Demonetization, a word less heard less known to the common people is now a matter of discussion across the country. On, 8th November 2016, 86% of India’s currency was nullified in demonetization effort that claimed to clean the black markets cash supply, terrorism activities but it disrupted the social, political and economic spheres of the world’s largest emerging market.Eliminating 86% of the value of currency, the government of India has called this “Short term pain, for long term gain”, but “What gain and by when” ?
It has clearly caused considerable inconvenience to common people, no matter whether you belong to upper class, middle class or lower class every single sector of the society is affected everyone is suffering and facing hardships by this unplanned and unorganized demonetization act . Long queues outside banks outside ATMs, lack of cash has made people helpless as well as hopeless. Farmers, Fishermen, vegetable sellers , small shopkeepers without card readers or PAYTM, taxi drivers etc have all been affected with loss of livelihood which may be irretrievable in some cases. The whole chain of demand and supply is tarnished, the unplanned decision of demonetization caused a complete breakdown in India’s economy. Trade across all the sectors of economy disrupted and cash centric sectors, informal markets are virtually shutdown.
The goal is to eradicate black money, counter tax evasion and destroy counterfeit currency. In most large economies, cash is around 5 percent of GDP, in India it is 12 to 14 percent. Fewer than one third of Indians have access to financial institutions. While most banks are concentrated in cities, most Indians live in villages.Only 5 percent of Indian workers pay income tax, just 15 percent of the economy is inside the tax net and India’s tax to GDP ratio at 17 percent is 5 points lower than comparable countries. Because of high property taxes, for example, buyers collude with sellers to understate the sale value and split the tax difference. This explains why the policy is an attack on the Indian way of doing business. Much of India’s cash based consumer transactions have ground to a halt.
Consumer goods sales are reported to have dropped by one third. Trucks are at a standstill. Farmers have difficulty buying seeds and fertilizer and selling crops and perishable produce. The fishing industry is close to collapse. Few villages have ATMs and having to trek into cities and wait in line for hours means the loss of daily wages as it does for the rickshaw drivers, street vendors, domestic workers and daily laborers in the cities. The construction industry has been badly hit with significant wage implications for its casual workforce
Inevitably, low income and rural households have been hardest hit by Modi government’s unplanned currency reform. Barter economies have reportedly sprung up in many towns and villages. Banks have limited the amount that can be withdrawn. Scores of weddings have been called off. As, Indian economy relies predominantly on cash, the effect will be far greater. An estimated 600 million Indians nearly half the country’s population are without a bank account. Three hundred million have no government identification, necessary to open an account. By comparison, about 7 percent of Americans are unbanked, with an additional 20 percent under banked, according to the Federal Deposit Insurance Corporation (FDIC).
One of the world’s greatest economists and former Prime-Minister of India DR. Manmohan Singh called demonetization “A Mammoth Tragedy“
Dr. Manmohan Singh, cleared his point, that the objective is good, but the implementation of the scheme is a complete failure.
He said the drive will result in a decline of 2% in GDP and went ahead to warn that it could be an “under estimation”.
It can be weaken and erode our peoples confidence in currency system and in banking system.
He further added, for the very first time it happened that people are depositing all their money in banks after standing for hours in queues but they are unable to withdraw their own money.
As, a result, according to International Monetary Fund (IMF) The Modi Government’s demonetization move has hit India’s growth, damped by 1% in (2016-17) and 0.4% for next year.
The chaotic decision of demonetization overtook the entire nation like a flash flood and the initiative is flop. The Modi government asked for “50 Days” to get things back to normal, but it is estimated that even if the printing of new currency to run 24/7 it would take upwards of 5-7 months. As, time period of 50 Days asked by the government is over but long queues of people are still visible out of banks and ATMs. People living in villages and backward areas are suffering a lot as they don’t have any idea how to get rid off from this chaos.
Tragically 100+ deaths have been reported across the country because of demonetization, the whole country is in disturbance mode and we still don’t know when and how things will get back to normal. As of now, Demonetization is actually turned into DEMONetization for the entire nation.