The government’s decision to ban high-value banknotes as part of efforts to stamp out corruption will have a profound and positive impact on India’s economy, World Bank chief executive Kristalina Georgieva said.
Demonetisation may have caused some hardship to people living in the cash economy but in the long run the move will help foster a clean and digitized economy, Georgieva said.
“What India has done will be studied (by other countries). There hasn’t been such demonetisation in a country so big,” Georgieva told Hindustan Times in an interview late on Wednesday.
The World Bank CEO’s appreciation for the 8 November move which banned Rs500 and Rs1,000 bills, comes after the International Monetary Fund said in November that it supported India’s efforts to fight corruption through currency control measures.
Georgieva compared the move to that of the European Union, which is also phasing out high denomination bills but over a longer period of time.
“While demonetisation has, in the short term, created some impact on businesses dependent on cash, in the long term the impact will be positive… The reforms India is targeting are profound,” she said.
She also said the government’s financial inclusion programme along with the move towards digital payments and direct transfer of subsidies will help the poor.
Georgieva, who was in India for two days, travelled on a local train in Mumbai and visited the world’s biggest slum in Dharavi. She said she found that people were eager to get a better life and were willing to pay more for improved services. Georgieva also appreciated the competition among states to improve ease of doing business. “India is the bright spot in today’s global economy and it is visible in the country’s performance and more so in the aspirations of the people here,” she said.
“Our growth projection for India for this year is 7%. The signs are positive with the reform process underway and GST (goods and services tax) expected to be implemented soon.”
