The currency of Rs. 500 and Rs.1,000 ceased to be legal tender from midnight on November 8, 2016. Prime Minister Narendra Modi announced this in a surprise address to the nation on that night. He said the decision was taken to root out the menace of black money and corruption. I believe that so far, the worst decision is taken by this ruling government has been demonetization. Completely useless nothing has been fruitful out of it on real ground. I don’t know what wrong was with older notes. Earlier it was handled with sweet sounds and rhetoric speeches. It had been trying to show it as potential irrespective of fixed aim.
Still, its aim has been a kind of myth. Each and every time it was found that the leaders to whom respective rights are vested have been trying to shift its goal post since demonetization. Initially, it was told as to counter black money followed by regulating the banking system, eradicating black money, ensuring people to pay income tax and digital economy. None of the above has yet been achieved by it.
It is not unusual to get news that people found unprinted notes from ATM. Not only issue with printing but with paper quality also. Mine Rs 500 note was washed away after getting drenched with water. Even SBI is not accepting it back. Firstly, If I put forward my dissent over it then people whom have great affection with their beloved parties will teach me for not drenching it. But I believe any policies is to be made by taking care all the possible circumstances where drenching could be taken into centre. Secondly, we know that so far Government has used Rs 7965 crore to print new currencies from July 2016 to June 2017. Don’t you think that this huge amount could be a part of current account deficit or not?
On the other hand, the ministry of finance tried to show some sorts of benefits out of it. They discussed the same paper talk like flushes out black money, eliminates Fake Indian Currency Notes (FICN), strike at the roof of financing of terrorism and left-wing extremities, converts non-formal economy into formal economy, makes money accountable, expands tax base and boosts digitalization of payment to make India a less cash economy. All these 7 points again seem to be dream casserole. We would try to talk to each point whether all these exist absolutely or not. Does it really have any kind of relevance to the demonetization or it has been deliberately added to show something fruitful out of it. Even they have added some data where it has been said that there were 17.77 lakh crores total currency in circulation of all denominations as on 8th November 2016 and one year after 14.75 lakh crores total currency in circulation as on 4th August 2017.
Indirectly they are rendering that almost 3 lakh crores currency in circulation decreases in one year. So, there could be this much of amounts were black money or counterfeits. On the other hand, contradictions have been coined up. Fiscal policy says that it recovers almost 3 lakh crores as the data has been uploaded by the ministry of finance, but monetary policy says 99% of money is back in banks. As per Indian express news on August 2017, 8.9 crore old Rs 1,000 notes out of 632.6 crore have not been returned post the note ban last November. This means all but 1.4 per cent of the old Rs 1,000 notes have come back into the banking system. As per the data released by the RBI, old notes worth Rs 15.44 lakh crore were there in the market, out of which 15.28 lakh crore have been received by the bank.
Next point would be related to counterfeit currencies. On discussion on this topic at my Facebook wall, I do agree with my elder brother Piyush Mishra. It is true that RBI gave figures of demonetized notes that were in circulation and returned back to banks after demonetisation. Obviously, RBI gave figures of valid notes only. But what about fake currencies of 500 and 1000 denomination that were being circulated by mischievous groups? Certainly, they were flushed out. At some extent it could be said. Yes, black money in cash in the denomination of 500 and 1000 was somehow managed by black money holders. A meager portion of black money is kept in cash, therefore the main purpose of demonetisation was never completely washing out black money. It’s the baseless logic of opponents and the ruling government that demonetisation proved fail on this issue because that was not the main purpose of it.
But I had also dissent upon their said statement. By the government authority it has been said that black money will be eradicated through demonetization. Black money does not only hold counterfeits it also holds money those has been solidified by some group. That’s why finance ministry patted their back by saying that they have converted non-formal economy into formal economy. That’s the reason why I put up my dissent over Piyush’s words. I meant to say that RBI confirms 99% of the valid money has backed. Does it really 1% of black money was being circulated. I am supposing it black since it doesn’t come back due to some certain reasons. There could be some reasons that people would have been failed in putting older money back in account. It could be. There are two clear points. First says it has flushed our counterfeit currencies. It could be right so there is no offence. Second says that how could it be possible that 99% people would have white money who pay taxes. I am saying so because repeatedly it has been said that people won’t unveil their income details accurately to avoid taxes.
If I agree on this that counterfeit currency could have been challenged with demonetization, it does not mean any kind of strike at the roof of financing of terrorism and left-wing extremities. Because afterward also we found many Naxals operations and wrong doing activities like terror financing and operations. Even I believe that it’s easier to make duplicate currency now as compared to earlier one due to low grade printing and paper quality. We must understand that the flow of counterfeits.
From where it comes and where it goes. It’s not easy to make counterfeit currencies. I think it should be researched and clear it from where it has been pumping? I am saying so because it is not very easy to print money anywhere. Fake currencies are made in central banks of other countries since that kind of facilities are needed to print that. Even companies cannot be setup. The counterfeit which is pumped in Indian market is made in the central bank of Pakistan through off the record.
It became possible for them because we and Pakistan both imports paper and from the same country to make paper currencies. I don’t know the reality but as far as I got from news sources if it is so then work must be done in that area effectively. If it reaches our market, then it is an administrative and security failure that must be strengthened. We must strengthen these fronts effectively and after proper programming and developing mechanism then only we must head for such processes like demonetization. For demonetization, planning was done only to print the note and make it available to the people as soon as possible.
This is a secondary matter. Primary was that for what purposes we did it. We would have worked upon it. Once demonetization was done then what steps were taken to stop further fake currencies. If it was not done, then there would be no meaning to change its color. If we see its impact theoretically then there will be n number of advantages but on grounds and news reports scenario is very different from our expectations.
What does circulation exactly mean? Does it necessary to put in the bank and withdraw frequently for business purpose to render itself as circulated money. It’s bank failure that so far bank failed in attracting people toward banks. Now a day I think people put their money in bank for the sake of security purpose primarily followed by the rest of thing as a side benefits. Now I can conclude that most of the money were backed to the account. Only thing is that it regulates banking by pulling back money into the bank by increasing its circulation. I am again asking the same thing. Does it way to regulate banking by forcing people and disturbing economy for a particular period.
Even still it is being said that digital ground has been provided through it. Does it a way to force people to put their money unilaterally and said forcefully to use the digital economy without preparing the proper ground for it? I believe that it should not be done through demonetization. This circulation and regulating of banks could be done through effective monetary and fiscal policies so that people could automatically take interest in getting together with banking.
It is true that Govt does demonetization from time to time and It has not been invented by the ruling govt. Demonetisation can only do one remarkable thing which is washing out of counterfeit currencies and the rest of the things that were enumerated were rumors only whether it is a matter of countering black money, terror financing, digital economy, and so on. Without good planning could cost heavily like the 2016 demonetization where 2% of GDP fall that is 3 lakh crores in absolute term. The most devastating section is the unorganized SME sectors which cost 20 lakh direct job loss and lakhs crores of huge deficits but justification from the government is extremely unpleasant.
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