Updated: Mar 26, 2021
So on 8th November at around 8:30 at night in India the king of our economy Mr. Cash was dethroned from his magesticity and made a second-class citizen! 86% of the total value of currency in India’s cash-intensive economy was wiped out. This all was done by none other than our beloved PM Mr. Narendra Modi. Well a big question that looms is whether it was done to embed himself in history, to finally respond to the eradication of black money promises made during election or indeed in the goodwill of the nation.
Well there are three school of thoughts. One of them belonging to the not so creamy layer of income (and thinking). For the poor and the middle-class, anything worse than their own suffering is the suffering of the rich. The knowledge that the “baniyon ki Sarkar” was changing its stance was all that mattered to them. Seeing that Mr. Modi is a PM who wanted to be their savior (though Demo’s implementation could have been better) was all that mattered to them.
The second school of thought, all the economists and huge fiancé biggies have spoken profoundly against it and questioned whether economics was winning or politics. Economic liberty was debased. It’s said that no RBI Governor ever supported this stance fearing the effects on economy. They believe economics underlying demonetization has flaws. First, all black money is not held in cash, and all cash is not black money. That more than 90% is in the form of gold, real estate, foreign accounts and used in consumption or business expenditures. Second, it is very difficult to separate black money from white money because the distinction is not once-and-for-all. Third, demonetization would indeed wipe out stocks of black money held in cash if it cannot be laundered. But which depends a lot of the behavioral pattern of people.
The third was in between the both. Digressing and lauding the step at the same time. Happy that there would a cashless society and sad on the accounts of suffering of the poor.
To get some facts right. The GOI and RBI have known that the total value of the Rs 500 and Rs 1,000 notes in circulation till March 2016 was Rs 14.18 lakh crore. Banksreceived Rs 14.97 lakh crore by the last date for depositing old cash, adding that the figures were provisional and could be revised to Rs 15.44 lakh crore.Govt had the conception that the difference would accrue to the RBI as a windfall gain since its liabilities would be reduced by that amount. Something I feel they would have to work upon with an econometrics off the charts.
Economics and politics go hand in hand, and whether our PM is going to win with flying colors can only be pronounced after the state elections of UP, Uttrakhand, Goa, Manipur and Punjab.