According to a statement by the World Bank’s CEO, Kristalina Georgieva, demonetisation in India will have a profound and positive impact on its economy. Prime Minister Narendra Modi’s decision to ban high-value banknotes was a part of all other efforts put into stamping out corruption in the country.
“Demonetisation may have caused some hardship to people living in the cash dominated economy but in the long run the move will help foster a clean and digitised economy,” says Kristalina.
“What India has done will be studied (by other countries). There hasn’t been such demonetisation in a country so big,” she added.
The World Bank CEO’s praise is the latest for Modi’s decision, which culled 1000-and 500-rupee bills with immediate effect, triggering a long-lasted cash crunch. In November, the International Monetary Fund stated that it supports India’s efforts to fight corruption through currency control measures, which have since alleviated.
Georgieva matched Modi’s decision to that of the European Union, which is also phasing out high denomination bills but over an extended period of time.
“Though demonetisation has, in the short term, created some impact on businesses that are dependent on cash, in the long term the impact will be positive… The reforms India is targeting are profound.”
She said the government’s fiscal inclusion programme along with the change towards digital payments and direct transfer of subsidizations will help the poor.
Georgieva, who visited India for two days, toured on a local train in Mumbai and visited the world’s largest slum in Dharavi. She envisions steady growth the country’s GDP and said that the people were excited to get a better life and that they were ready to pay more for improved services.
She also esteemed the competition among states to upsurge the ease of doing business saying the condition has “improved”.
“India is the bright spot in today’s global economy and it is noticeable in the country’s performance and more so in the aspirations of the people here,” she said.
“Our growth estimate for India for this year is 7%. The signs are positive with the reform process underway and GST expected to be implemented soon.”