WASHINGTON: Noted American economist Steve H Hanke has said the demonetisation of high value Indian currency notes will have a ‘political fallout’ besides slow down in the economic growth.

“Modi’s cash crunch is sure to slow the growth of the Indian economy. We should expect political fallout in future,” Hanke, an applied economist at the Johns Hopkins University in Baltimore, Maryland, said in a tweet.

Prime Minister Narendra Modi on November 8 had announced scrapping of Rs 500/1,000 notes in an assault on black money, fake currency and corruption. Post demonetisation, RBI lowered the GDP forecast by half a per cent to 7.1, Asian Development Bank (ADB) and World Bank too lowered it to 7 per cent. The manufacturing sector contracted in December as new work orders and output took a knock for the first time in 2016, according to an index. The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) — an indicator of manufacturing activity — fell to 49.6, down from 52.3 in November. The index came in below the crucial 50 threshold — which separates contraction from expansion — for the first time in 2016 in December.—PTI