Demonetisation: Govt. fails on every front

Over a month has passed since our Prime Minister announced the demonetization of the old 500 and 1000 rupee notes. The PM claimed that this extreme measure is to fight corruption, black money and counterfeiting of currency notes. But due to improper planning, inexperience and despotic attitude of the government this step failed to yield anything positive. Over a month has passed while poor people are still suffering every single day, queuing up to exchange their hard-earned money. Dozens died as well during this process.

Experts say this chaos would go on from six to seven months. Many economists have said that such measures are less beneficial and more harmful to the economy. Governor of Reserve bank of India (RBI) himself pointed out the expected fall of the GDP from 5.7 per cent  to 5.1 per cent . It is evident that unemployment will increase as industries are facing problems in buying raw materials, paying wages and meeting day-to-day expenses due to the artificial cash crunch. People from service sector are badly affected as their salaries have been credited to their accounts but they are unable to withdraw their money due to restrictions on withdrawals. One should remember that these saving deposits are demand deposits and must be paid when demanded but these people are refused payment as per their demand.

            The PM has claimed that this step would curb corruption but this measure has led corruption to grow more as influential people and bank employees themselves are involved in illegal exchange of currency notes. Directors of co-operative banks are indulging in unlawful exchange at 30 per cent  to 40 per cent  commission and due to this fraud, government has restricted co-operative banks to collect deposits from the public. Government employees are facing problems of depositing and withdrawing their money from such banks as most of the employees are having accounts in such banks.

As far as black money is concerned, we have come across news of prior information to near and dear ones of the ruling party. One of the ministers of the ruling party has converted 100 crores of his black money into white in his son’s marriage. Government announced and took U-turn on depositing black money and paying taxes with penalty from 85 per cent  to 50 per cent which itself is like stealing, paying 50 per cent of stolen money as tax and penalty and enjoying with the rest. RBI Governor recently said that around 11.5 lakh crores of currency notes in the form of 500 and 1000 rupee notes have been deposited with RBI while the total value of these notes is 14.5 lakh crores. If it is assumed that banks had 5 lakh crores as Cash Reserve Ratio (CRR) and other statutory reserves with RBI, it means a good amount of black money has become white and no one knows who holds what -- black or white?

Former Finance Minister, P Chidambaram, said in an interview that in an economy like India, it is almost impossible to fully eradicate the counterfeit currency though the counterfeit currency can gradually be replaced or exchanged in a time span of 3 to 5 years and earlier governments have done so in the past. Within few days of the new measure, many people across the country were caught with fake currency notes while the new 2000 rupee notes were found with terrorists killed recently. The income tax department has raided and found sizeable illegal amounts of the new currency notes.

The PM, Finance Minster and other ministers of the ruling party are defending demonetization and emphasizing a cashless economy. They forget that in India where around 20 per cent  of the population is totally illiterate and 80 per cent of the remaining don’t have complete knowledge of our complex banking and online payment systems, online frauds and cyber crime will rise.

Day-by-day government’s announcements, discounts on cashless transactions and rise of online portals indicate inefficiency and improper planning on Government’s part. Long queues in big cities outside ATMs and banks symbolize the absence of a cashless economy as only a small fraction of people in our big cities frequently use debit or credit cards and online mode of payments. The situation in rural areas is worse as limited banking facilities are available in villages. In short, it can be said that Government seems to have failed in what it claimed to aim for.

Fahim Ahmad Abdul Bari Momin
Lecturer Samadiya Jr. College, Bhiwandi 

This article appeared in The Milli Gazette print issue of 16-31 December 2016 on page no. 5

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