India

Devastation of Indian Economy Started with Demonetisation, says Congress Leader Rahul Gandhi

New Delhi (Sputnik): India’s principal opposition party, Congress, has been attacking the government led by Prime Minister Narendra Modi on various issues including high oil prices, unemployment and the ongoing economic slowdown. Congress has also criticised the government’s $266 billion stimulus plan to mitigate Covid-led disruptions. 

A day after India reported the first economic contraction in last 40 years, Rahul Gandhi, former chief of the country’s main opposition party Congress,  said the devastation of the economy began with demonetisation.

The remark came as an apparent reference to Prime Minister Narendra Modi who dramatically announced demonetisation in 2016. It meant all high value currency notes of INR 500 ($6.8) and INR 1000 ($13.7) were to be swapped with new currency, as a measure to reduce the amount of counterfeit currency in circulation.

Taking to Twitter on Tuesday, Gandhi, one of the most vocal critics of Modi, posted:  “Devastation of the India economy started with demonetisation. Since then, the government has taken a series of wrong policy decisions.”

The Congress leader says that major policy decisions like the new goods and services tax, and the insolvency and bankruptcy law announced after demonetisation, were flawed. 

On Monday, the Indian government released economic growth numbers for the April-June period of the current financial year (April 2020-March 2021). The data showed a massive contraction of 23.9% compared with the same period last year. All the sectors of the economy barring agriculture were in the red. 

According to government data, manufacturing contracted by 39.3 percent, construction by 50 percent, and production of commercial vehicles by 84 percent. 

Even though the recent data release pertains to the April-June period of this year, during which economic activity was at a complete standstill due to lockdown in April and May, the Indian economy had been consistently slowing over the past two years.

From over 8% gross domestic product growth in early 2018, India’s economic growth slipped to 3.1% in January-March this year. 

On May 12, Prime Minister Modi announced a $266 billion stimulus package to help the economy over the challenges posed by Covid-19 pandemic.

India’s banking regulator Reserve Bank of India also pumped in liquidity worth $127 billion to ensure stability in the financial system. 

Modi announced demonetisation in November 2016, aimed at taking out the high value notes in circulation. The old notes were replaced by fresh currency notes.

The public was given 50 days’ to swap their old currency notes with new ones. At the time of demonetisation, former prime minister and veteran Congress leader Manmohan Singh said that demonetisation would impact India’s GDP by at least 2%.

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