The economy would have collapsed without demonetization: Gurumurthy, board member of the RBI

New Delhi, Nov. 15 (S) Gurumurthy, a board member of RBI, said Thursday that the economy would have collapsed if it had not been demonetized in November 2016 , notes of 500 and 1000 rupees having been used for the purchase of real estate and gold.

In a shocking decision, on November 9, 2016, the government demonetised the old 500 and 1,000 rupee bills in order, among other things, to control blackmoney, the financing of terrorism and to promote digital transactions.

"Only 18 months before the demonetization, 500 rupees, 1,000 rupees (notes) amounted to 4.8 lakh crore.That is what financed the real estate prices and the gold and we would have proceeded in the same way (as happened in) 2008 in the United States due to sub-prime loans.

"Without demonetization, the Indian economy would have collapsed. It was a corrective measure, "Gurumurthy said at a conference at the Vivekananda International Foundation.

Answering a question, he regretted that economists and intellectuals had not taken the right position in terms of demonetisation and GST

"… this is not an economic speech. It has become a political and ideological discourse I … It's the problem for the ruling party to convince the people and the opposition party to convince him … ", he added.

the banking sector, Gurumurthy explained that this resulted from loans generated by an excessive flow of foreign currency during the period 2004 to 2010.

Even the former RBI, Raghuram Rajan, admitted that the excessive loans made during this period resulted in bad debt, he added DP NKD CS MR MR