The year 2016 finale saw a defining descendency of the state of Indian economic health. Demonetization took a heavy toll of peoples patience and financial inconveniences.
The risk of demonetisation was a step that Prime Minister Modi took to hit at the heels of corruption, weed out black money, and help the poor, as he said and has since been saying too. 50 days from November 8, 2016, the real India is yet to realise what the Prime Minister meant by digitalization. In a country where there is more illiteracy than literacy, a square meal is hard earned, internet penetration is poor, digital literacy needs great efforts yet, bank accounts still to open, demonetization has hit hard. Digital fixes cannot solve social problems. Demonetization has punched the informal sector, the economy has shaken so badly it will take long time to bounce back to normal and terror attacks continue unabated from across the border. Even thought the intention is good the gains seem to be difficult and too long to come by. Was the risk worth taking!!!!
President Mukherjee acknowledged that demonetization is bad news for India as it has hit the economic growth trajectory. Former Finance minister Chidambaram called it a case of extreme mismanagament and corruption as did former economist Prime Minister Manmohan Singh. Chidambaram rightly put it when he said 'the government has tried to change the narrative from black money and corruption to a cashless economy. No economy can become — or has become – totally cashless. We support encouraging high-value transactions to adopt the digital mode, but to insist that even low-value transactions should go cashless is an absurd and undesirable goal. There are serious issues of privacy and cost to the payer and the payee.'
Last year that kickstarted with positive economic growth due to good monsoons was deflated soon by the slowing of economy in all possible ways of demonetization implementation. The gains of immoblizing black money and fighting corruption in a way was neutralized by the troubles perpetrated by demonetization. Long serpentine queues in front of banks and ATM's betrayed insecurity in terms of cashlessness, making people restless in desperation and confusion, somehow trying to believe the prophetic sounding words of the prime minister saying please take the trouble for some days for the sake of the nation. People cooperated to their best and are doing so after the lapse of 50 days.
Weak and unprepared implementation of such policies can cause havoc with the citizens of the country who rest full faith in the words of their leaders. The poor was left jobless, small shopkeepers, hawkers shut shop affecting small businesses, laborers lost work as infrastruture sector dipped for want of ready cash, investments ceased, real estate crashed, only the rich and the politicians are in comfort zone. They do not have to queue up afterall. Interestingly the e payment companies are the ones that have literally danced their way to the banks. To crown the glory the limit set on withdrawls and deposits saw rules oscillating every second day. Paradoxically people have been barred access to their own hard earned honest money.The government is now struggling to damage control with a laughable set of schemes of awards being declared by the Prime Minister on every occasion and his ministers trying hard to justify them for the people. In a country like India where 98 percent of transaction is through cash, to loose a huge sum of currency from circulation can be ill afforded by the economy. ATMs are scarce, and few rural Indians have a credit or debit card, an estimated 600 million Indians—nearly half the country’s population—are without a bank account, three hundred million have no government identification, necessary to open an account.
It has also brought to the fore the rotting state the banks are in. Demonetization was declared without ensuring adequate amount of currency in the banks. The number of seizures of contraband money in new notes has proved an endemic rot that is thriving in our banking system. How could otherwise hordes of new currency reach some individuals even before the announcment without the connivence of bank officials. Officially the RBI advices the government on demonetization of any currency but in this case the government barely informed the RBI one day prior to the declaration. Also that ideally all the series of any currency are not withdrawn at once which was unmindfully done. No consultions were held outside the PMO... the opposition, RBI, Economists, the people. Even though Mr Modi says there is no question of its roll back the government is surely fretting. Two months later there is still shortage of cash.
The flip side is even though electronic payment systems are convenient, fast and easy, but the system curtails our economic liberty. Every financial transaction is not only charged a fee but can also be tracked and monitored. Where goes the privacy on our money then?
Other countries have also experimented demonetization and there has hardly been any success story behind this move. Economists and media around the world called it a disastrous move although a bold one. New York Times has reported that the Indian economy is suffering following demonetisation and that it was atrociously planned and executed. Internationally some countries like Australia and US have been thinking of demonetizing their 100 tender. Venezuela sometime back declared its 100 Boliver not legal tender and saw the worst unrest of its time. One death and the Carrabian country called of the move.
A well intended move but ill planned and ill implemented. There is no doubting that Prime Minister Modi has a great vision for India and has given us a place of pride once again in the world arena but what is now important to be seen is how long will the economy take to stablize, cash crunch overcome and how much will this swap reduce corruption and tax evasion.
Is it that the Prime Minister has taken this risk mid way his term that will give him adequate time to test waters till 2019!