It’s been a week that India’s highest banknotes have been demonetized, but one could still feel the rippling effect across the nation. The demonetization has been a mixed bag. People liking the decision is indirectly proportionate to their position in the society. By position I mean what they do and how they do business(work). Lower income level higher dissatisfaction. Higher income lower dissatisfaction
Let’s look at the good that has happened because of the decision, Overnight the value of high bank notes became zero, this was a sudden blow on the copious counterfeit notes which lost its sheen. Black money is the backbone of terrorism and the circulation of the same stopped as the value of the stored notes became zero. It is believed in the long term; the economy will benefit from the reduction of black money as it will lead to higher tax collection, better business environment, less corruption, and transparency. Besides, there is a strong possibility that banks would reduce interest rate after being flushed with funds. I also feel it was paramount to set an example to the racketeers and money launders that a robust stand will be taken against them and the future is uncertain and bleak for them.
Now the bad, people who have read my previous blog know my take on issuing a higher currency note. Assuming the primary purpose was to avoid the immediate cash crunch, we all know how ineffective it was. India has a rural population close to 67%1 i.e. 0.87 billion people. Do they worry about the ₹ 2000 note or are they more worried about their daily wages which are less than the ₹ 500 notes that got banned? Of the remaining 33% urban population, only 18% 1 are salaried workers and remaining are self-employed or businesspeople. In short, the effect of this decision resonated across 85%~90% of Indian population. Considering the 80:20 rule, 20% of the population hold 80% of the wealth and apparently only 5% of the elite population came under the radar of this decision. Also, India is a cash-intensive economy, a little bit preparation to manage the situation better was expected from the think tanks behind the decision. We all know about the pressure built on the banking system which was not used to ,nor prepared to manage such huge influx of cash.
The small-time street vendors are apparently wiped out from the scene. It will not be surprising that after farmers if they start committing suicide. The government needs to take a drastic step in managing the situation in a better way. The ₹ 50 and ₹ 100 circulation should be increased to ease the situation.
Last they Ugly part of the decision was the Implementation, it’s said that the best-laid plans go wary if not implemented correctly. The image2 beautifully sums up my feeling without writing them in words
Lastly, The purpose of the blog is not to find faults but to get all the aspects forward. Being a proud Indian, I’m happy that measures are taken to control the black money, terrorism, and counterfeit notes. I would like to see it extended to all walks of life and not being limited to a certain sector of the society.
- Image by Rev.Fr.Prince Varghese Madathileth