In the wake of India’s move to demonetise large currency notes of Rs 500 and Rs 1,000, Harvard University professor and former chief economist of the International Monetary Fund, Kenneth Rogoff, has the following advice for developing nations:
If you’re a developing economy, don’t try this at home.Kenneth Rogoff, Professor, Harvard University
In an interview with Bloomberg, Rogoff said the Modi government’s demonetisation drive is a radical step with laudable goals but implementation and execution will be key. According to him, the collateral damage could be too great especially for a developing economy like India which is yet to achieve full financial inclusion.
The decision to switch Rs 500 and Rs 1,000 currency notes with the larger denomination Rs 2,000 notes is an “180 degree opposite” to what he’d advise, Rogoff added.
On whether the Reserve Bank of India was on the same page as the government in this latest maneouvre, Rogoff said Governor Urjit Patel’s silence over the last two weeks suggests otherwise.
It doesn’t mean that they (RBI) don’t agree with the broad idea but they might not agree with the tactics. They might have wanted to do it slowly and gradually as others such as myself would suggest.Kenneth Rogoff, Professor, Harvard University
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