New Delhi: India could face significant short-term economic costs from the ban on large-denomination currency notes, with no significant long-term benefits, economist Paul Krugman warned on Friday. Prime Minister Narendra Modi on 8 November scrapped the high-denomination currency notes in a crackdown on unaccounted wealth, tax evasion, terror finance and counterfeit currency. Indirect taxes are generally considered regressive as they affect the rich and the poor alike, unlike income tax, the burden of which increases progressively on tax payers with high income levels. “Trying to have an OECD style income tax system in a country which has a per capita GDP far below OECD levels is not doable,” Krugman said. Krugman said unlike China or Brazil, India will not be at the receiving end of any protectionist measure by the US.

Source: Mint December 02, 2016 12:50 UTC