THIS ARTICLE WAS WRITTEN BY PRACHI KOTIA, A STUDENT OF SCHOOL OF LAW, INDORE.
On the 8th of November Prime Minister Narendar Modi made a very bold and historical move by demonetizing the Indian currency notes of Rs. 500 and Rs. 1000 and introduction of Rs 2000 notes. Which created a buzz in the country leading to serpentine lines outside the ATMs. Prime Minister Modi made the decision in a secret meeting where very people were present so that the very reason behind the demonetization is not hampered by the disclosure of the news by giving chance to hoarder of black money to find the solution of their problem.
Demonetization was introduced to tackle three main problems which are counterfeit currency,terrorist financing and black money. These are the 3 major problems that our country is facing, which has to be given priority in order to give a push for development.
This immediate change was both welcomed with applaud and criticised with disgrace. Some skeptic people called it utopian and unworthy and a fail step to lure the public for the next state elections. Whereas some supported the decision of PM and applauded for the bold step.
In order to ameliorate the decision of demonetization, government made various changes in guideline in order to give help the citizen to face such sudden change. Which in a way also irritated the citizen with such snap changes in the rules.
There have been dubious views regarding the demonetization we can measure its success or failure by seeing its merits and demerits which are as follows:
- One of the biggest positive impact of demonetization is to bring more peopleonto the dominant economic grid, where can be easily looked upon and taxed and also generation of more revenue.
- Through the demonetization there has been kick start of cashless economy, where many people have started using internet channels for payment of money.
- This step has given a major foundation base to various e-payment portals and the drive towards the digitisation on the nation.
- Large amount of people and business are brought into the bosom of the formal economy via demonetisation program which has led to bosom in liquidity and an apparent in its recorded economic growth.
- Transaction through banking channels have led to moving informal business into formal business as the transaction are now being recorded in banks as payments are made via them.
- Curbing the black money which has been one of the main agenda of demonetization will get the major push as the black money hoarded in the form of banned currency will no longer be of use, leading to publication of such amount or throwing away of these notes.
- Fake Indian Currency Notes(FICN) which were mainly used to fund the terrorists will be dismantled.
- The true tax paying people will get reward in the form of lower price of real estate as most of the black money are converted into assets in which real estate and gold tops the lists.
- Various additional facility has been provided like no charge by bank on banking transactions.
- The introduction of new currency notes of Rs. 2000 and Rs. 500 have come with fine security design to avoid the production of counterfeit notes.
- Due to demonetisation many tax evaders and hoarders came into light where heavy duty was imposed on them.
- This out of the blue step of the government, it has given a major setback to money hoarders about the dynamic plan of the government.
- In the country where 90% of transaction takes place in cash in the market, where only 40% have bank account in that country government banned those notes which had 86%of share in the market which led to great hustle in the market.
- The bulk of black money is not in money at all so such step of demonetization has affected the middle class tax payers.
- Demonetization had an adverse effect on farmers and villagers who did not have bank account and had mostly the demonization of 500 and 1000 rupee notes after the sale of their crops.
- Due to the demonetization many people lost their life either because of standing in long queues or denial by hospitals to give treatment in exchange of old currency notes which led to death of many people.
- Small business faced the major loss and people also had to skip their work in order to withdraw money from ATMs by standing in serpentine queues.
- There was poor coordination between the banks and the government,
- The frequent changes of the policy gave the idea about the lack in preparation of the government for such change.
- This off-guard step was greatly criticised by the oppositions where many rally were taken out in protest of such change.
- Families which were having marriage ceremony were greatly affected as they had withdrawn cash which were mostly in the currency notes of Rs500 and Rs1000
Well, besides there are other measures also to curb the black money which are:
Reducing disincentives against voluntary compliance:
Simpler compliance process and low taxes reduces the black money. High transaction cost associated with compliance with law is the major factor of black money accumulation. Simplifying it can be helpful in reducing the black money.
One of the major cause of inflow of black money is the long and slow process of allotting licence and permits which often leads to under the table transactions leading to increase in the black money. If these process are simplified them the inflow in black money can be reduced.
Besides the work of government, it also the duty of every individual in the country to follow the rules of government and help the government in application of the law.
India has signed an agreement with 80 countries to restrict any kind of agreement between the individuals of the signatory’s countries for the exchange of black money.
Demonetization will have long term benefit and short term pain. Long term benefits are that’s the there will more generation of revenue, andhence government will spend more on infrastructure.
And short term pain is the unavailability of cash in the market, leading to problems to common people. But soon this will also come to an end.
With this aftermath we can conclude that right now we cannot decide whether it’s a success or failure, to know that we will have to wait.