Note ban execution 'deeply flawed', says Nobel Prize winner Richard Thaler

Mumbai: Days after the one-year anniversary of demonetisation, Nobel Prize-winning economist Richard Thaler has said that although the ban of high value currencies was a “per se good move”, its execution by the Narendra Modi government was “deeply flawed”.

Thaler won the Nobel Prize in economics for his extraordinary work in the field of behavioral economics in 2017. His comment on the controversial note ban move comes as a reply to an email sent by his student Swaraj Kumar.

“The concept was good as a move to a cashless society to impede corruption but the rollout was deeply flawed and the introduction of the Rs 2000 note makes the motivation for the entire exercise puzzling,” Thaler told Kumar.

Kumar, in his email had asked the economist, "After the announcement of Nobel committee, your tweet on India’s demonetization got a lot of attention and many people are quoting it to support the whole exercise. I know that you have suggested in the past to demonetize higher denomination to reduce corruption and to move towards a cashless society. But I was wondering what’s your thoughts on the execution like demonetizing 86 per cent of the notes in circulation and only 50 days for the note exchange?”

The email was sent to clarify Thaler’s stance on the issue as previously, the Bharatiya Janata Party (BJP) had claimed on Twitter that he supported the demonetisation of Rs 500 and Rs 1,000 notes. "This is a policy I have long supported. First step toward cashless and good start on reducing corruption.” – this is the text of the Thaler’s tweet from 2016 that was shared by members of the ruling party after he won the Novel Prize, to hail the Modi government’s move.

However, Thaler replied saying “really? Damn.” when he was notified by Twitteratis that the government was introducing Rs 2,000 currency notes. This part of his tweet was however not highlighted by the note ban supporters. 

Thaler’s straightforward response reveals his thoughts on the move that seized 86 per cent of the currency in circulation overnight. The recent slowdown in the economy with the GDP falling to a three-year low of 5.7 per cent has also been attributed to the note ban move.

Apart from Thaler, a lot of economists who hailed the demonetisation of the high value currencies, found the introduction of Rs 2,000 notes puzzling and contradictory to the objective of note ban.