November 8, 2016, was the day when the Nation’s supreme leader, Prime Minister Narendra Modi took a crucial decision of replacing the flow of old currency with the new ones banning Rs 500 and Rs 1000 currency notes.
What actually is Demonetisation? The best definition we could find was ‘to strip off the status of existing currency as legal tender’. The government, no doubt, announced the ban on old currency (Rs 500 and Rs 1000 notes only) and provided the nation with a time period. This move left the country rattled as the money people had with them somehow were now valueless. A commotion spread and people, in hurry, lined up with the banks to deposit the big numbers. The banks were given instructions to stay open a bit longer than the usual timings. The public responded in favor of the government. PM Modi acknowledged saying this step will help in bringing the black money that is hidden inside the country, another reason was to tackle terrorist network by bankrupting them, to get rid of the fake currency and to promote digital transaction he added later on.
The double tax penalty was brought into the scenario for the money hoarders and tax stealers. Another twist was noticed when accounts opened through Pradhan Mantri Jan Dhan Account Yojna, started getting thousands and lakhs. The businessmen and entrepreneurs were shuffling money through the poor people’s account. It turned into a commission game in India. Stories were coming to change old currency with new ones on 25-30 percent incentive. It attracted law and order maintaining institution’s attention. They netted tens of thousands from money keepers. Not all the black money is kept stashed. Some of it is used in buying property and invest in Gold. Remaining, cycles to foreign nations. If Global Financial Integrity (GFI) is to believe then the India has exported $46 Billion on a year average for over a decade. A large amount of hoarded money is sent abroad.
With the note ban, the traders’ not taking old notes created panic among the consumers. How were they supposed to buy daily need products and other important necessities? Modi again came up with an amusing (will tell later) idea, asking the people to do cashless purchase. Now, the question why amusing? A whopping number of the population still relies on traditional cash based dealings, they lack modern education which restricts them from making an online payment. PayTm emerged as the Lord, it marketed and demonstrated its services, resulting in significant increase in e-payments, most of them through PayTm, of course. Local vendors started accepting wallet transfers. The situation seemed to be containing only, it didn’t ease the pain of cash withdrawal. 8 out of 10 ATMs were running out of new currency then. Remaining ATM had long queues moreover, the government had limited the withdrawal to Rs 2,000 and Rs 2,500 only. Those who were lucky enough to get Rs 2,000 note had to deal with another and much bigger problem traders stopped taking the big guy due to lack of change. They weren’t to blame. Selling product worth Rs 100 and getting offered Rs 2,000 note for payment was the last thing any entrepreneur would do when the nation was crying over change.
The Market appeared to be coming on the right track. New currency was now flowing. People despite long lines were getting cash and circle once again looked complete. But, there was a storm coming. The brand new Rs 2,000 notes were now being recovered from many sites across the country raising a serious finger on the government and RBI. How those money launderers were getting access to the fresh currency when more than half of the country was depriving. Conflict stories from banks became normal. The Masses started to go out of limits. Bank officials got beaten up sounded a typical exercise. The damage was and still is uncontrollable.
The condition in the most part of the country may have stabilized. ATMS, now, do not have the crowd. Banks have proper cash, everything back to normal except corruption which prevailed through all odds. Involvement of bank officials into illegal exchange, defaulters’ connection to political parties and surviving long streak of crowd outside banks in rural areas, tells you something about the administration’s management amidst demonetisation
The day when demonetization was introduced, this country had 15.44 lakh crores of old notes (Rs 500 and Rs 1000 notes only) in circulation out of which 12.44 lakh crore has been returned to RBI as of December 10, 2016. What did government actually accomplished? The estimated parallel economy of India which believed to be 20-25% of the Gross Domestic Product (GDP) According to RBI fake currency amounting 29.84 crores was taken out of the banking network. Till December 13, 86% or 14.4Lakh crores has withdrawn and in return received 13.2 lakh crores. 30-40 thousand crores are expected to be in neighbor countries such as Nepal, Bhutan, Srilanka, and Bangladesh to name few. Wherein almost same amount lies with the Nonresidents Indian. And the remaining might lie with the poor. With this much effort government possibly will get nearly 30,000 crores in max. Whereas the amount to print the total new currency costs around 42,000 crores to the government. Unquestionably, there has been a steep rise in digital transactions but at the cost of an almost failing strategy. Weeks of ruckus, failure system, fraudulent schemes, long lines before banks, downfalling economy and an overrated step ‘Demonetisation’.
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