Prime Minister Narendra Modi thinks he couldn’t have picked a better time to demonetise the economy. Speaking during the motion of thanks on the President’s address to Parliament, Modi used the analogy of medical surgery to defend his decision. No matter how critical, a surgery is carried out only after ensuring the patient is scoring fine on vital parameters such as blood pressure, heart rate etc. The Indian economy was in good health when the government decided to scrap Rs 500 and Rs 1,000 notes, Modi said. Also, it was done at the risk of minimal disruption because it came days after Diwali, when the economy usually enters a lull phase. That is why, he argued, the government could successfully implement what has now come to be known as the biggest disruption in India’s financial history.
Given that this was the first time the prime minister spoke on demonetisation in Parliament, one expected he would support his claim with hard data and empirical evidence. Unfortunately, he didn’t. He didn’t because he can’t. Because, the economy was as shaky at the time of the note-ban decision as it was when Modi came to power in May 2014.
Data available now suggest industrial output contracted in as many months as it grew during the January-October period last year. More importantly, October had seen a sharp increase – 5.6% – raising hopes that the economy was finally turning around. This was also reflected in exports, which had picked up a sustained momentum through September and October, after a roller-coaster ride for nearly two years.