Visakhapatnam: The approach of the Central government is a logical step in the direction of controlling black money and the menace of counterfeit currency in the country, according to Prof K Sreerama Murthy, an economy expert.
Delivering a talk on ‘Demonetisation: Issues and challenges’, organised by the Public Relations Society of India local chapter here on Thursday, he observed that after Jan Dhan Yojana scheme and voluntary disclosure of wealth scheme, demonetisation proved to be the right step to benefit the economy.
“Any measure of this magnitude requires the cooperation and support of all sections of society. This measure would certainly help the economy to tackle the problems of poverty and unemployment and helps in building a robust and vibrant economy in the years to come,” he said.
Explaining that demonetisation is the process of removing the monetary value of a legal tender currency by the issuing authority of the government. There are several issues pertaining to demonetisation of high-value currency in the Indian economy. They include– the economy being paralysed due to the presence of huge black money which is not allowing the economy to grow at a higher level, the presence of high currency GDP ratio (11.55%), and more than 85% of currency in circulation in the form of Rs 500 and Rs 1000 denominations.
He also said that due to several scams during the last 10 years that accounted for the growth of black money. There was also the menace of fake currency. Added to this were the ineffective monetary and fiscal policies due to the ever growing parallel economy, growth of terrorist financing, smuggling, drug trafficking etc over the years.
While the protagonists of demonetisation argue that demonetisation will be helpful in controlling price level, reducing land costs, gold and interest rates and also reduces the cost of production in the economy increases tax revenue and also liquidity of the banks and provides huge investment capital at lower rates of interest.
The antagonists are of the opinion that this measure would be ineffective as black money is not only present in the form of currency but also in the form undervalued assets such as gold, jewellery and land. Also, a huge amount of money laundered is deposited in foreign countries which serve as tax havens, they allege. According to them, this measure may adversely affect poor and unorganised labour that depends on cash transactions only.
The meeting was presided by chapter chairman U S Sarma and former chairman Prof D V R Murthy proposed a vote of thanks.