Ten Things that can be expected from Demonetization of Currency
- In Current Affairs
- 12:39 PM, Nov 15, 2016
- Nilesh Singh
“I will not let anyone walk through my mind with their dirty feet.” – Mahatma Gandhi
This quote by Mahatma Gandhi is true not just for the ‘Swachh Bharat Abhiyaan’ started by the current NDA government, but also aimed at those corrupt people who have been walking in the muck of black money for long.
November 8th 2016 will go down in the realms of history of India as a single major move by any government post-Independence, to jump start the desperately-needed boost to our economy and to change the mindset of society in general. On this day, Narendra Modi, announced demonetization of Rs 500 and 1000 notes, which went effective 4 hours after this announcement.
Now why is this such a huge step?
The entire country has been lamenting for years about the curse of black-money along with the consequences that stem from it, like fake currencies, foreign sponsored terrorism, inflation and high real estate prices to name a few. With this single big bang step the government has made sure that anyone who owns the currency in the denomination of 500 and 1000 must deposit their cash into the banking system or else forfeit their money!
As soon as the announcement was made the entire media and the people of the country went into frenzy, everyone was caught off guard. This is a real surgical strike on the economy to get rid of the black-money from the system. Social media was flooded with the messages appreciating and supporting the historic step taken by the government. But for those people who had un-accounted money in form of 500s and 1000s (which combined makes for 86% of the total cash in circulation) the decision of demonetization came as a rude shock. In an unprecedented move, many of the jewelry shops were open till late night as customers came flocking with their cash in a rush to buy gold and other precious items before their cash loses the status of legal tender. There was chaos among the political parties. Champions of ‘fight against corruption’ termed this move as a scam for reasons known only to them.
This step will undoubtedly create problems for the public as well. We have already seen few scenes of chaos in banks and among the people queuing up to withdraw/deposit cash. But this is a small price that we all should be ready to pay for a better future. Pest control in a house comes with some inconvenience but that doesn’t mean you do not pursue it. It might not guarantee you a 100% elimination of pests but will get rid of most of them, similarly this move might not land all the black-money hoarders to the jail but will make sure that the big players are traced or are forced to trash their black money. The parallel economy of black-money is like a game of musical chair, just that the chairs are very limited in this game. Many lucky people might have already converted their money to gold or might have purchased real estates, but those who are stuck with cash in hand are going to have nightmares. I have in fact been told that there are some people who are taking risky routes to convert their black money into white which could end up to be the path of disaster in coming days.
Looking at the brighter side there are tons of reasons to cheer for this move. People who are going to lose big due this this step are the politicians, government officials, property builders etc. Ironically the law enforcement/enablers like police, income tax officials, lawyer/judges, custom officials also will bear the brunt of this ‘black storm’.
Here are a ten things that can be expected in near future or at least I would be looking forward to:
- Low Inflation: The inflation rate in past few years have been crazy. Prices of food items in general have gone over the roof. With all the fake currencies and the black money eliminated from the system, we should expect lesser liquidity and therefore fewer hands reaching out to the same amount of supplies.
- Fear among the Corrupt: Next time you think of taking bribe, you will be forced to think twice, especially for the transactions involving huge amounts of cash.
- Move towards a cashless society: The pain felt by both the customers and the small business owners might have taught them a tough lesson to make a move towards a cashless society where most of the transactions are done electronically. This would also help the government to accumulate more tax, which will ultimately help us all.
- Reduction in terrorist backed activities – You will see a drop in the incidents of protests in the Kashmir valley as most of the protests are funded by foreign agencies notably from our neighboring country. This move will also break the back of Maoists and block the fund on which they have been thriving. There has already been news from far reaches of villages in West Bengal, neighboring Bangladesh, where poor people whose bank accounts have been dormant for a long period have deposited amounts in sum of lacs! This again is like poking a hungry tiger. There are going to be investigations.
- End of fake Currency: We can be rest assured that for a year to two there would hardly be any injection of fake currencies in the system and we will see an un-timely death of the fake currencies that are currently in circulation.
- Rich government: Assuming, most of the black money doesn’t make it to the banks. With the dawn of the year 2017, the government would have a good estimate of the amount of money that it should mint to tally the numbers of 500 and 1000 Rupee notes before and after the ‘Black storm’. This extra amount would directly go in to the government’s locker and for the welfare of this country.
- Lower property prices: It is known to everyone that the real estate in India runs on a huge amount of black money. With that money gone, the demand (which has already been subdued for last couple of years) is going to go further down which could well work as a needle to burst the balloon of real estate prices. Expecting a 15-30% correction is not un-real.
- Income tax raids and some surprises: We should be expecting multitude of raids by the income tax departments throughout the country and consequently, we should expect few surprises as well. Given how humungous this task in hand is, we are bound to find things which have been hiding under the rug for a long time. This is like cleaning a mansion which has not been cleaned for decades!
- Desperation from a section of media/political parties: We have already witnessed a section of media and few political parties calling for a rollout of this decision by the government. We might see further desperate actions by this section and they are going to be the biggest losers once we are done with this ‘black storm’.
- Support from the poorest of poor: We should not forget that this is one such decision that is going to involve contribution from every single person who earns money be it of a small amount or big. The poorest of poor will feel like they finally have someone who is thinking about them and I expect them to rally behind the government in coming elections.
Having said all this, I am eagerly waiting for the next year to know the magnitude of the aftermath of this ‘black storm’. It is also upon the law enforcing agents and specially the income tax department, not to resort to bribery in dealing with the culprits who are to be caught in the storm, else we will be at risk of falling back to square one.
Revolution is not something that happens by chance, it must be put into action by someone and this is what Mr. Modi did. His actions will cause a grave problem to the small business owners who happen to be his core supporters as well and that too, most of them from his home state. His own party supporters and his ministers might come under spot with this action. He has taken a huge risk and is ‘all in’ to counter the biggest problem this country faces today – that is corruption. The start has begun with a bang, hope to see more measures to curb corruption in all forms.
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