidambaram as saying today. He said the government should have at least consulted Yashwant Sinha or Manmohan Singh before going through with the move.

Chidambaram is of course trying to be too clever by half. Sinha is not an economist and it was under Singh that proliferation of the high denomination currency took place. During the 10 years of the United Progressive Alliance government, the country also saw the effect of the policies of Singh the economist.

As always, Chidambaram is being economical with the truth when he says “every major economist has condemned” the demonetisation move. There are, in fact, many qualified economists who have supported the move and listed various long-term benefits such as a fall in interest rates, better tax compliance, lakhs of crores of windfall for the government as informal transactions become part of the formal economy and a boost to the much-needed recapitalisation of banks battered by non-performing assets.

These are, however, long-term benefits, and Chidambaram’s former boss believes, in the words of British economist John Maynard Keynes, “in the long run we are all dead”. Policymakers, however eminent, who can’t see beyond short-term gains must probably not be consulted for a move like this.

Here are some of the top economists and commentators who have supported Prime Minister Narendra Modi’s demonetisation drive:

1) Jagdish Bhagwati

An eminent economist who is a professor at Columbia University, Bhagwati co-authored a piece for the Times of India (13 December) with Pravin Krishna, Professor of International Economics at Johns Hopkins University, and Suresh Sundaresan, Professor of Finance at Columbia Business School, advocating the withdrawal of specific currency notes. Here’s what they wrote:

2) Bibek Debroy

A renowned economist with degrees from Delhi School of Economics and Trinity College, Cambridge, Debroy is currently a member of NITI Aayog, central government’s policy think tank. Hitting out at economists criticising the demonetisation step, Debroy said in an interview:

3) Surjit Bhalla

He is chairman of Oxus Investments, a Delhi-based economic research and advisory firm. He was a professor at Delhi School of Economics, and has worked at the World Bank. Bhalla has called demonetisation a bold step and a bigger reform than the goods and services tax, or the GST.

However, Bhalla said the demonetisation move would be called an utter failure if other reforms did not follow it.

4) Arvind Virmani

A leading economist, former India representative at the International Monetary Fund and former Chief Economic Adviser to then Prime Minister Manmohan Singh, Virmani has also served as Principal Adviser in the now-defunct Planning Commission.

Though Virmani admitted the step will hurt small businesses, he said it was a “useful method of flushing out black money”.

5) V Anantha Nageswaran

Nageswaran is a noted economist and public policy commentator based in Singapore. He has made several insightful interventions on the dangers of judging the government’s move to withdraw Rs 500 and Rs 1,000 currency notes based on short-term implementation challenges.

In his thoughtful cover piece written for Swarajya’s December print edition, Nageswaran highlighted the risk taken by the prime minister and said the move had to succeed as it could transform both our economy and society.

6) Niranjan Rajadhyaksha

The executive editor of business newspaper Mint and a celebrated economics commentator, Rajadhyaksha wrote that the government’s move was “a rare, and perhaps unprecedented, natural experiment whose deeper effects will be known well after the dust settles down.” He called the currency reform a game-changer.

7) Vivek Dehejia

Dehejia is a professor of economics at Carleton University in Canada and a resident senior fellow at IDFC Institute in Mumbai. He earned his PhD in economics from Columbia University under the supervision of Jagdish Bhagwati. He specialises in international trade, economic development and international macroeconomics.

He had this to say about Modi’s demonetisation drive:

This is just a short list of economists in India who support the demonetisation drive. If this doesn’t satisfy Chidambaram, he can proceed to read the views of four former Reserve Bank of India governors here, some of whom were nominated by and served under his party.