‘Black money that was lying idle is now earning interest’
SPEAKING UP Bad money has to be identified once it gets back into the formal system, says Rajan
ingenuity is pretty significant in India. We are a very clever people, especially I think when it comes to jugaad. The real question you have to ask is how easy is it to prevent all this? And if it’s not, what is the amount you are going to cash in through this process.
Until pvt investments pick up, industrialists are not voting with their rupees on the health of the economy in a positive way Human ingenuity is pretty significant in India. We are a very clever people, especially I think when it comes to jugaad
Four percent would be ₹16,000 crore on ₹4 lakh crore. But remember the RBI is sucking this excess liquidity out at 6%, so it’s about ₹24, 000 crore then. That’s what you have to pay every year if it stays in the system ... The fact that the RBI surplus has come down by ₹30,000 crore-plus suggests that this is not an insignificant cost and over and above note printing and note cleaning up. So when people thump on the table and say we have formalised this, I think they misunderstand what cash actually is. Look, I’ll just make a common point — not on demonetisation but whether the economy was healthy, given the GDP numbers at that point. Remember, we had a re-evaluation of growth based on the new GDP numbers from the old GDP numbers. What was 5% in the old went up to 7%. In the quarter before demonetisation, which would have been about the last quarter reading, it was about 7.5%-7.6%. So 7.6% was about 5.6% in the old reading, which few people would have said is hugely strong. So I think... to say that we were back to the old strength, which was 7% or 8% in the old numbers. Again, you can’t do this exercise as crudely as I am saying it... but would need a stronger growth than 7.6%. So I don’t know what people mean by healthy. Private investment has been falling. Until we see private investment pick up, our industrialists are not voting with their rupees on the health of the economy in a positive way. They are holding back. A number of reforms have been undertaken, which hopefully in the longer run, will have a very positive effect. We have established a little bit of a reputation for doing the reforms. There are three areas of concern. First, the twin balance sheet problem — of the corporates and that of the banks. The second sector I worry about is the (debt-ridden) power sector. The other concern is why are we not doing better when the rest of the world is picking up on exports.