De-Monetization a Halo Effect


As an Indian, I am  fed up with these   surgical strikes carried out by Modi in last couple months. First, he said he has carried out surgical strikes against terrorist camps across border, everyone believed that  this proactive attack would tone down the infiltration bid and cross-border firing , but the reality is that in the last couple of weeks the firing across the border has been intensified , several of our jawans had lost their lives . Before the dust settles across the border  another surgical strike followed  on November 3 rd, But it  was a surprise attack by our own PM to his people  by announcing the ban of   500 and 1000 Rs currency in circulation , PM told the people  that  this another surgical strike against black money, counterfeit  currency and terrorist funding.  Our PM  went  ahead a bit and appealed to people that I know that you will face problems for some time ,but for the larger interest of the nation, I know you will bear the convenience to  stop the menace of  thriving parallel economy in India. Yes, we all agree , But before such large-scale announcement Govt would have invested time to minimize the sufferings of the people, the plan was ill-conceived and committed a drastic lapse in its implementation. It seems to me that somebody is so desperate to announce such  a big move  to salvage some image to this Govt under the pretext of national interest.

People have started hailing this as a historical move, Our PM has shown the spine to finally crack down on black money and after some days Modi again spoke in public meeting  , he told that  lot of  other actions  are going to follow in the coming days  which would  completely root out black money from our economy  .  Very bold statement from PM  , Our PM has started the war against black money which he has promised during his campaign days before he gets elected as PM.  Several economists coming to the various media discussions platforms has started supporting this as a fantastic move in the long run, Once the bank is flush with more unaccounted money , interest rates  would come down  and lending rates become more attractive , demand becomes more robust and NPA will get reduced, Yes very good logic and I remember my days as a sales manager while doing sales pitch for investment products to HNI customers I also depended on using such analogies  to convince then customers .Building an image at the cost people burden.

Banning the legal tender overnight is not the best move to put a stop to the proliferation of black money. But this hanky panky decision precisely seems to have taken not in the interest of the nation , but a purely tactical move to build an image in the upcoming elections in UP and other states which go  to poll in the next one year  . In the last 2 years and odd , this govt has failed miserably in reviving the economy, the in action  of the govt has only added more insult to the injury  through  the  rise  in  unemployment rate, increased  farm crisis, suicide of farmers and reduced demand in the economy, Now here comes so called  best move taken by Modi to withdraw legal tenders of 500 and 1000rs from the market, it is nothing but a  strong slap on the face of the common people who are already reeling under immense stress.


Cash economy to cashless economy

I wonder how our  85 % population can immediately migrate to  cashless economy  But our FM says  this is the immediate solution to the issue after the banning  currencies ,I think he is  ill advised by his team for making a grand statement  which is like piling up on the misery of the majority  of population living in unorganized sector  , he never thought of the plight of daily wage earners, small farmers and house maids who gets their wages in hard  currency, How are they going to survive , this move by the govt shows how insensitive a govt can become. Why  did the govt act in  a hurried manner through the decision without  considering the fate of more than 60% population living in the rural sector?  It is similar to advise someone to choose   cake when they say they don’t have even a bread to eat. The idea of cashless economy is good , which can be put into practice gradually , even  in  developed economy like Japan majority of them still  transacts  in hard currency.

Demonetization is like icing on the cake

The demonetization is like a  last nail in the coffin  when all other measures are been taken properly to tackle the issue. The tax to GDP ratio is one of the lowest just 13 % of GDP that means you have a situation where a large percentage of the population is not paying their tax or they are hiding their actual profits and paying their tax which is low when compared to their actual income. Big corporates show  fewer sales form exports and pay less tax . Trillions of unaccounted wealth are lying abroad in tax heavens , bring a major tax reform  so that tax collections becomes more efficient and transparent , with out thinking of all those measures Govt has decided demonetization  as a grand step to curb black business. The big black money hoarders are not going to keep  their wealth in paper currency , but they hold their wealth in other asset classes , Govt thought that after taking this  step  all the black money holders  would  queue up  in front of the bank to convert the black  currency to a new one. There are multiple ways to convert their illegal tender to legal tender. So in nutshell what govt has done is that instead of addressing the core  issue they have gone for a surgical strike , So in nutshell treatment  to cure the cancer is ineffective  because if you want to cure cancer called black business the Govt could have gone down to its roots to permanently cure the disease , but this treatment is only cosmetic , cancer called black money would flourish as usual without any respite.


3 thoughts on “De-Monetization a Halo Effect

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