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On November 8, all Rs 500 and Rs 1,000 notes were made invalid. Was this a masterstroke by Prime Minister Narendra Modi? He must have had a noble intention behind this decision but, economic prudence can never allow that 86 percent of the money should be removed from circulation.
This kind of a decision is reason enough to create a chaos and civil war-like situation in the country. And more than anything, there is no immediate replacement of notes, which further adds on to the agony of the common man- like you and me.
For a lay man, demonetisation means withdrawal of a particular form of currency from circulation. Our PM announced that this move was initiated to stop the circulation and hoarding of black money. And undoubtedly, this strict measure would definitely and effectively address counterfeit currency, terrorist funding, and corruption etc.
But, what about that daily wage earner who doesn’t even know what ‘go cashless’ means. A large amount of money belonging to the poor and the uninformed lot has become invalid. It is their hard-earned savings which they are unable to convert either because they don’t have access or right information about the whole process.
The so called- informal economy is collapsing for the simple reason that it thrives on cash transactions. More than 90 percent of the labour force in India is dependent on this, receiving the biggest setback of their lives. The demand has come down drastically and the small or micro enterprises have slowed down on their production. Since the labour force works on a daily wages, a loss of one-month of their pay has crippled the informal economy like never before.
Yes, note ban does serve the purpose of one-time wiping out of all the counterfeit currency. But then, what about the various cases of duplication of new currency coming to limelight. It was shocking to know that one ‘Make in India’ awardee from Chandigarh was caught with fake new Rs 2,000 notes.
If we talk about curbing funding of terrorist activities, I guess we are fooling ourselves. Do you think any sort terrorist activity would be dependent on cash? Terrorism I already much advanced, to put it more clearly. There are various instances where for a particular terror activity money has been wired. So, if we think we can really curb terrorism by note ban…we are highly mistaken.
Coming over to black money, it is not right to say that a large chunk of black money is being hoarded in denomination Rs 500 and Rs 1000. For God’s sake, most of these notes were already in circulation.Now, all of us know that cash component of the black money that the government was trying to unearth is not too high. The hoarders have already found a way out. Every day, we have been hearing and reading cases of bank officials being bribed to exchange the old currency for new notes. So, a major chunk is getting leaglised through this channel. Agents are available who are converting black to white at 25-30 per cent commission.
Not just this, immediate and distant relatives have also come to the rescue of these hoarders to help them sail out of this situation. And if not relatives, then their employees have been targeted, who have been paid salaries in advance for whole of the year. So basically, all sorts of ‘jugaad’ has worked for these hoarders.
In the end, coming to the big question ‘can demonetisation lead to something positive’, as of now I have just one thing left to say that a crippled economy will never allow any benefits from demonetisation, as is being expected by the present government. Still, I leave this question to be answered by one and all who are part of this historical change that has affected each one of us.