source :Indian express
Certainly, by far in the history of governance in India, the move to demonetize currencies of the higher denomination by Modi govt is to be seen as a major disruption to the economy which is already reeling under a lot of problems. Economist and political pundits across the spectrum have hailed it as Short term pain with long term gain, But nobody knows how long it takes to set the business as usual when demand and unemployment rates in the economy are already seeing severe stress and strain. It was thought that bitter pill of demonization would be easier to swallow and things would get back to normalcy after some time but now it is almost sure that the self-infused crisis by the govt take more months to get back to normalcy , But the deadline sought by Modi to sort out things in order is already nearing its end. The pain and hardship is not yet over , The long serpentine queues in front of the ATMS and banks are continuing with no respite , People are finding it difficult to withdraw their legitimate earnings lying in their account , the informal sector is struggling to get on to their feet to cope with the sudden and unexpected whammy imposed by Modi on people.
Our PM was even mentioned in a speech on a lighter note mentioning the use of POS machines by beggars on the street while accepting alms, his pipe dream of converting the most entrenched cash as a medium of transactions in India to cashless India remains a gargantuan task with no immediate resolution in place.
Modi’s pipe dream
I think we should give a big credit to our PM for dreaming big by snatching the lively hood of people in rural sectors like farmers, daily workers, and small and medium establishments whose business survives on cash transactions. Now, November 8 the Modi had decided to change the predicament of common people by introducing such a huge reform of chasing black money by bringing them into the formal economy. But the cost of such a move is huge and enormous than expected, by all means, once affected it takes longer to time to kick off the demand, naturally, corollary is that 2% dip in GDP is almost on the cards.
On one side we hear reports of lives lost while waiting in long ques to withdraw money, which was earned legitimately, On other side reports are coming from several parts of the country of the reported seizure of money in new currencies. Banks are denying the people their rights to withdraw the money lying in their account, but influential people are still enjoying their days without much sweat. The whole exercise is completely taken without much preparations, which brought huge distress in the rural sector, especially to farmers. I think PM Modi became too much obsessed with his image building ex-cerise as powerful PM in the making after Indira Gandhi , so PM deliberately overlooked the likely implications on common people of this country , rather PM’s belief is that this move would better his image as a strong leader, So deliberate attempt from Govt, public machinery to make everyone believe that this one stroke of brilliance by Modi would make our country free from black money,
Modi jumped the Gun
I think Modi jumped the gun to demonetize currencies without much thought and consultation, Now it is like a catch 22 situation which even those in PM’s cabinet secretly agree. The move has already made a huge dent in the rural economy which takes more time to recuperate than expected. The rural demand has virtually come to a standstill, transactions are not happening, the supply of money in the system has stopped. Farmers are not able to meet their daily expenses because they are forced to sell their produces at much lower price than what they have spend on production. The government is of the opinion that that money which has come to banks from informal sector would be used for the greater good of the nation , So a calibrated effort is doing the rounds to create a narrative to link the move to help the poor in the long run. But center failed to recalibrate the ATMs to welcome the new currency, such is the lack of planning which govt has committed without considering the ill effects of such a move. Suppose consider a hypothetical situation if all the black money in circulations are in cash this move would have created a telling effect on the flow of black money ,but when you have real situation in which more than 80% of the black money which is already in circulation are converted and stored in various form of assets , how can such a move have an impact on the black wealth, which is a question needs more answering . The logic of such move never meets the details or this might be another way to show the Modi’s autocratic style of functioning, future .even putting the most trusted institution like RBI reputations under risk. The people who have initially supported the big move by Modi slowly started to realize the pitfalls committed by the central govt severe cash crunch most of the bankers poses grim picture in front of their customers who are waiting to withdraw their cash. But I feel this drastic unprepared move certainly a hidden motive of supporting the private mobile wallet companies to ramp up their operations and also helping public sector banks to write off their non-performing assets and recapitalize banks to lend more to the corporates.
Cash to Cashless system
One thing is for sure converting our economy from cash to cashless is a long journey which takes years to put in place, the bleeding common people has to bear more pain than the usual to get everything back to track. As per the statistics suggest almost the 86% of the cash in transactions has come to bank system since Nov 8 , and interesting part is that only legitimate money which is kept as small savings by farmers and house wife’s came to banking system, but how far the real black money which was the intended motive behind demonetization drive could have helped the economy begs more answers from the Govt . Now the latest amnesty scheme rolled out by the Govt to those who declare their black money with 50% penalty seems to be a desperate attempt to draw some credibility to the failed demonetization drive. The institutions like RBI and its independence has been completely subverted by the govt through this move. I think RBI has never been consulted, at least before making such move, better preparation would have helped the to lower the common man’s sufferings.