On November 8, Government announced the decision to discontinue the legal tender status of Rs 500 and Rs 1000 notes. The original objectives were stated as
-Eliminating fake currency;
-Inflicting losses on those with black money and;
-Disrupting terror and criminal activities.
Later, new objectives were tacked on: enabling growth in bank credit, turning India into a cashless economy.
Contrary to the tall claim of the government, it has not hit the affluent, but the poor rendering him helpless. Let us analyse one by one the ramification of this so-called historic move:
- Firstly, let us analyse whether it has been able to eradicate the black money. Indeed, to conclude, is to dwell in fool’s paradise. Only 6% of the black money exists in the form of cash. Remaining 94% is by way of investment in real estate(property), gold and valuables. After the announcement the cunning black money holders have managed to convert them into gold, payment of advance salary to the employees, got exchanged their obsolete currency by hiring daily labours and so on. By the time indelible ink was introduced it was all over. Who after all stood in the queue and for that matter still standing in the queue? Mostly, the labour class.
- Another, claim made by the government is that the terror funding will be badly hit and flow of funds will be choked. The government claimed that the after the declaration there has been normalcy in the J&K. It may be worthwhile to mention that after the declaration there have been two major terror attacks one in Assam and another in J&K.
- The small and medium shops which primarily run through cash transaction are almost out of business and in the process they have retrenched their employees. The daily labours are out of work. People are leaving their usual work and standing in the queue for hours together for either exchanging money or getting the cash withdrawal. One must calculate wastage of man hours in the national scale.
- The tourism industry has been severely hit and the tourists are curtailing their stay and packing off. Going back home they will dissuade their near and dear ones not to visit India in near future.
- The persons undergoing treatments in various private hospitals are undergoing a harrowing time. It be pertinent to mention that only 4 crore debit/credit card holders are there in the country having a population of 130 crores. So to say that people should make payments through debit card is simply ridiculous.
- Lastly, it is beyond rational thinking how discontinuing the 1000 rupee note and introducing 2000 rupee note in its place is going to kerb the black money.
Now check out Pros and Cons:
#1. Attack on black-
People who possess huge amounts of black money in hard cash are at a complete loss now.
#2. Death to fake currency rackets-
- Most of the fake currencies used to be in the denominations of Rs. 500 and Rs. 1000.
- By banning Rs. 500 and Rs. 1000 notes, Modiji has busted all these unethical rackets completely.
- Now there will be no use of this Money.
#3. End of terrorist funding-
- Huge sums of money especially in hard cash in the denominations of Rs. 500 and Rs. 1000 was used to fund terrorists, Naxalites and other non-state actors.
- Now, these Organisations will suffer from the shortage of funds.
- Most of the terrorist used these funds for buying arms and weapons.
- Buying arms is an extremely difficult task now after this ban.
#4. End of huge donations-
- Huge amounts of donation that are taken in the private education and healthcare sectors would be stopped.
- Schools, engineering and medical colleges and hospitals (private ones) used to take huge amounts of money as donations especially in the form of hard cash in the denominations of Rs. 500 and Rs. 1000.
- These money-minded people running these institutions won’t be able to make any easy money now.
- Same applies to the real estate sector.
#1. Rush at banks-
- Banks will be extremely overcrowded by people.
- People will forget everything else and throng to the places where the banned notes are being officially exchanged leading to a tremendous chaos.
#2. Shortage of money to common people-
#3. Short Term Inflation-
- Due to the shortage of money in the market, a short-term cost push inflation will occur.
- The price of gold has already become sky high.
- Prices of vegetables and fruits have also soared burdening the common man.
#4. Marriage Season-
- Difficult for those Families those have weddings.
However, the decision to demonetize Rs. 500 and Rs. 1000 notes is misconceived and will not address the problem of black money for the following reasons-
- If it is the government’s case that high-value denomination currency is used to hoard black money, then the decision to reissue new Rs 500 and Rs 1000 notes does not make sense. Issuing even higher value Rs 2000 note is completely inexplicable and puzzling.
- Black money is generated through evasion of taxes on income from lawful activities and money generated from illegal activities. In the absence of steps to kerb the generation of black money, demonetization is a futile exercise, as it proved to be in 1978.
- 86% of currency in circulation is in Rs 500 and Rs 1000 notes. 97% of all transactions by volume are done in cash. Summary demonetization has created chaos all over the country with people unable to purchase daily essentials and, in many cases, life-saving goods and services. 5 persons, including one infant, have died as a direct result of the impact of demonetization.
- In the last 5 years, IT raids have found that only 5-6% of the black money is kept in hard cash. Moreover, those who have amassed sizable black money are equipped to find ways around demonetization by converting their existing cash to bullion, gold jewellery, real estate and foreign currencies through brokers and middlemen. In fact, organised middlemen and touts have already emerged to convert black money into white for a commission.
- We are all concerned about the use of money power in elections. Why hasn’t the Government proposed state funding of elections? Why is the BJP resolutely against transparency in its own funding by refusing to come under the Right to Information Act?
The summary way demonetization has been affected is leading to a riot-like situation in the country. We demand that the Government ensure that common people have immediate access to enough money to pay for their daily needs and health emergencies. Failing which, we demand the rollback of demonetization or suspension of demonetization to enable the common person to make adequate arrangements for daily needs and for more orderly phasing out of the old notes. The role of the Government is to undertake honest tax administration and not to treat the common person like a criminal making him/her stand in line and filling forms to access his/her own legitimate money.