Some academicians based in Dehradun say that the volatility the demonetisation drive has triggered would spell disaster for the Indian economy while adding that it would help weed out black money from the system.
SGRR (PG) College principal Vinay Anand Bourai said that uncertainly has been prevailing in the markets with sales of the traders plummeting down to an alarming low and those working in the unorganised sectors fearing loss of jobs. The daily wagers are migrating for their native places from the cities as they are not getting jobs in construction and real estate, he said.
“It is easy to control inflation and it is very difficult to control depression. It seems that the Centre has unleashed depression on the country,” he said.
He said that the character of our economy being diversity, 40 per cent of the total Indian population does not have bank accounts. “Things are still thriving thanks to the inherent strength of the rural economy,” he said.
“Moreover, Marginal Propensity to Consumer (MPC) has decreased. Demand of the masses has nosedived. Production sectors would face the heat too. Output will be less, employment opportunity will be less, people’s income will be less,” he warned while adding that the demand cycle is very important for a developing country like India.
He further said that the magnitude of the counterfeits in circulation being used to fund terror did not warrant such a drastic step.
“Our actual Indian economic model is more investment, more output and more income. But post-demonetisation, it seems Government has followed less investment, less output and less income. Our economy depends on agriculture, animal husbandry, milk dairy in the rural areas which have collapsed thanks to the acute cash crunch,” he said.
However, on a positive note, the economist said that it would help weed out black money or at least reduce its volume.
DAV (PG) College associate professor (department of Economics) VB Chaurasia said that the demonetization impact on economy will have J curve hypothesis by which economy will slow down in the short period and will recover and grow in the long period after things are back on tracks, absorbing the massive shock the drive has dealt. “The Centre has to take measures to encourage non-cash transactions to trace or record all economic transitions,” he said.
He further said that to help the unorganised sectors to survive, the Centre should start circulating cash of smaller denominations in the markets through various means. “Those working in unorganised sectors should not panic. They should opt for alternatives to survive. Though the Centre has sought three months to neutralise the adverse impacts it would take at least six months to one year for the Indian economy to absorb the shocks,” the academic said.