At the stroke of the midnight hour about a year ago, India’s highest denomination notes, the old ₹500 & ₹1000 were scraped off in a single blow – the demonetisation. In what was described as a radical attempt to dethrone the reign of black money and corruption, PM Modi’s ambitious attempt was initially greeted with thunderous applause. A year down the line, however, even the most ardent supporters would hesitate to go kind on this move.
Intention of Demonetisation
The agendas on the cards were manifold, namely,
- tackling corruption
- increasing digital transactions
- striking down terrorist funding
- decreasing the dependence on asset-based land growth
The Indian economy back then was supremely-cash driven, with 86% of our cash consisting of high-value notes. The intended targets were not met, and the move turned out to be a colossal disaster, resulting in a stunted GDP growth rate. India’s GDP growth rate fell steadily, amounting to a 6.1% for the quarter January – March 2017, and it further dropped down to a paltry 5.7% in April-June; it’s lowest in 3 years. The initial slump which was anticipated and expected to phase off slowly, did not, and left the economy in shambles.
The unorganized and low-key business sectors took a major hit, resulting in massive job losses. Cash shortages due to demonetisation severely struck small enterprises and several firms across the country had to close down operations. The gamble did not pay off for the larger sectors either as Industrial output recorded an embarrassing decline as well. Arun Shourie had referred to the demonetisation as the “World’s largest money laundering scheme”. Whether or not holds water is dependent on the largely polarized public opinion and economic figure. Contrary to its intentions, the scheme adversely affected the livelihoods of millions, especially that of the economically weak and the common man.The demonetisation fiasco
Digital transactions spiked post-India’s “Notebandi” as platforms such as PayTm recorded sky high numbers and e-wallets saw the high demand. The government launched an app, Bharat Interface for Money, BHIM, to smoothen the process. However, as soon as things started to fall back into place, and the new notes made their way to the public. As a result, the frequency of transactions on digital platforms fell yet again. The biggest disappointment of demonetisation was the fact that 99% of the outdated cash made its way back to the banks. Surprisingly, only one-fifth of the abandoned notes were expected to be killed off in the process.
Demonetisation did manage to help the government in getting a better insight of the income tax returns of its citizens. Various tax evasive businesses and individual properties were raided to flush out black money holdings. The sex trafficking industry was also temporarily paralyzed in the beginning. But whether or not terrorism was curbed in any way is a matter which still remains a mystery. ‘Well intended but poorly implemented’ or not, one is left perplexed at the end of the day. One wonders whether an alleged one hundred lives, loss of livelihoods and an unprecedented level of human misery was worth all this pain.