Demonetisation damage greater than its benefits, says Kaushik Basu

On day-2 of the demonetization drive, serpentine queues have reported from banks and ATMs around the country

World Bank Chief Economist and India’s former chief economic advisor Kaushik Basu said that the Narendra Modi government’s demonetization drive was not ‘good economics’ and that the damage it causes will be greater than its benefits.

“GST was good economics; the demonetization is not. Its economics is complex & the collateral damage is likely to far outstrip the benefits,” Basu tweeted on Friday evening. Basu was the CEA in the Finance Ministry from December 2009 to July 2012.

On day two of the demonetization drive, serpentine queues were reported from banks and ATMs around the country.

While government utilities were said to be accepting old currency, banks were quickly running out of cash.

Senior government officials said that such difficulties were expected and things would improve in the coming days, even as the centre extended the use of old notes in utilities by another 72 hours.