Notes Demonetization
The Big Announcement
I was fortunate to notice the pop up at 8 Pm on 8/11/16, when the message read ‘Live Address of the Prime Minister now’. Being totally taken off guard, I switched channels and started listening to our PM. In his chaste Hindi, he was building up the case for a big announcement. My expectation was that he would announce a war or some other major initiative.
But out of the blue came this announcement of Demonetization. He went on to share the details at length to show that he and his administration has gone to great details to minimize the impact.
But after listening to him I was not convinced. I realized that this was a big event in our country and this surprise action will hurt many – some intended and many undeserving. First of all my thoughts went to the cash I have for tomorrow’s journey and quickly realized that I need not worry as I will be going to office and then only catch the flight. Geetha, my wife was very exited. She felt that this is the act and would punish those who have avoided taxes and who have generated unaccounted money. For this, she felt that a little bit of discomfort for most of the unaffected must be accepted.
I was not convinced. My initial reaction was - couldn't the government found better way to do this. Is this a political move to eliminate cash so a to facilitate victory in Punjab and UP election? Would this really punish all those intended or the guilty would find methods to circumvent this as well?
My collegaues in the office were all very exited and they said 'wow - great thing'. The taxi driver in Mumbai from UP, had mixed feelings. He said it will not work and it will put all poor people in trouble. I heard that my vegetable vendor who has a bank account was charging up to Rs. 200 to convert the odd Rs. 500 rupee savings the house maids might have kept inside for emergency.
My feelings as I write this after almost 18 hours after the big announcement and reading about it in the papers is mixed.
The move will hurt some for whom it is intended and will not impact the big fish. Common man and women will bear the brunt and that is a bad move. Economy will be severely hurt as consumer goods transactions will significantly drop. Major expenditure avenues of the economy which operate in cash – Agri commodities, Marriages and such celebrations, interior decoration, Tourism, logistics etc will suffer.
And to make it successful, further measures are needed – especially tightening of raising of cash, stopping hawala transactions and ploughing back assets from Benami holdings back to circulation.
By late afternoon I saw a news flash that any deposits over Rs.2.5 lac would be liable for scrutiny by Government and they may deduct 30 to 120%. That is comforting.
What would I do differently? I would announce it at 8:00 in the morning of a lazy second Saturday instead of late night on Tuesday. I would recall the banking the staff and open for emergency exchange of notes on the same day by late afternoon. And yes I would introduce mobile exchange vans. I would allow eCommerce firms to accept limited cash – say Rs. 5000 per address for which an old count exists and so on so forth.
I m holding the final verdict and would like to see follow up actions in the next few weeks before changing my opinion. For the moment though I feel that this is an I'll advised move.
And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always.
I had posted a link of this blog in my Facebook page and I list some of the comments for reference:
Reforms and regulations are needed immediately in real estate, construction sector and also entertainment industry. Or else same cycle will be repeated after six months.
Transaction tax on cash withdrawal is a must.
@Suhashis Chowdhry Well written Gopu and fully agree. I think even the biggest of Modi detractors will grudgingly admit that the ostensible objective of removing black money from the market is laudable. However, one inescapable truth remains. 1) The methodology is ill advised 2) it will not remove the majority of the black money. To compound matters, it emerges that, the execution too could have been planned better. With a majority of the ATMs shut on account of lack of cash and huge queues in front of banks, the principal objectives will be very soon forgotten. I will, of course wait for credible statistics to be informed of the success of this move
Uncle,
Change is always difficult and everyone have their own views on how it can be done. And here we are talking about a change that affects 1.2 billion people.
If someone thinks that there is political gain and doubts PMs' integrity, I am really curious.
No politically motivated person with dig such a grave for himself. Only a true patriot will do this keeping the only think in mind. To improve the country.
No normal politician has functioned so far keeping countries benefits in mind. Everyone has always worked in a way to make sure they get re-elected the next term to make more money.
Especially with some of the major states going for election he still took a chance to come up with this.
After he gave time to declare in disclosed income, IT records shows only 55000 Indian have an income of more than 1 crore. Is that believable?
Immediate suffering is there, but tell me when the common man doesn't suffer in India. But this suffering will definitely benefit the common man in terms of value for his hard earned money.
If persons hoarding black money doesn't declared, this still serves the purpose as the inflation will come down. Real estate will have "Real" pricing.
History has proven that chance has not happened without hardship. If China has developed people of china have had their share of sacrifices.
Every country that has developed the citizens have had their share of sacrifices.
Lastly I want to ask- why is the corrupt business man or the black money hoarder never blamed for this situation? Why only someone try to clean it is blamed? Is it because the classes system is so rooted in us that the we blame the cleaner for the bad smell and not the person who creates it in the first place.
And my reply: Dear Swarna Kalyaan I note that you have strong views and also like many of us believe in what is reported through the press. Let me just say this. Press, both Pro Modi and Against, have their own axe to grind. There are many incidents which are taking place reportedly which are working to defy this move. I have a self declaration to make here. I am not affected nor any in the family. I wasn't luckily inconvenienced. So, I also wish that this move bring forth the desired effect. And mark my last paragraph on the blog - "And yes – it is a wakeup call for all of us. Our PM can take big risks and we better be on the right side of law always." Let us wait and see.
2 comments:
While the intention behind the move is good, the common public and retailers are put to great inconvenience. How long this will continue remains to be seen. Printing error in 2k note and the need to recalibrate ATMs for new 500 note has compounded the chaos. As of now, it's a crisis situation.
Many people were giving suggestions on eliminating black money. It is always easy to suggest so many things but implementation has many challenges as we see now. I am personally affected with a major function in my family round the corner.
I can understand the chaotic situation that may arise if you have a function at home now. But purging something like this always impacts many. Suggestions in the public space are made to share views and obviously these may be mostly amateurish. But then sometimes you do come up with genuine suggestions which are implemented.
Yes; the next time this is done anywhere in the world they will have the experience of Indian government to learn from. But we are the first in the recent past and so challenges must be faced. I am also personally affected.
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