THAT the large non-performing assets (NPAs) on the books of banks, especially public sector banks, is the only blemish in India’s continuing economic story, is the official view. Speaking recently at the Council on Foreign Relations in New York, Finance Minister Arun Jaitley reportedly declared that NPAs were “one very big challenge” facing the government, and resolving that problem was its “top priority”. Parallel to this, others such as top-level Reserve Bank of India officials, have been floating trial balloons, in the form of recommendations on various methods of addressing the NPAs.

SOME weeks ago when the official “quick estimates” of GDP for the third quarter of 2016-17 (October-December) had been released, putting the GDP growth in this quarter (over the corresponding quarter of 2015-16) at 7 percent, which broadly conformed to the CSO’s prediction before demonetisation, a veritable chorus had gone up that the critics of demonetisation had been proved wrong, that the measure did not have the recessionary effect they had claimed it would.

COMRADE BT Ranadive used to reminisce that in pre-independence Bombay (as it was then called) there would occasionally be impressive workers’ strikes at the call of Communist-led trade unions which were powerful in the city at that time, at which Hindu and Muslim workers would stand shoulder to shoulder. Not surprisingly however, given the colonial context, these strikes were not always successful, and, when that happened, they would often be followed by communal riots.

THE Reserve Bank of India has just come out with a document titled Macroeconomic Impact of Demonetisation: A Preliminary Assessment, which, while conceding that demonetisation did have an adverse impact on output, suggests that this impact would have got over by mid-February, because of the re-monetisation that has occurred in the interim. As the document puts it, “…the impact of the liquidity shock was assessed to largely dissipate by mid-February…” 

PERHAPS no other public policy debate in post-independence India has seen as much of an “inversion of reason” on the part of the government as the demonetisation debate. When critics were pointing, on the basis of government statistics themselves, to the palpable failure of the demonetisation measure to achieve its purported objective, which was to cripple the black economy, the government kept harping, in its justification, on the extraordinary“boldness” of the move.