Not a single macro economist thinks note ban was a good idea: Gita Gopinath
Interview with John Zwaanstra Professor of International Studies and of Economics, Harvard University
This interview was first published on December 22, 2017. Business Standard is republishing it as Gita Gopinath has been appointed Chief Economist of IMF today, October 1, 2018.
Demonetisation was not a good idea and the time should have been utilised instead to fine-tune the goods and services tax (GST) before it was introduced, said Gita Gopinath, John Zwaanstra Professor of International Studies and of Economics at Harvard University, in an interview with Advait Rao Palepu. Rising oil prices are emerging as a big challenge for the country, she said while she was in Mumbai to deliver Exim Bank's commencement day lecture. Edited excerpts:
Was demonetisation a good move?
No. I don’t think I know a single macro economist who thinks that this was a good idea. And, it’s not something I think should be done for a country such as India and the level of development it has. Japan has the highest cash per capita, way more than India. The cash in circulation, relative to the gross domestic product (GDP) for India was 10 per cent, whereas in Japan it is 60 per cent. That is not black money; that is not corruption.
How do you see the disruption that demonetisation, and the GST has caused in the short term? Would it be beneficial in the medium to long term?
I view the GST very favourably because that is a real reform. It is a way of formalising the economy. It is a very effective way of ensuring tax compliance and makes it harder to earn black money. But obviously it is going to take some time to smooth out; the implementation again has been disruptive. Which makes me wish they hadn’t done demonetisation is then you could have used that time to have brought in GST smoothly.
Do you think policy making in India should be made more transparent?
What needs to be done generally for policy in India is just better data. It’s not great when everybody, everywhere, seems to be suspicious of the GDP numbers. For instance, I am working on a paper that is trying to basically answer the question: What was the impact of demonetisation in the economy? And the data hurdles are immense, in terms of what kind of data you have to measure things. Different parts of India were affected differently by the cash crunch. So, for instance, at the minimum, suppose you have a state GDP per capita, and you would want it at a quarterly frequency, which doesn’t exist. It’s just basic stuff that doesn’t exist.
Could you explain some of the policy implications of your research work on a country’s trade dependency on the dollar?
I think policymakers didn’t realise it, but kind of indirectly, they actually do obsess about the currency, relative to the dollar. Most emerging countries’ central bankers do look at this. But that is what the implication would be. Usually, policymakers might pay attention to what they call a “trade weighted exchange rate”. And what my research says is that you want to pay attention to the exchange rate relative to the dollar, doesn’t matter who you trade with or how the exchange rate moves one way or the other.
What are the trends you see in commodities, for 2018, especially that given oil prices have risen to $63 a barrel?
I think that is an important risk factor for India, because it weighs very heavily on monetary policy and fiscal policy. I do not believe it will get close to $100 a barrel, I think all projections for it are in the $60-$70 range, because there are lots of other supplies. But that wonderful era of very low commodity prices is now in the past. And so this is going to be something that the government and RBI will have to grapple with. I think there is going to be a lot of frustration. Inflation expectations usually tend to be quiet sensitive to food prices and fuel prices. And so even if the inflationary pressure on the economy, as a whole, is not that high, if people notice that when they are buying stuff that they are paying more for food, it shows up in inflation expectation numbers.
courtesy : business-standard.com
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2 Indians killed, 10 injured in drone attack on Oman's industrial hub of Sohar
New Delhi (PTI): Two Indian nationals were killed and 10 others injured in a drone strike in Oman's Sohar city on Friday that marked the first Indian fatalities on land since the Iran-US conflict erupted on February 28.
Joint secretary (Gulf) in the Ministry of External Affairs Aseem Mahajan confirmed the killing of the two Indians in Oman at an inter-ministerial media briefing on the crisis in West Asia.
He also said that 150,000 Indian nationals have returned to India from West Asia after the conflict began.
"I wish to share with you an incident that happened in Sohar city today. There was an attack and in this incident two Indian nationals have died," he said.
"We express our deepest condolences to their families. Of the 11 injured (in the attack), 10 are Indians. Out of them, five have been discharged after receiving treatment, and five others are receiving treatment in local hospitals," Mahajan said.
"None of them is reported to have serious injuries. Our mission is in close touch with the concerned company and local authorities and is rendering all assistance," he said.
While Mahajan did not provide specific details of the attack, the Oman News Agency (ONA) reported that two drones crashed in Sohar, with one hitting the Al Awhi Industrial Zone and claiming the lives of the two expatriate workers.
These latest casualties brought the total number of Indian fatalities in the West Asia conflict to five. While the strike in Oman marked the first deaths on land, three Indian sailors have previously been killed in attacks on merchant vessels since the conflict erupted on February 28.
In the last few days, India has ramped up its diplomatic efforts to ensure safety and security of 10 million Indian nationals living in West Asia.
India has also been making efforts to secure safe passage for over 20 Indian-flagged merchant vessels currently stationed on either side of the Strait of Hormuz.
In his remarks, Mahajan also said that 15 Indian crew members of the US-owned oil tanker Safesea Vishnu were safely evacuated to a hotel in Basra city.
The tanker came under attack near Basra in Iraq on Wednesday. An Indian crew member was killed in the attack.
Efforts were underway to transport the mortal remains of the deceased to India , he said.
Mahajan said the Indian mission in Basra is also trying to ensure safe repatriation of the 15 Indian crew members to India.
The senior official said 150,000 Indian nationals returned from West Asia.
Around 2,900 Indians returned from Qatar in Qatar Airways flights over the past few days, and 1,000 Indians who returned from Bahrain.
External Affairs Ministry spokesperson Randhir Jaiswal said 117 Indian nationals have crossed over to Armenia from Iran through land border crossings and several of them have returned to India already.
We told all sides to adopt the path of dioplomacy and dialogue to resolve it the conflict as soon as possible, he said at the briefing.
We are also talking to BRICS member states so that a consensus evolves on this issue, he said.
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