Port Wings, 14 Nov 2018:
Two years have passed since the Prime Minister Narendra Modi’s announced demonetization of all notes in denominations of Rs 500 and Rs 1000.
When he made the announcement in 2016, it has snowballed into an unprecedented financial crisis in the country and left an indelible mark on people’s memory.
The highest and most circulated currency notes of Rs 500 and Rs 1000 in India – Asia’s third-largest economy – form 86 % of the currency by value.
Within few hours after the announcement, banks and ATMs ran out of money. Everyone who banked on ATMs for their daily chore became pauper. While the common man suffered, died even in queues for cash, ruling establishment unleashed a new way of governance laced with fear and insecurity.
Yes, there was a need to go to war against black money. But, what was the tearing hurry to implement it without printing adequate currency notes, getting banks and ATMs ready? Without thinking through the pain and misery that would disrupt life?
These were the questions that remain unanswered even after two years. Without any plan, without any strategy, Modi rushed in where economists fear to tread.
Like an impatient general launching a strike without adequate ammo, without manpower, without supplies, without any regard to the foot soldiers of India and their lives. Just to create a big bang sound economics has been replaced with dramatics.
Modi’s decision was to tackle corruption, black money, and fake currency that often finance terror. But Indians are panicking, even after two years.
For the supporters of BJP, Modi’s masterstroke would mean more people disclose their real incomes and pay taxes, which is good for the government’s coffers. Only some 1% of the country’s population pays income tax currently.
As the supply of money dried up after the announcement, small and medium-size business found difficulties in paying daily wages and raw material costs, among other expenses. (Indian small businesses typically rely heavily on cash for their day-to-day operations.)
Some critics say not enough steps were taken to handle the deposits and withdrawals that were expected following the announcement.
In 2018, the impact of ill-advised demonetization still fresh in the minds of common people who suffered heavily two years ago. The General Elections for Parliament is due in May 2019 and it needs to see how the demonetization will be played out before the voters by various parties.