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India was ‘pretty incompetent’ in scrapping high value banknotes: Rogoff

A man counts Indian rupee notes near the Bombay Stock Exchange building.
Dhiraj Singh | Bloomberg | Getty Images
A man counts Indian rupee notes near the Bombay Stock Exchange building.

The way India handled the scrapping of its high-value banknotes was "pretty incompetent," Harvard professor Kenneth Rogoff told CNBC's Worldwide Exchange.

Rogoff, professor of economics and public policy at Harvard University, told CNBC that Indian Prime Minister Narendra Modi's move had been "pretty paralyzing" for the emerging market economy.

In early November, Modi announced that India would be scrapping its 500 and 1,000 rupee notes in an effort to clamp down on fraud, replacing them with new 500 and 2,000 rupee notes instead. Indians were effectively given a few hours' notice that their existing cash would no longer be considered legal tender. The recall period for the old notes ended on December 30.

Distribution issues followed Modi's decision, with Rogoff adding that "worst of all, (the Indian government) hadn't printed the new cash to replace the old cash."

"I don't really think that's an ideal policy for developing economies in general," Rogoff said, adding that he advises "phasing out large bills slowly over five to seven years" in contrast to Modi's shorter-term action, in which he "did that overnight."

Rogoff said that India's move at the end of 2016 could signify the start of national economies shifting away from cash, referencing Australia, which is "talking about phasing out its 100 dollar bill."

"I'm for less cash, not cashless," he clarified, "I think we need paper currencies for ever, just not the mountains of it that we have in large denomination notes."

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