Note ban 'highly disruptive'; won't change behaviour: Paul Krugman

Criticising demonetization of Rs 500 and Rs 1000 notes, Nobel laureate Paul Krugman said it is "highly disruptive" and will not change behaviour of people who would become more careful and sophisticated in money laundering.

"I understand the motivation but it is highly disruptive way to do it...I would not think there will be prominent change in behaviour. People will be more careful and sophisticated in money laundering so that they will be protected next time," Krugman, Professor of Economics at City University of New York said at the HT Leadership Summit here.

Krugman said it is an unusual step and there is good case for demonetization of high value notes.

He said launching Rs 2,000 currency is not outrageous but is an attempt to flush out hoarders.

On low wage labour intensive jobs being shifted elsewhere from China, he said India does have some low wage manufacturing possibilities, but there are a number of countries in that potential pool.

On India being turning a service export-oriented economy, the noted economist said: " We have been talking a lot about rapid services growth and it has not still fully materialised but if it does, then India is the likely place." However, he pointed out poor infrastructure and said India still has a big problem with transportation infrastructure and that is a big problem for manufacturing and also for services that is one reason for direction of growth.