Cash in circulation Rs.17.65 lakh crores
Demonetized currency 86% i.e. Rs.15.18 lakh crores
Extinguished currency 21% i.e. Rs.3.19 lakh crores
Modi needed this much money to induce funds into cash strapped public sector banks whose NPAs doubled in the previous one year and their day to day operations are under jeopardy and also to reduce budget deficit since their lobbying for ratings upgrade by agencies from near junk status was rejected and declined to budge citing concerns over the country's debt levels and fragile banks and stated that ratings upgrade for India was some years away, depending on the progress on reforms.
After ascending to power in 2014, riding the 'anti congress' wave, Modi with charismatic and dramatic speeches had engulfed 'middle class segment', who generally live in total disconnect with the realities of rural and lower strata's of society, made them believe that he is Messiah to save save the nation of all its ills and steer it in the direction of development. But in the past 30 months he didn't do anything except hammering past blunders of Congress and enjoying foreign jaunts. Now saddled with all round political & economic failures and, midway he is under pressure to unleash some daring action to win forthcoming five state elections and President & Vice President elections. He was impressed with a 'quack economist' presentation of demonetization and tax reforms, with out getting it evaluated by experts for its veracity and impact on the common man, he saw an opportunity to resolve all his problems in one go and unleashed secretly hatched, unprepared, high risk & wild gamble of demonetization within two months bypassing and destroying institutions like RBI, Ministries and Departments, without even pretense of process of law. Ironically, demonetization was not an economic tool to achieve any of these objectives which would seemingly do good but inflicts unbearable direct and collateral damages.
These were the main reasons and all other things told rhetorically by Modi was 'bakwas'.
After dramatized high pitch announcement by Modi on Nov 8, 2016 that with demonetization he would save the country from the menaces of black money, fake currency, corruption and terrorism financing, but with in days it was clear that it was a monumental debacle with inept cash replacement arrangements resulted in crores of poorer section people loosing their livelihoods and ending up in serpentine bank queues. Stunned with this Modi invoked 'patriotism' like a scoundrel and demanded that people bear the brunt for 50 days. Some days later he shifted goalpost from 'black money, fake currency, corruption and terrorism financing' to 'cashless economy' which would expand 'formal economy' and shrink 'informal economy' and higher tax realization would accelerate development.
- What he has not told is that informal sector will stand to lose at least one third of its working capital (from black sources) and how that informal economy (with 45% GDP share and 90% employment share) would survive and get funded by banking sector.
- What he has not told is that 'cashless economy' which is at least 10-20 years away, due to 'infrastructure defects & constraints' and will involve holding and usage costs unaffordable by lower class people of India.
- What Modi has not done is that the moment he realized demonetization landed in fiasco subjecting crores of poor people to hardships he should have initiated mitigation measures and instead went ahead with resolution at least six months away. All that he has done is demanding suffering for 50 days, in the name of patriotism. Except some hollow speeches, nothing else.
- He was remorseless for people sufferings, 100+ deaths of aged and women in bank queues and 10+ bank employee deaths consequent to abnormal work stress.
- Over 60 circulars from RBI, often contradicting, indicates thoughtlessness, unpreparedness, panicky management by concerned authorities. Fortunately riots haven't erupted and that is no credit to government.
- Modi instead of participating in the mandatory & obligatory parliamentary debate and explain the nation, abstained from parliament and chose to address public meetings, where he need not have to answer any questions, flabbergasted the nation that after short term pain (to poor), long term gains (to rich) will start pouring in, is nothing but audacity of an arrogant tyrant.
- Dramatized speeches blaming opposition parties is OK for a political leader to win elections, but as Prime Minster addressing nation must desist from dramas or blame gaming and harping on blunders of previous regimes, but must be truthful to people of the country exhibiting honesty & sincerity of purpose, upholding principles of democracy and defending constitution and laws of the land.
- This demonetization which is under the purview of RBI and Parliament, was done with a mere televised announcement by Prime Minister, himself and followed by a notification of Ministry of Finance and without undergoing even pretense of process of law. Purposeless secrecy was taken as a shelter for violation of all constitutional processes.
Now after passing Dec 30, 2016, it was clear that 97% i.e Rs.14.82 lakh crores of cash has gotten deposited with Banks & RBI leaving just 3% i,e Rs. 46,000 crores, unreturned black money. With NRI's having time upto June 30, 2017, the final figure would be much less.
The expenses for the 50 day period, direct & indirect, are estimated as below:
- Direct expenses to RBI & GOI Rs.16,800 crores.
- Banks to bear an estimated cost of Rs.35,100 crores.
- Cost of queues to exchange currency is estimated at Rs.15,000 crores
- Enterprise* losses are estimated at about Rs.61,500 crores.
* includes all businesses, farmers, input suppliers, transporters, wholesalers, retailers, manufacturers, stockists and distributors, malls and other retail outlets, restaurants, entertainment and other enterprises.
- Total cost of demonetization, during 50 days period, is estimated at Rs.128,400 crores
- Total amount confiscated during raids is Rs. 4,000 crores.
Modi's ascending to power in 2014, with a massive campaign expenditure of about Rs.10,000 crores funded by his industrialist friends is not without having made massive and horrendous economic & moral compromises. He is neither a saint nor a statesman but a low class politician with deep roots of RSS ideology. Therefore his secret decision of demonetization even though seems to be in national interest is primarily aimed at deriving political benefits. Ironically, it has become a war with gullible common man.
RBI Governor Urjit Patel's perplexing silence sacrificing his & institution's reputation for probity, competence and independence is in tatters indicating that he was not consulted but just asked to implement. Any institution can be independent in its functioning to the extent elected executive desires. In this case Modi & co just bulldozed them.
Modi suffers from worst possible type of corruption: an insatiable desire for personal glory at any cost, an extremely deep moral and spiritual corruption. He also represents the worst aspect of democracy: a demagogue who caters to an irrational populace’s cravings for self-identity and release from self-responsibility. Any difference of opinion is tarred quickly as unpatriotic and anti-national by the troll brigade.
It is not that easy to flush out the black money. Projecting that demonetization will resolve issues of black money and corruption is misleading the gullible masses of the country. Reforming the tax administration and tracking data would have given good and lasting results. Modi's inaction during the past 30 months in this matters speaks volumes about his real intentions.
Modi's unprecedented act of demonetization, is not only damaging country's economy and threatening destitution to countless millions of its already poor citizens but is also breathtaking in its immorality. What Modi has done is committing a massive theft of people's property without even the pretense of due process; a shocking move for a democratically elected government.
The scale and speed of Modi’s scheme has more in common with the failed experiments of dictatorships which led to runaway inflation, currency collapse and mass protests. Demonetization was supposed to be a fight against black money but now it seems like a war against the people. Instead of making surgical strikes against corrupt & black money hoarders, Modi has carpet bombed the whole economy destroying informal economy resulting in crores of poor people losing their livelihoods. Shifting the goal post to 'cashless society' indicates Modi's acceptance of failed operation and it is also suspected at creating economic devastation and usurping of an individual's economic liberty.