Demonetisation a draconian, monetary shock, says Arvind Subramanian

Says Reserve Bank holding excess capital to the tune of Rs 4.5-7 trillion which could be used to recapitalise public sector banks; sides with it on PCA

A few months after announcing his resignation from the post of chief economic advisor, Arvind Subramanian is now candid on controversial issues such as demonetisation, which he had eschewed during his stint. 

“Demonetisation was a massive, draconian, monetary shock. It was an unprecedented move that no country in recent history had made in normal times,” he notes in his new book. 

The decision to do away with Rs 500 and Rs 1,000 notes accelerated the slowdown in economic activity with growth averaging 6.8 per cent in the seven quarters after it, as against an average of 8 per cent in the six