The sabre-rattling between parties on rival sides of the political divide over demonetisation showed no signs of softening today with the government accusing Congress of engaging in “fear mongering” and the latter hitting back calling the exercise a “not well thought out move” whose after-effects will last long.
Commerce Minister Nirmala Sitharaman, who was fielded by the government to mount an assault on the opposition on the issue, rejected the charge that demonetisation of high-value currency notes had hit the common man and insisted that despite facing problems people were backing Prime Minister Narendra Modi’s action targeted against black money.
“Congress is trying to create fear in the common man’s mind. It is not needed. It is fear-mongering,” she told reporters in Delhi, responding to the opposition party’s claim that it will take seven to eight months for the situation to stabilise.
Sitharaman rejected the opposition charge that there was panic in the government following the launch of demonetisation drive which was reflected in fresh announcement of measures for easing people’s problems. The government, she said, had undertaken as much preparatory work as it could before announcing the decision to demonetise Rs 500 and Rs 1000 bills.
However, senior Congress leader and former Finance Minister P Chidambaram did not concur with the government’s claim and termed the exercise as “not well thought out” and whose after-effects will last longer than expected. He also wondered if the government had consulted “the only knowledgeable economist” in the dispensation CEA Arvind Subramanian before announcing it.
“You are seeing the first-order effects of withdrawing, sucking out 86 per cent of the currency in circulation from the market. The first order will continue for several weeks now. Then you will see the second-order effects,” Chidambaram said in Mumbai.
“My suspicion is the only knowledgeable economist in the government, Arvind Subramanian, was not consulted,” he said.
Talking about the first-order effects, he said there are many people now living with very little money and not consuming, which means produce, especially perishable items like vegetables and fruits, are not being sold.
Chidambaram said the second-order effects are already visible in places like Tirupur and Surat, where lay-offs and retrenchments have started.
The second-order effects will be more prominently felt if farmers, who have sown their farms, do not have money to buy fertiliser and hire labour. “So I think the consequences will certainly be negative,” he said.
“The PM’s time out for 50 days might ease the liquidity crisis at individual’s hands, but it won’t solve many other problems.