Is demonitisation in India successful?
On 8 November 2016, the Government of India announced the demonetisation of all ₹500 (US$7.40) and ₹1,000 (US$15) banknotes of the Mahatma Gandhi Series. The government said that Demonitization will help to resolve below issues.
- Black Money
- Fake currency issues
- Excessive Cash in Indian economy.
- Demonitization was absolute success because Black money in system is wiped out from economy. People had deposited all their money to Banks and all money has been accounted for. If any one now try to again convert it to black, Income tax and other agencies would be able to catch him easily. Many people have to show their black income & they may be filing their tax returns first time.
- Corruption had been reduced significantly after the demonetisation. People are aware that now black money is being tracked and they should not get the excess of money from bribe otherwise they would be caught. During initial days of demonetisation there was no money with people to bribe.
- Fake currency was one of biggest problem of Indian economy. Already there had been many proofs of Pakistan's hand in circulating fake Indian currency to damage Indian Economy. By demonetisation, fake notes in circulation has been curbed and People possessing & circulating fake currency has to face the heat. It is a big success to curb fake currency.
- Indian population is more interested in traditional methods of cash transaction. Electronic and online transaction is not so popular in India. Due to this government is not able to track the income of many entities/people. After demonetisation many people have taken route of online transaction. Lot of transactions are happening through online and money is going to accounts in white(legitimate) way. Due to this there will be major impact on tax collection. Before Demonetisation there were 17,165 million pieces of Rs 500 notes and 6,858 million pieces of Rs 1000 notes in circulation on November 8, the day Modi made the announcement of demonetising the two high denomination notes. The total amount of high denomination currency circulating in the system on that day was, thus, Rs 15.44 lakh crore (Rs 8.58 lakh crore in Rs 500 notes and Rs 6.86 lakh crore in Rs 1,000). Exact figures are not there but as per the latest reports nearly 12.5 lakh crore is deposited into the banking system. Out of this only 20% was circulating by banking systems and rest was circulating outside the banking system in the form of cash. I will call it a big success if for next three financial years Govt. is able to retain 60% of this money with banks and rotate the same through banking system only. If this is made possible the same money after CRR and SLR can be used to provide loans to industries.
- Demonetisation is not successful because all black money was not in the form of cash but in other forms also like precious metals and property, so idea that all black money is out of economy is ruled out. Even if we are thinking that all black money which was in the form of cash is now disappeared is also wrong because the same has been deposited with many names into bank account and will come back again to Indian economy.
- After demonetisation will Pakistan stop its activity of circulating fake currency and will not copy the new currency, well we cannot rule this out completely. So fake currency was there in system but it will again come in system slowly.
- Demonetisation has no impact on corruption. Corrupt people are now taking bribes in Gold or any other form. Even few officers are caught taking bribes in new currency. So it is evident that claim of curbing corruption is completely failed.
- Biggest negative impact of the Demonetisation was the long queues in front of banks. Common men has to suffer a lot during this period. It had slowed down the economy overall. Marriages and function have been ruined for many. Many died during waiting for money in bank queues.
- The planning of demonetisation was very weak and people has to face lot of trouble. ATM machine was not calibrated with proper planning. Neither new currency notes made available on time. Due to that common people has to face lot of issues.
Demonetisation definitely impacted Indian economical scenario. Fake currency notes have been curbed. Black money flown back to the banking system. Cash flow will help to provide loans to businesses and also increase the tax income of government. There is another side of Demonitization, that is execution. Execution had few flaws and can be better planned but still demonitization has been successful.
Contributed by: Raj ratan sharma