By any standards demonetisation of 86% Indian currency that affects the wallets of 125 crore population is no ordinary decision. The Union Government sent shock waves among not just the hoarders of unaccounted money but also among the state governments and the huge political constituency. The measure may have precedence but the dimension of the effect has no precedence and therefore, economic historians are watching in gaze for generating a new script.
Cash is dirty; banks keep soap for their staff handling cash to wash off their hands because of the bacteria that causes pneumonia or skin infections. Yet we would love to hold them. Most drug dealers, casinos, prostitutes, or casual farm workers prefer to receive cash for they only receive small remunerations for their day’s labour or night’s pleasure. Waste and scrap dealers, many steel merchants only deal in cash.
Large farm owners in India who indulge in unaccounted leasing of their farmlands invest their incomes in films or tourism industry or clandestine drug peddling, showing the income as agricultural income and hence non-taxable. The vote bank politics has all along protected this clan from being taxed.
Many of those shocked out of their wits, quickly turned to gold shops. Several gold merchants, I heard, seem to have billed for one and half tolas (about 11grams) giving only one tola and billed on dates preceding the D-day. Institutions and individuals behave the same way in crisis. One of the prominent gold dealers told me that it would not be difficult to handle raids by the taxmen! He said that it is a win-win for him, his buyer and the taxman.
My instant praise for Prime Minister Narendra Modi on this daring feat has taken a U-turn on witnessing the events during the past few days. Hollow planning of the massive effort affecting masses is unfolding day by day. Automatic Teller Machines (ATMs) stopped functioning even one day one after the two-day recess. Strange that banks and the Finance Minister argue that the technology of ATMs cannot roll out new currencies without systemic correction (calibration)! Did they not they know this before announcing opening of the ATMs to the public?
Serpentine queues that had disappeared after computerisation are back in front of every bank. Banks will not be able to handle any other business for months to come as the process of readjustment to the new currencies and holding operations. Credit business will suffer for want of personnel, as all the bank employees are busy in handling only cash and cash for exchange operations.
Strange indeed that banks like State Bank of India (SBI) is speaking of huge accretion of deposits at the end of three days! After all, when you withhold withdrawal and allow only deposits would not the latter swell? The Reserve Bank of India (RBI) failed to pump in equal exchange in smaller denominations for Rs4,000 per person and in exchange is the Rs2,000 denomination currency note that can buy the goods and services a common man needs.
The RBI knows for sure that rural areas lack basic infrastructure to handle the demonetisation. Cooperative banks, local area banks (LABs), primary agricultural cooperative credit societies, regional rural banks (RRBs) and even commercial banks operating with as thin a staff complement as two persons do not have capacities to handle cash exchange required by the persons – customers and non-customers – living in their areas of operation. There are not so many ATMs either. Business correspondents (BCs) and business facilitators (BFs), the new clan of intermediaries in the financial inclusion engine of the RBI nowhere figure in this exercise. By any stretch of imagination, the infrastructure for this massive operation just does not exist.
The government may come up with the argument that till 30 December 2016 people have the option to deposit their currency. However, where is the cash for their day to day operations when there is still large scale illiteracy and poverty?
My maid and my driver tell me a different story. Both subscribe to an informal chit fund group, where the needy among the group bid for the chit amount at a small discount. Since all the members are of the same economic clan, they invariably put their bids within bounds. They say that their accumulated chit savings are all in Rs500 denomination that lost its value. They plan to cash it within the boundaries fixed by the Government before December 2016.
Barter and credit are other options that have suddenly sprung up. The retail shopkeepers in my locality offer liberal credit for the next one month. They are promised similar lines of credit from the wholesaler of grains and pulses. Here there are only promises and no promissory notes. But the promises are credible. The moot point is will they survive the entry of foreign direct investment (FDI) in retail? This trade operates on credit cards and debit cards, net banking and digital banking.
A few questions arise in. Will the RBI continue to be the monetary authority? Will alternate currencies like the Bitcoin or other innovations by mobile and digital traders overwhelm the governments? Can money move to the realm of public utility whereby the elected representatives take seize of the financial and monetary systems?
World Bank may have lauded the participatory budgetary process of Brazil that resulted in improvement of the standard of living of many communities where government could issue money directly to communities as a part of democratic process. But can it succeed in India where the local bodies in villages and panchayats are not trusted with cheque drawing powers till date in spite of legislative sanction embedded in 73rd & 74th Amendments to the Constitution?
It is strange that the FM should ask the people to bear the hardship for a few more days! Can the labourer who received Rs500 on the 8th November buy his loaf of bread or packet of milk next morning as he used to do otherwise? No. And there are millions in this group in rural areas. There can be no two opinions on the need for an overnight decision to clean up the economy. However, the PM could have set up a confidential think-tank on planning for the event and planned it better. The well-intentioned move is having roadblocks and potholes all the way.
(
B Yerram Raju is an Economist and Risk Management Specialist and Adviser, MSME Facilitation Council, Industries Department, Government of Telangana. The views are personal)
https://www.quora.com/Has-the-demonetisation-been-more-of-a-failure-than-a-success-already/answer/Ankit-Panda-4?srid=DsGw&share=36d3ab9c
Here are , seemingly some unbiased individual thoughts shared, hence worth re-sharing among/ with the ordinary mortals, especially the majority of us who are not sufficiently inspired to mind and find time to spare more thoughts aimed at public-centrist- 'the common good'. May be, whatever its worth or to-be-expected final outcome, try and cover all such points, aplenty in public domain*, viewed from crucial angles, in sending any response to our beloved PM, in response to his open invitation to the citizenry, to care and share with him, so as to serve as a purposeful feedback-input.
* Random Samples:
http://www.thehindubusinessline.com/opinion/benefits-of-digital-money-and-cashless-banking/article9416230.ece?homepage=true
Jai Hind
1. Existence of corruption and black money: No body including great economists are buying this argument that demonetisation eradicates the menace of black money permanently. Do you think all these sarkari babus including income tax/excise/sales tax/RTO officers are going to stop taking bribes. I do not think so. Rather one section of the general public is saying that these same government officers will take bribe money by vengeance because may be they had to burn some of these demonetised currency notes. Businessmen probably would stop having "so much" black money. A very simple solution worldwide including India which is followed is " you make taxation affordable - I mean all sorts of taxation including custom duty, excise duty and what not. People would have less temptation to have black money. You increase custom duty on gold, gold will come by havala route. You reduce and make it affordable, people will bring it through official channel.
1. Prevalence of counterfeit/terrorist funded money : You could have asked people to exchange pre-existing currency notes (say printed before 2016 year or say upto 2015 year) - like what they have done earlier for currency notes printed before 2005. If you are saying that the newly introduced currency notes have additional and foolproof security features so that no one can counterfeit it.
Poor planning and extremely poor execution. Nobody is doubting on the benefits of this Scheme. But what about the harassment to common and poor citizens of this country.
BUT till you have taken that first step why are you taking the second one ? What was the reason for this haste that is now threatening to derail the entire exercise ? Nothing new had happened to necessitate this action and pls do not say that people like me will be negative whenever a step like this is taken ....there is never a right time etc etc. I am pushing this only to force out the real truth...ELECTIONS. Look at what it has actually achieved :
Modi appears more muscular than ever .
BJP gets a chance to revive its flagging image.......by the admission of its own party leaders " We will use the 2 surgical strikes to the hilt "!
Modi and his partymen now get to use even more outrageous rhetoric than the Oscar winning performance in Goa.
But Mr Garg there is a God above ....he balances out in one sweep. The dismal implementation, the unnecessary hardships, the unfortunate deaths, the sloppy planning , the dithering bumbling beauracracy, the uncaliberated ATM's, the lack of 500 Rs notes, the insensitive statements have all managed to destroy the myth that the BJP had so assidiously and religiously built around their leaders efficency, his hard work ,his sharp mind etc etc.
Having said all of the above I do hope it will start a thinking process in peoples minds instead of blind acceptance of propaganda.
1. ILL Planning and extremely poor implementation of the Scheme.
2. Same objective of counterfeit would have been achieved simply by 'first' introducing new currency notes of any and all denominations and then making a pre-dated (like in earlier case all notes before 2005 year) illegal.
2. If any body is having a dream that 'black money' would be eradicated or even reduced in this country by this means. Absolutely not and never. See what happens after a gap of 6 months or a year. Do you think builders/netas/babus/bureaucrates/IT officers and entire Government machinery would stop taking bribe. Never.
You have simply put the whole country to ransom by making them to stand in queue for exchanging the notes. Not a sensible way to 'run' and 'administer' and 'govern' this country which is aspiring to become a world economic power.
Look at the long and serpentine queue outside any bank in India.
Good Indian PM who made the entire country to stand in queue for days together just to get a paltry exchange of Rs. 4000.00 - hardly any thing to meet both the ends of a family.
As for my maid suffering from demonetisation, I give her Rs.100 notes out of the Rs.4000 which I got exchanged from an SBI Branch. If she needs more, I can help her by parting with my notes.
Every month I receive the wages she has earned in cash. As she does not know how to send the money to her son in a rural area, I send it to her son's account by using my own remittance facilities. My act comes out of a realisation of her need and there is no need for me to put on any new-found affection for her.
Also I dont find any need to criticise my PM for her and my little inconvenience.
So far as I see, the only mistake the govt has made is to waste its time in printing and distributing Rs.2000 notes. Presence of this largest denomination note is going to make bribe-giving and bribe-taking easier.
The government can even now flood the economy with Rs.100 notes, and be stingy with new Rs.500 and Rs.1000 notes. With the NHD (New High Denomination) notes being available in plenty, we will be back to square one where corruption and black money will reign supreme , rather sooner than later.
The Government and RBI can think of enhancing the supply of low denomination notes by all means and they can order the major Temples, Churches, mosques and all establishments where huge collections of small denomination notes and coins take place to surrender the same compilsorily to nearby banks. on a day to day basis . The running of chit funds and other money circulation schemes in operation in various markets and small towns and villages are not a permmissible line of business and there are several such illegal transactions in and around the country which can be ordered to be stopped with immediate effect. Black money holders are moving left and right to encash their hoardings and they seek the help of commission agents who are making lots of noise on the inconveniences with the support of backing from persons having vested interests. This is the time for banks to be innovative to enhance their presence and see that they are able to mobilise funds of small denomionations and enhance their credit facilities to those weaker segments who are really in need of cash. The middle class people who can afford to wait are also found crowding the banks for withdrawals and this can be minimised by special appeals and assurances. This is the opportune moment to switch over to digital and other modes of payments and the Government has to ensure that the business establishments all over the Country accept card payments without any hesitation. Those who discourage card payments including by resorting to extra charges need to be identified and disincentivised. Even make my trip are charging inconenience charges to book any tickets through them using cards. Umpteen things can be done if there is a will. This is the best opportune moment for public to give support to the Government which has an intention to clean the economy eliminating black money with allits attendant ill effects.
Banks should have instantly increased the transit insurance limits of BCs and BFs and also provided safety to them for turning the dead cash into the related vaults at the end of the day through a special designated branch without they having to get into the crowded counters!! Planning at the level of commercial banks and RBI needs correction and this can happen only when they think of the customers that they long back transferred to the machines in front of them.
War on fake and untaxed cash to last seventy days? Why not? Fifty days therapy for a Seventy year ailment.
The ordinary man seems to relate to monetary theory and the imperative of demonetization better than India's opposition leaders. Everywhere I go I see only admiration and gratitude for Modi among the ordinary voting citizen. There are exceptions. restaurateurs, hoteliers, tour operators.
I don't know any, but I am sure vice mongers would be as annoyed as their customers. The Politician, Bureaucrat, Police, Judge, Journalist, Crony Capitalist Kleptocracy. To this number we add the likes of Mamta Bannerjee, Arvind Kejriwal, Mayavati and Raoul Gandhi.
But Raoul Gandhi, who represents a lineage and party that has given the ordinary man endless trouble since 1921, both personally and systemically by eradicating integrity and competence, gets away with it. Because, he has only five fingers to a hand. When he points at Modi, only four fingers point back. Where are the other thousand fingers to point at this scion of Angulimal Sampradaya?