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Moody’s rating blow on demonetisation anniversary ironic; govt must do this to restore trust

FE Online
demonetisation, note ban, sunil jain, trust on govt, auto sector, real estate, revenue, govt revenue, tax collection

The cut in India's credit rating outlook on the day of the third anniversary of demonetisation is ironic, as lot of problems we are facing today have originated from Narendra Modi's shock note ban. 

Many government economists said that the damage done by demonetisation will remain for a couple of quarters until money comes back in circulation. However, it is seen, especially in the large informal sector, that once the momentum is lost, it takes a long time to come back, says Sunil Jain, Managing Editor, Financial Express. One of the major issues with demonetisation is that it was aimed at increasing the government's revenue dramatically but this did not happen.

The other issues include a drag in consumption, investment, and other sectors like banking, real estate, telecom, etc. Consumption has been slowing down for many years, while investment impulse is slowing down. The government should work on improving banking, NBFCs, and real estate sectors. The Finance Minister is working on these issues but how quickly and in what direction, is to be measured. 

Some of the troubled NBFCs should be taken over by government-owned banks, LIC, or some other organisations. As far as the telecom companies are concerned, the Indian telecom companies were suddenly hit by Rs 1.2 lakh cr, which was the government's fault and inability to deal with license and spectrum charge.

WATCH VIDEO | Moody’s downgrade on demonetisation anniversary: What went wrong? Explained