PM Narendra Modi on his televised address to nation on Tue Nov 08, 2016 at 8PM on announced the demonetization of Rs 500 and Rs 1000 currency notes and said the move was aimed at curbing the negative impact of fake currency, black money, corruption and terrorism on the nation's economy. Pakistani spy agency ISI was pumping fake notes of Rs 500 and Rs 1,000 to finance terror activities within, even earning a handsome profit of around Rs 500 crore per annum in the process.
The immediate impact was that citizens were stunned and dismayed, who never experienced demonetization in the past, found themselves with all their cash worthless, transactions in pipe line stalled or aborted, property values eroded with only few hundreds of rupees left. Small business owners & daily wage earners surviving on day to day work for making living are so much helpless today with no activity and income, how to pay monthly bills at the beginning of next month. Not many have any reserve cash.
Demonetization is not new invention by Modi & Co. In the past many countries did it but none achieved even 10% of the targeted benefit. Morarji Desai's 1978 demonetization was a utter flop then. What made Modi to believe this would do would do wonders for him, despite inherent risks and with no proper plan for mitigation & implementation? The guy who advised Modi and influenced him must be sacked at once for his irresponsible projections.
While the told reasons are impressive and in the interest of the nation the untold reasons are purely political for the following reasons:
- All economic parameters are well within limits.
- Annual economic growth rate at over 7% is impressive.
- UP Elections are slated for early 2017.
- BJP is desperate to win UP elections. Otherwise their numbers in Rajya Sabha will remain minority for reminder of Modi's term. BJP candidate will have uphill task in winning President & Vice President elections next.
- Fake currency below Rs.1,000 crores is less than 0.01% in the economy size of our country.
- Black money is nothing new. There are many ways of dealing with it seamlessly.
- Terrorism control can't be achieved with demonetization alone.
See what Raghu Ram Rajan thinks on the current Demonetization.
VIOLATION OF CONSTITUTION
Demonetization by an executive order is improper. Govt should have proclaimed an ordinance and immediately enacted law. Misuse of authority without proper constitutional authorization indicates highhandedness of the Prime Minister Modi and his dictatorial tendencies.
Article 21 which reads as follows:-
Protection Of Life And Personal Liberty: No person shall be deprived of his life or personal liberty except according to procedure established by law.
The demonetization had thrown out millions of people in "informal sector" etc without livelihood. There was no process of law which has been followed. Depriving livelihood tantamount to depriving life and personal liberty, Supreme Court ruled in the past.
Our Jurisprudence is based on the Blackstone's formulation is that: "It is better that ten guilty persons escape than that one innocent suffer".
Modi’s startling and sudden move to withdraw 500 and 1,000 rupee notes a week ago has left India with 14% of its currency in circulation. Small businesses, real estate, gold and the informal sectors -- which see a high component of cash transactions -- have been affected as hundreds of thousands of people spend time in long queues to exchange currency rather than working. The informal sector (which is 40% of economy & provides 65% jobs and livelihood to 850 millions) has come to grinding halt and revival is estimated between 6 months to two years.
- Printing of new currency notes Rs.12,000 crores.
- Improper arrangements derailed economy and recovery would take at least 2 months.
- GDP lost Rs. 2-3 lakh crores.
- Growth rate is likely to be reduced by 2%.
- RBI's likely to gain Rs.3 lakh crores of black currency not deposited.
- Naxalites lost their extorted and concealed amount of Rs.5,000 crores.
- Fake currency made redundant about Rs.1,000 crores.
- Informal sector, Agriculture etc effected people over 850 million.
- Enormous stress borne by bank employees dealing with unending queues, fear of giving away more money, extended work hours for several days in a row, petty quarrels with customers leading to stress.
- Public standing in serpentine queues for several hours only to get exchange worth Rs.4,000.
- At least 50 deaths reported standing in long queues for currency exchange.
UTTER CONFUSION & CHAOS
First two days were bank holidays the truth that Rs.500 & Rs.1000 notes are worthless sunk into brains of people. From Nov 11, 2014 long serpentine queues were common scene before every bank with ATMs derated to just 10% of its capacity dispensing only Rs.100 notes. Only 50% ATMs are operational due to poor maintenance. The new Rs.2,000 notes were as good as worthless since none in the market accepted for payment with very little change available with them. With less than 14% currency left in the economy retail took immediate beating with retail sales less than 30% and informal sector grinding halt with no cash.
Modi should remember that the people standing in long queues certainly don’t have the mindset of a soldier fighting a national cause but only have curse words for the government for turning their lives into a nightmare. Modi must have acknowledged this state of affairs, the failure of the government on execution front and promised to resolve the issue as early as possible. Instead, he warned about further measures post December 30, 2016, when the deadline expires. This will only add to the panic since people would start speculating that what the next blow is going to be.
Common man would need to pay to his vendors, a majority of whom still live in the cash economy, for whom PoS terminals, plastic money, PayTm are all still fancy words. While in metros like Mumbai and Delhi, people still have the possibility to use plastic money to meet most of the daily needs, in the semi-urban areas and villages, life will turn hell when ATMs dry out of money, daily labourers are denied wages because their employer doesn't have cash and kirana wallah frowns when asks for credit yet another day.
The mob psychology works in full swing on such occasions. And that psychology would drive the common man into a panic mode, telling him to run fast to the nearest bank branches and ATMs to withdraw maximum possible amount permissible (as of now Rs 2,000 per day), even if he doesn’t need that amount. It is getting clearer that economy is heading to politically motivated & fast reaching point of disaster. While many are still hopeful that this landmark initiative will reap dividends eventually, deeper analysis concludes it is not only poor politics but also an unmitigated disaster.
With commodities supply-chain-retailing systems crashed, shortages will be come order of the day in coming days.
Armed with shots to fire, opposition parties have common cause to conduct street agitations and Modi is helpless in dealing with them. Politics without principles leads BJP to nowhere. BJP leaders are now arguing that in long term demonetization benefits nation, in low voice. Despite demands and obligation, Modi hasn't attended Parliament last two days.
The idea of a cashless economy sounds great. But it is viable only at high-end convenience stores, shopping centers, malls etc along with the online shopping industry. The transaction overheads is an added cost to consumer indirectly or directly. Not all commodities have that much margins for seller to pay these costs. Also high cost items like cars etc, it makes sense to avoid cashless payment and save some bucks.
The fear of unfamiliarity is very fundamental and money matters are serious; hence the reluctance of consumers to shift from cash to plastic, even for across the counter transactions. As for online transactions horror stories of cyber-crime and sheer unfamiliarity with online payment systems is the basis of this reluctance.
Cashless economy will become reality slowly with higher income levels, awareness, education levels and transaction costs coming down to affordable levels.
EUPHORIA GONE; PANIC & DAMAGE CONTROL BEGINS
- The government was ill prepared to deal with what was going to follow and completely miscalculated the enormity of the move it was making. Every honest citizen wants his country to be free of the evil of fake currencies and black money. The miserable failure of Modi government to design the implementation in the days after the demonetization announcement, though no one is questioning the intention.
- The situation is not likely to change soon. Finance Minister Arun Jaitley has said it will take about three weeks to replace the old notes. By then, the problem can go totally out of hand for the government. Printing Rs. 500 and Rs.100 notes now and making available for exchanging is at least a month away.
- PM Modi made a bad analogy comparing the cash drought prevailing in India now, to the chaos prevailed in Japan in the aftermath of the 2011 earthquake. "People stood in line for four hours, six hours but accepted the decision in national interest the way people of Japan tackled the aftermath of the 2011 disaster," Modi said speaking in Japan. The chaos that follows a natural disaster and the will power of a society to withstand the difficult days is one thing while the chaos and disruption of normal life in a society post a “well-thought-out decision” planned months in advance by the government is another.
- Modi-government thought of an ideal situation where people will laud the government and put their personal miseries behind the larger cause of patriotism. "Don’t preach the scriptures to someone who is hungry" – was forgotten.
- Over the weekend, Modi made an impassioned plea to the nation to give him 50 days to weed out ill-gotten wealth in the country.
- Today i.e. on Fri Nov 18, 2016, Supreme Court refused to restrain various high courts and subordinate courts from hearing petitions against the Union government's demonetization notification, saying "people are facing real problems and we cannot shut them from moving courts to register their grievances."
- The ill-thought of idea to use indelible ink during withdrawal at banks will not just take more time in dealing with a customer but also, it can be easily removed.
- Unless the RBI & Govt increases Rs.100 notes to overcome shortage, there's a high chance that fake notes of this denomination will soon be circulated.
- Worst is 50+ people so far died across India standing in queues for cash exchanging or stress related issues, in first 10 days.
- Panic is reflected in unstable govt guidelines modifying every day creating confusion for the bank staff.
- Software modifications in ATMs can't be done in hurry. Modifications are to be designed, planed for implementation. With changing procedures several ATMs are out of service and many ATMs not upto date with govt directives. In any case ATMs exhausts cash within an hour.
- With short cash chasing too many goods - undesirable deflation is a certainty. Later improved cash position - inflation will impact economy.
Former Union Minister Arun Shourie mocked the claim of demonetization of high-value currencies being a radical measure, stating that jumping into well or committing suicide is also radical.
Why hasn't the BJP-led government first targeted the black money deposited in Swiss banks as it was promised during the election campaign? The situation of crisis, in the name of "fight against black money", has affected the poorest the most. The good intention behind the currency ban and the long-term benefits it will bring to the economy will then be forgotten and Modi will run the risk a strong the anti-incumbency wave, if the cash drought continues and remedial measures are not brought into place. Better watch out for a bigger storm than the 2011 Japan earthquake, Mr. Narendra Modi.
Demonetization is bound to leave indelible impact on the nation. Shrinking economy leaves many jobless and recovery will never be the same again. Needless to say we may find ourselves pushed backwards by about 10+ years paying bitter price for Modi's adventures.
Modi's decision seemingly was in his & BJP's political interest rather than in national interest and he will go down in history as India's greatest wealth destroyer.
BJP leaders of UP felt that post demonetization blues, they have no face to show up in UP and were reluctant to either for campaigning or for erecting hoardings. They opine that Modi has effectively reduced BJP to ZERO.
Keeping eye on UP Assembly elections and subsequent President & Vice President elections, Modi abruptly demonetizing currency and its inept handling has thrown the nation into chaos effecting 850 million people starving for cash & change and threatening their livelihoods.
Now that demonetizing has boomeranged, Modi has no face to show up in either Parliament or public. If any shame is left in him, he must own up responsibility for the fiasco, apologize nation and step down so that his successor would do better damage control and rehabilitation without the burden of the past. Also FM Jaitley and RBI Governor Urjit Patel should be eased out along with those who recommended this failed operation.
Had Modi followed Gandhi Talisman while making decisions, I am sure he would have made correct decisions in national interest and this chaotic situation averted.
apply the following test. Recall the face of the poorest and the weakest man [woman]
whom you may have seen, and ask yourself if the step you contemplate is going
to be of any use to him [her]. Will he [she] gain anything by it? Will it restore him [her]
to a control over his [her] own life and destiny? In other words, will it lead
to Swaraj [freedom] for the hungry and spiritually starving millions?
Then you will find your doubts and your self melt away.