November 20, 2016

Demonetization: How good is the move ?

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Several good steps have been taken by the current Central Govt, but the two major decisions that will be remembered for long, are the Surgical Strike on Pakistani terrorists in POK, and the current demonetization of Rs 500 and Rs 1000 notes. While the demonetization being termed as "Surgical Strike" on black money was a bit too much, but then it does seem to be a great idea. However, there are several other things which need to be pondered upon.

Initially, the sudden announcement of demonetization came as a shocker but a pleasant one. The most surprising and appreciable thing was the secrecy with which the entire plan was put into action. But then, what came next was shocking! The ATMs were announced to be out of service for 2 days. So it was expected that they will start working from the third day onward. But forget third day, the ATMs remained out of cash, even after 7 days!! There has been utter chaos for cash. All this thanks to the horrible implementation by the Government. They first banned use of notes, and then started printing new notes. None of ATMs had anything other than Rs 100 notes, which drastically decreased the vending capacity of ATMs. The new Rs 500 notes were not even available with banks, they were still under printing. The Rs 2000 notes were so out of dimensions that they couldn't be made available in the current ATMs. So Govt first banned the notes, without making the equivalent notes available with banks/atms. Needless to say, the great looking idea was spoiled thoroughly and forced Govt to head to disaster management tactics!

But talking of some major issues:-
  1. Do I welcome the demonetization idea?
  2. Will it ensure development?
  3. Do I appreciate the efforts put that went into implementation and planning?
  4. Will it reduce corruption and black money?
1. First, Yes I absolutely welcome the idea. The idea in it's core looks great. If it will not curb corruption or black money much, at least it will definitely kill the counterfeit notes in circulation completely. 

2. Will it ensure development? Quite an unrelated issue, but I think it won't affect development much. Removal of counterfeit notes, and curbing black money to some extent, it will surly boost development for a period, but then after some time, development will hinge on the core issues. On the other hand, development may even slow down for the near future. There are already news of GDP growth rate likely to go down in coming quarters.

3. Do I appreciate the efforts and implementation plan? Absolutely not! What initially came as a great plan, later turned out to be a horrible mess. Come on, which Govt first bans notes, and then starts printing them! What was Govt even thinking! On top of that, this situation of chaos is going to remain for significant number of days. When PM himself has asked for 50 days, you can very well understand what is going to happen. For 50 days or more, there are going to be severe restrictions on withdrawing of your own hard earned money from Bank! Why should Govt block your money from getting withdrawn! There can be several issues for which one can need cash in lakhs, which one can't withdraw even if he has enough in his own account, all legally earned. Already, there has been news of some deaths due to the chaos. So it's quite apparent that the great looking idea was turned into a disaster.

4. Will it reduce Corruption and Black Money? Corruption- absolutely not. Black money- Yes to some extent definitely. Corruption will continue with new notes, I think corruption has hardly got anything to do with demonetization. The Black money though, will certainly be reduced to some extent. Even though most of the black money is either invested in properties or other non-cash items like Gold, whatever black money is there in cash, those are definitely going to be curbed. There are news of black money getting turned white through various clever means, but even despite all those tricks, a significant amount of cash black money will definitely be reduced.

All in all, a good move, but with horrible implementation. It could have been far better, had Govt prepared better for the big decision. With so much of inconvenience to public, it doesn't come out to be a great thing to happen. For catching 1% of people, Govt is troubling 100% of people, in some cases, threatening the lives of innocents, so all these take the sheen out of this great looking idea.

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