Sunil Bhardwaj
Prime Minister’s announcement on the demonetisation of 1,000 and 500 rupee notes on 8th November, 2016 came as a surprise to the people of India. It also speaks volumes about the political commitment of Narendra Modi to curb black money because irrespective of many contradicting views every Indian admit that black money has become a long festering menace and a serious problem of the country. A country of 1.21 billion people but yet only three million people file income tax return and only two million actually pays it. Many people and corporate houses who must be there in the income tax bracket or contributing to the national pool of financial resources are actually hiding their income by using advance accounting methods or by other immoral means. The step taken by the government may have created a situation of distress, panic and uncertainty in the short run but in the long run this bold step is for the betterment of the economy. The Govt. has done more than ten months hard work before taking this call on demonetization of currency to curb the nuisance of black money. If all the hidden money is recorded and rooted through formal financial system the government can easily track, record and tax the proceeds. People can swap their hoards of useless bills for useful ones, but those who cannot present justification for their cash piles will receive hostile attention, and heavy tax bills, from the government. But the irony is that cash is the least preferred method of holding black money where as most of it is stashed in foreign banks and is in the form of foreign currency assets, undisclosed stocks, gold, real estate assets etc. Capturing hoarded black money within the country is just like capturing the tip of the ice berg.
Terror funding is another very serious problem which is weakening the democratic fabric of this diversified country and is mostly done in black money or counterfeit money. This unaccounted money is capable of doing much harm to the innocent citizens of India. Sweden has more than 98 per cent cashless economy because cashless economy has its own inherited benefits which include all transactions are recorded, connivance, easy tax collection, safety of transactions etc. On these line think tank in the NDA Government is striving hard to convert the economy into less cash economy which seems pragmatic rather than cashless economy because India has higher cash to GDP ratio among many top economies of the world. Inflation is one of the major problems of India and black money is one of the major factors contributing to it. About 20 per Cent money in the Indian economy is black money which is acting as parallel shadow economy. According to Finance Ministry report in 2012, real estate account for more than 50 per Cent of current black money market. So this step will definitely rationalize the prices of real estate, gold and other assets in the long run.
Demonetisation has cause sudden rise in bank deposits, decrease in Non Performing Assets (NPAs) and thus enhancing the lending capacity of banks. There is dramatic rise in the deposits particularly in zero balance Jan Dhan accounts which received Rs 21,000 crores within two weeks of demonetisation. According to RBI, between 8th November and 10th December banks has received Rs 12.44 lakh crore worth deposits. This will lead country to higher levels of growth if visionary and pragmatic polices are put in place by RBI and the authorities. Government can use these funds in financing fund scarce sectors of economy, infrastructure, renewable energy, reviving sick industries thus helping country to achieve Nationally Determined Contributions Commitments of Paris Environment Summit. India’s long cherishing dream of converting itself into skill capital of the world can be achieved only if this money find way to skilling and training the ever increasing young population of the country. Some economists also believe that this endeavour will definitely become a fertile ground for the development and boosting new ventures and startups in IT like PayTm, wallet etc as e-payments are being promoted and encouraged very enthusiastically in the present economic scenario. This also presents an opportunity to the aspiring youths of Jammu and Kashmir to become new entrepreneurs and start new ventures in the respective field. Money collected by Govt. by way of this exercise will adds to national financial resources which can be used for making robust infrastructure for make in India activities in the fields like bullet train, defense, space, road infrastructure, agriculture etc. The State of Jammu and Kashmir needs these funds in order to lift the people out of poverty, ignorance, illiteracy and militancy.
Prime Minister’s hand pick team seems to have done little home work on demonetisation of currency if analysed from other perspectives. Ahead of Uttar Pradesh and Punjab assembly elections, this attempt give a notion of political move rather than a well thought economic strategy in nation interests. More poor and ill thought is the implementation part which has stressed payment infrastructure of the country having insufficient ATMs, PoS terminals and digital wallets, present mostly in urban areas. Demonetisation does have its pros but if it is a well thought, right directed and properly implemented exercise; it can’t be a universal treatment for all diseases.