Demonetisation for a new India

Narendra Modi, first prime minister who really made some huge progress when it comes to attacking one of the biggest social evils ‘black money’. I am not a Pro BJP person nor a person who blindly supports Modi , but one should really appreciate the secrecy and suddenness which was maintained in announcing ‘Demonetisation’. This man showcased few wonderful leadership tactics. His boldness and decisiveness made him stand out. He brought a sense of optimism especially among honest people, educated and salaried employees. That night we really saw the upper class scurry and beating their heads trying to escape the nets of the tax officers.

 Every decision has both pros and cons and the same is with demonetisation. This is one of the biggest moves taken by India after 1991. So here I intend to present my view on both sides of the coin.

This exercise is a major assault on the poor. There are people who do not have bank accounts and would have faced difficulties in exchanging the old notes with the banks. Small business men would have seen a sudden drop in sales as the cash flow was at a minimal for a month or two. But these issues were solved eventually. If things work out, the government can compensate the poor by passing on the benefits received by it by the tax offenders. This could be done by allocating the expenditure in such activities which can do a greater good to the society.

Black money is much more in the form of gold, real estate, commodity stocks and offshore accounts. Cash is not the biggest factor contributing to the black money. Once the notes are banned the prices of real estate also fell steadily. Indirectly demonetisation would have an effect on all the sectors where unaccounted money is involved. (We may never know if a new scheme is being introduced to catch the black money stored in such other instruments too). However, it also made carrying large amounts of money in a smaller briefcase with the introduction of 2000rs notes.

Demonetisation has demanded for a huge investment by the government in re calibrating the ATMs, printing new notes and a lot more. There was also a huge burden on the bank employees. However, it can actually benefit long term prosperity of India. People had to stand in long lines to withdraw their own money. But we can also think it in this way:-  Numerable patriots have laid their precious lives for freeing our nation from alien rule, therefore, in order to free us from this social evil we all can endure it smilingly. Inconveniencing ourselves for a greater good is always better than suffering forever.

Funding for criminal activities is mostly done through unaccounted money. There will be a stop on these criminal activities due to the note ban at least for a while. When government’s budgeted expenditure is more than the revenue it is termed as fiscal deficit. Now due to demonetisation tax revenue would increase the revenue in the hands of the government hence reducing the fiscal deficit.

As the levels of unaccounted cash dropped in the economy, the demand for goods and services would drop which in turn keeps a check to the inflation levels. Demonetisation has also waived off the whole black market of making illegal currency.

 Foreign investments into the Indian markets would increase only when our country has a good credit rating. Due to political stability and economic transparency credit rating agencies would upgrade the credit score of India which would increase the scope for more foreign investments.

   

The transition towards digitisation and a cashless economy will definitely help curb corruption in the long run. The increased transparency and record of transactions will make it considerably difficult to hold black money and carry out under-the-table deals hence making corruption difficult.                       

          

Economists are busy in listing out many more merits and demerit of this policy. The government is saying that there are only advantages of demonetisation policy and this will be seen in the long term. Definitely Modi has created a positive wave among the masses and we have climbed a step in a hope towards change.