LATEST NEWS – India’s demonetisation led to huge cash shortages that have “adversely affected” consumption and like a “vacuum cleaner” it sucked in cash and then was slowly replacing the currency, a senior IMF official has said.
“You’ve heard about so-called ‘helicopter drops’ of money with unconventional monetary policies, so one way to characterise this demonetisation initiative is a vacuum cleaner,” Paul A Cashin, assistant director in the IMF’s Asia and Pacific Department, and mission chief of India, told PTI.
“It’s sucking in cash, withdrawing it from the economy, and then the vacuum cleaner is going in reverse, slowly replacing cash but as I said, at a fairly modest pace. That’s led to a lot of cash shortages that have adversely affected consumption,” Cashin said in response to a question as the IMF released its annual country report on India.
Given the shortage of cash in the market, IMF in its report urged the Indian Government to continue to enhance the supply of new banknotes, and if needed consider extending or expanding targeted temporary exemptions, including on the use of old banknotes, particularly for rural and remote areas. READ MORE