By:Ali Mahdi Naqvi,
The quietness and the silence of the evening of 8th November, 2016, had been shaken by the declaration of demonetisation of 500₹ and 1000₹ note by PM Modi. Apart from the demonetisation of currency, new currency notes of 500₹ and 2000₹ were also introduced and the public had been given the time to exchange their demonetised currency with the new legal tender money within upcoming 50 days until 30thDecember, 2016.
This demonetisation was undertaken by PM Modi with the aim of curbing black money and the parallel economy by making India a cashless economy, but……
But….. This “but” is quite interesting, some questions are remaining unanswered and some problems are left with the country’s fate:
1: Rules framed and its implementation:
With the advent of time, the decision of PM Modi seems to be unplanned and vague. While addressing live to the public, PM had promised greater benefits to the public in exchange of some sacrifice from their part and framed various rules regarding deposit, exchange and withdrawal of new currency but presently, rules framed earlier are not on the path of PM’s promises and words which shows its unplanned implementation.
2: Democracy not for the public
With the dream of making India cashless and corruption-free economy, PM surprisingly demonetised its high-denomination currency of 500₹, 1000₹. For some time it was felt that from tomorrow onwards business tycoons and big players of the market will be standing shoulder to shoulder with their blue collared employees in the large queue but Alas! situation had taken U-Turn, big players had hired daily-waged labourers to exchange their black money in their own names, hidden their black treasuers in jan-dhan accounts or in the advance salaries to their employees or they had discounted their demonetised currency with the legal tender. Unending queues are only filled with the fellows having their gullaq’s saving in their hands and just waiting for their turn to arrive. Bowing before PM’s order, aam-aadmi is standing in the unending queues finding it difficult for him to earn even his white-money.
3: Effect on Production and Employment:
From 9th November onwards, white market is running at a lower pace as compared to the black one. Problem of “Cash-crunch” had left the consumers, producers and traders with only hopes of some revolution. Trade and production had came to halt due to insufficiency of funds required for the operation of their business.
Unavailability of cash ceases the demand for majority items and the consumers are only trying to spent their income on necessary goods and are trying to save cash and necessity goods to meet some unforeseen situations. As the demand in the market is going down, production houses, factories, small scale and cottage industries takes a stand-still, labourers and factors employed in these production houses or factories are left with their fate. Lesser money supply, decreased demand, lowering the production, trade and employment levels will create the problematic situation in the short-run.
4: Effect on Agri-Products:
The order of demonetisation had arrived during the sowing period. Wheat, potatoes and necessary food items are to be sown during this period, in short, this is the crucial time for getting finance for the healthy crops and if the sowing period is over and the fields are left un-sowed, scarcity of food items will make the prices shoot upward drastically and even it will lead to severe starvation and high inflation in the short run. Infact, Government is claiming that it has taken care of the farmers but in reality, alike before farmers are left with mere promises but in reality, they are not getting sufficient funds and finances for their seeds, manures and other important uses. Shortage of man-power and time leave them with only one option, either to stand in queues or in their fields.
Moreover, after the completion of this demonetisation process, Government have to issue new currency equal to its reserves being made, and as the currency exchanged by the public will not be equal to the currency issued prior to demonetisation due to black money hoarders, this unclaimed money printed by the RBI will directly move towards the treasury of the Government. As being suggested by a renowned economist, Dr. Anjum Abrar, Government is left with the option that it should increase its expenditure on productive purposes so as to nullify the effect of inflation, unemployment and distrust of the public.
At last, it can be said that, this demonetisation would be a grand success, if these points would have been taken care off.
Ali Mahdi Naqvi,
University of Lucknow.
Director, The Educators.