Govt Must Replace Notes Fast As Bulk of Cash is White: Chidambaram

There’s a non-monetised economy, you can’t call it black money, the former Finance Minister said on Wednesday.

Former Finance Minister P Chidambaram speaks during a news conference in New Delhi. (Photo: Reuters)

A day after Prime Minister Narendra Modi announced his government’s decision to scrap Rs 500 and Rs 1,000 notes, senior Congress leader P Chidambaram came out in support of the ruling party. The former Finance Minister on Wednesday said that the Congress backed the Modi government’s decision if the purpose was to curb the menace of black money.

However, he raised concerns over how fruitful his decision will be for the economy.

If the purpose of the decision is to curb menace of black money, then it deserves our support... Introduction of new series of notes is estimated to cost between Rs 15,000- 20,000 crore, hence the economic gains of demonetisation should be at least equal to that amount.

P Chidamaram

Chidambaram revealed that multiple governments in the past have considered demonetising high denomination currency notes, but dropped the idea given the “economic gains would be too small” and and the “inconvenience to the people too great”.

He further said that the bulk of the money was white and, therefore, legitimate. And so, the government should exchange the notes quickly.

I don’t encourage or support unaccounted wealth or income, but there’s a non-monetised economy, you can’t call it black money. 

Elaborating on the issue, Chidambaram said that he expects some disruption in the economy initially. However, if the process of exchanging the old currency notes becomes cumbersome, then it will turn into a problem for the economy.

Not Sure if the Govt’s Exercise Will Reap Great Benefits

Chidambaram added that irrespective of his support, the jury’s still out on the demonetisation decision, adding that it will have to be seen whether the government’s objectives are achieved.

The government had demonetised high-value currency before in 1978 – and it failed. It is to be seen if it works this time.