We all know what happened on 08th November, 2016 India evening. Till now, I am unable to figure out whether it was a boon to India or a Nightmare to Indian People. So to make myself clear on it, I decided to personally consider its effect on India.
Since Demonetization, there is a boom in Digital Payments across India. As per CIO report, Ola money saw a 1500% increase in wallet recharge, Paytm wallet top-up increase by 435% and Mobikwik traffic increases by 15 times (Ref.: CIO). More and more people are going cashless that is really good as it will not only make transactions easy but will also save printing cost of notes in future that can be used for other development tasks.
No/ Minor effect:
As per RBI report & this ET article, 80% of money in denomination of INR 500 & INR 1000/- notes that was in circulation have been deposited in banks till December, 2016 1st week. Deadline for depositing old notes is 31st December, 2016 (leaving 31st March, 2016 for deposit in RBI and 30th June, 2016 for Non-residents aside). Therefore, most likely chances are that rest of the old notes i.e. 20% will also be deposited in banks pointing out that entire black money will be converted in white before 30th June, 2017. Apart from cash, black money is kept in form of gold and under priced real estate that is already safe without having been effected by Demonetization.
Fake Currency Notes:
Old fake currency notes might not be of any use for the culprits but there is no lack of new currency fake notes. 6 persons were arrested in Hyderabad with INR 2.22 Lakhs worth of fake notes in denomination of INR 2,000/- (Ref.: indiatoday). Also, 3 persons were recently caught with fake INR 2,000/- notes amounting to INR 42 Lakhs (Ref: NDTV). Bad news is that out of 3, 1 guy was a “Make-in-India Awardee engineer”. But the thing is that there are only few cases that have been caught. There must be countless cases like these that will not be caught.
I think, Demonetization move has opened the doors of new opportunities for the corrupt people. You might have heard about tens of RBI officials who were arrested for illegal exchange of old notes (Ref.: Indian Express). INR 4.7 Cr. were seized in new currency notes in Bangalore from the house of just 2 engineer which is a live example of how senior officials really earned well black via illegal exchange during demonetization scheme .
Undue Hardship to Public at large:
I would not like to mention anything here as you already know what hardship India faced during demonetization.
Mounting Printing Cost of new notes:
A new INR 500/- note cost INR 3.09/- and new INR 2,000/- note cost INR 3.54/- (Ref.: NDTV). Further, total cost to fulfill demand of new currency notes will set back RBI by a total of INR 12,000 Cr. as per an estimate of The Hindu (Ref.: The Hindu). That appears to be huge considering the present benefit of Demonetization.
Legendary Opinions on Demonetization:
Raghuram Rajan, Former RBI Governor on Demonetization
Unfortunately, my sense is the clever find ways around it. Black money hoarders find ways to divide their hoard into many smaller pieces. A fair amount of unaccounted cash is typically in the form of gold and therefore even harder to catch. You find that people who have not thought of a way to convert black to white, throw it into the hundi in some temples. I think there are ways around demonetization. It is not that easy to flush out the black money. I would focus more on incentives that lead to generation and the retention of black money. – Raghuram Rajan, Former RBI Governer
Amartya Sen, Nobel Laureate on Demonetization
Telling the people suddenly that the promissory notes you have, do not promise anything with certainty, is a more complex manifestation of authorization, allegedly justified – or so the government claims – because some of these notes, held by some crooked people, involve black money. At one stroke the move declares all Indians – Indeed all holders of Indian Currency – as possibly crooks, unless they can establish they are not. – Amartya Sen, Nobel Laureate
In a country like India where only 46 Crore people use internet out of 125 crores, forcing people to use digital mode in a non sense and thoughtless way (like demonetization) is really a brutal act and is a day crime with (unfortunately) no penal provisions. Of course, There may be some minor benefit in terms of no deposit of some % old notes that were stores as black money and India shifting to a digital world but that will be set-off by the printing cost of new notes (exact set-off of will be concluded only after 30th June, 2017 that is the last date for deposit of old currency notes for NRIs) . But as of now, loss due to demonetization seems to outweigh the benefits of demonetization. That is my personal view. You may agree or disagree with this. But It is India with democracy and nobody can stop others from expressing their views.
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