Demonetisation rollout 'deeply flawed', Rs 2,000 notes launch puzzling, says Nobel laureate Richard Thaler

Nobel laureate economist Richard Thaler has clarified that demonetisation of high value currencies per se is a good move, but the way it was done by Prime Minister Narendra Modi is “deeply flawed”. [caption id=“attachment_4127155” align=“alignleft” width=“380”]  US economist Richard Thaler, of the University of Chicago Booth School of Business. Reuters[/caption] Thaler clarified his stance to his student Swaraj Kumar in an email exchange, which both of them tweeted. “The concept was good as a move to a cashless society to impede corruption but the rollout was deeply flawed and the introduction of the Rs 2000 note makes the motivation for the entire exercise puzzling,” Thaler told Kumar. Thaler won the Nobel prize for economics this year. Soon after the announcement, Bharatiya Janata Party (BJP) leaders had claimed on Twitter that Thaler had supported the demonetisation of Rs 500 and Rs 1,000 notes announced by Modi on 8 November, 2016. However, even then it turned out that though in principle he supported such a move towards cashless economy, he had reservations about introduction of Rs 2,000 notes. The twitter exchange between Thaler and Kumar was brought out by Rupa Subramanya who also tagged Thaler who retweeted her tweet:

This is what @R_Thaler told @swarajkumar224 on demonetisation. Those sharing an old cherry picked tweet of Thaler’s do take note. pic.twitter.com/P2rNE6Um02

— Rupa Subramanya (@rupasubramanya) October 15, 2017

Now, with the latest development, it is clear that Thaler never supported Modi’s drive and even considered it deeply flawed. The move had sucked out 86 percent of the currency in circulation and even resulted in deaths and depression among citizens. The slowdown in the economy has been partly attributed to the ban on notes which crippled the small-scale sector. The introduction of Rs 2,000 notes has been criticised by many experts earlier too. A section of the economists questioned the very objective of the move asking if Rs 2,000 notes are being introduced, how would ban on Rs 500 and Rs 1,000 notes be effective. According to media reports, soon after the ban announcement, the government’s note printing presses worked overtime to print the Rs 2,000 notes. The idea was to meet the demand for currencies at the earliest. However, that did not help the people as they were stuck with the high value note as there were not enough lower denominations available. However, the Reserve Bank of India (RBI) has now stopped printing Rs 2000 notes, with the focus shifting to lower denominations.