It was a known fact that the word ‘demonetisation’ was demonised in the last three months. And mostly it was described by all depending on their choice of perception. In the eyes of Bhakts, it was the much needed ‘Sanjeevani’ to cure all ills of Indian economy. In the eyes of Spoons & Aapis, it was another ‘Jumla’ by Modi. And, I’ve not dared to consider the opinion of Didi.
Well, following is my perception.
As was already informed to the committee of parliamentarians, it seems demonetisation was being discussed since the days of Raghuram Rajan. Probably, Rajan viewed the idea negatively. For the records, Rajan delivered more to the nation during the period of Modi, rather than the period of Manmohan Singh, who recruited him. The equation between Modi and Rajan was also good. It was only when media started speculating why Rajan deserved another term, much heat was generated.
However, if at all the government had any reason to view Rajan in negative light, it was only his comments on ‘rising intolerance’ that was created for Bihar elections. Rajan might have realised how he became a pawn in the hands of liberals, but by the time, he must have also realised his mistake couldn’t be reversed. It was not for a functioning Government employee to comment adversely on the popular government that was ruling the country. Only the President and the Supreme Court can comment on the way of any government. Of course, common citizens have the right to criticize much like the opposition, but being in the position of Controller of Indian economy, Rajan crossed the line.
Though Rajan may have his own reasons to oppose demonetisation – no two economists agree on anything, much like philosophers, Urjit Patel, being Rajan’s deputy might have viewed the proposal from another perception. Maybe this was the reason behind his elevation.
Modi might have realised the impossibility of bringing back the black money stashed away in foreign banks. The money might have already been transferred from the accounts, whose details were with the government long ago. Anyway, with the opposition leaders demanding for fifteen lacs in their accounts, Modi was under pressure. So, he chose the next best option!
Black money in the form of hard cash was only some percentage of the black money. Maybe about ten percent. Still, the amount was quite large. As was said by Arun Jaitley in his budget speech, ‘Indian society considers tax evaders as cleverer persons, while the tax payers were being foolish’.
To bring the moral semblance back in the society, a shock was much needed. And demonetisation provided that shock.
Immediately after the demonetisation, government had estimated about eight lac crore rupees would be deposited in the banks, while the remaining seven lac crores would perish. However, it was clear soon that people resorted to all means to save their ill earned money. Though the average Indian expects others to be morally upright, he normally tries to do the opposite. By the time the window of cash deposits ended on 31st Dec, 2016, Entire fifteen lac crores had found its way to the banks.
Opposition claimed the purpose of demonetisation was defeated as all black money in the form of cash was coated white now.
However, it appears some homework was done by the government. As declared during the budget speech, there were about 1.48 lac deposits with an average deposit of ₹3.3Cr, totalling to ₹4.89Cr. Well, now the government is probing this money. Let us hope, the government would do its job now thoroughly and identify the black portion in this corpus.
Even if the government is fifty percent successful and recovers fifty percent tax on that amount, treasury may be richer by about ₹1.25Cr.
The other point the opposition forgot was despite his best efforts, Rajan couldn’t make retail banks reduce interest rates. The accumulation of so much deposits has forced the banks to reduce interest rates and many have already done so.
And this reduction happened even without any instruction from RBI or government. After all, the banks need to pay the basic interest on the deposits to customers and now are forced to earn at least that much. So, they need to lend at reduced rates to increase volumes. This would be good for people and provides much needed impetus.
Another intangible gain from the demonetisation was the increment of people under tax net. Number of tax payers was expected to increase to justify the deposits. Already real estate prices have come down across the range. This happened even before the fresh impetus given in the budget in the form of ‘infrastructure’ status to the housing sector and thrust on affordable housing.
In November, there were news reports that the Rabi seeding was getting affected due to lack of cash to buy seeds. The data however shows that aggregate Rabi seeding had remained unaffected. However, it is true that the seeding in November was less than usual, but it picked up in December. This was not to say that the problems experienced in rural were less. In my opinion, it was rural populace that experienced most of the inconvenience caused by the demonetisation and not the urban folks.
It is better not to comment on the deaths attributed to demonetisation, as it would be purely a political game and in my opinion, human lives shall be valued apolitical. I refrain to comment on this issue.
As was emphasised in the budget speech, demonetisation should be seen as only one activity in the list of actions being considered and taken by the government to cleanse our economy. It was for us to decide if there was a millionaire pan seller who doesn’t pay taxes, whether we should continue in such a system or not!
The average Indian psyche has become something like those who pay taxes in the range of five to twenty lacs and consider themselves middle class, because their neighbour who owns a business who pays only two lacs as taxes, but roams in a BMW. A family that earns thirty thousand a month considers themselves ‘poor’.
I wonder what then we call the real poor? The poor families that migrate from Bundelkhand to Delhi, Marathwada to Mumbai, Rayalseema to Bangalore in search of livelihood are real poor. If we see families living under flyovers in the metros, we shall understand what ‘being poor’ is.
It is time for us to stop demonising demonetisation and try to be responsible citizens. It may sound new to us, as all we heard from the liberals was ‘right for’ or ‘right to’, but not ‘responsible for’ or ‘responsible to’.