Demonetisation in-principle was good, but didn’t work: Bimal Jalan

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New Delhi: Former RBI governor Bimal Jalan on Friday said demonetisation in-principle was a good move to eliminate black money, but in terms of consequences it did not work.

“Demonetisation, in terms of the principle of it, nobody can object to black money being tapped, or if demonetisation is being done to make sure that black money hoarders declare their money. But in terms of the consequences, you can see that it didn’t work,” the former governor of the Reserve Bank of India (RBI) said at an NCAER event in Delhi. “Now if it didn’t work, then we have to make sure what is it that we can do in its place which can actually work.”

Noting that there is a structural issue in policymaking, Jalan said policy is made by politicians and executed by the administrative system and policy making should be flexible and respond to change in circumstances. In actual policymaking you have to be practical, he added.

Talking about current global scenario, he said the only thing happening is de-globalization.

According to former finance secretary Vijay Kelkar, who delivered the C.D. Deshmukh lecture at the event, policymaking is required to address market failure, improve efficiency and equity in the society. With regard to taxation, Kelkar said it should be stable and simple which gives investors confidence to invest. He also advocated a single goods and services tax (GST) rate as it is simple to administer. So, simplicity is the first mantra of policymaking, he said, adding that right sequencing is another important pillar of policymaking.