The great disruption of 2016 (Mint)
Mains Paper 3: Economy
Prelims level: US National Bureau of Economic Research
Mains level: Relations between demonetization and unemployment
- India’s overnight ban on high-value currency notes in 2016 was a shock
- According to a study published recently by the US National Bureau of
Economic Research, demonetization reduced jobs by up to three percentage
points and hurt economic activity by a similar magnitude in the first two
months after it took effect on 8 November that year.
- Research has also found that the exercise aimed at spiking black money,
curbing corruption and depriving terrorists of funds led to a two-percentage
point decline in bank lending in that period.
- The research paper examines the impact of demonetization across the
country at the district level to make national-effect estimates.
- The paper concludes that figures put out earlier had underestimated the
economic impact of the move.
Outcome of this research
- The paper’s attention to detail, especially its reliance on data for
various parameters on the ground, offers us the reassurance that this study
is reasonably comprehensive.
- The research method employed also reveals that the note ban’s shock was
felt unevenly across the country, with some regions hit harder than others
because they had a higher proportion of high-value notes in circulation.
- The study’s period of analysis is rather short, though, and has not
captured the secondary effects of the ban are arguably still being felt.
- As many observers have noted, late 2016 disrupted a recovery of India’s
economy and sent it into a prolonged slump from which it is yet to emerge.
Q.1) With respect to “draft National Logistics Policy”, consider the
1. It aims to reduce the logistics cost from the present 14% of GDP to less
than 10% by 2022.
2. It has been prepared exclusively by the Department of Logistics, Ministry of
Commerce and Industry.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. Both 1 and 2
Q.1) Do you think the demonetization had felt impact on increase unemployment in