Demonetization Completes 1 Year: The Good, The Bad & The Ugly!
Exactly 1 year back, on November 8th, PM Modi appeared in front of people and announced demonetization.
Exactly a year back, on November 8th, PM Modi appeared in front of people, and announced demonetization of Rs 1000 and Rs 500 currency notes, which sent ripples across the nation.
There have debates, accusations, and counter allegations regarding the usefulness of this drive, which wiped out 86% of total currency in the country overnight.
Within 12 hours, Rs 15.44 lakh crore of Rs 500 and Rs 1000 currency notes became invalid, and it impacted every citizen of the country – be it business, corporate, unskilled labourers or housewives.
Long queues were witnessed outside ATMs, as the new currency notes slowly started trickling in, even as economies of India changed daily.
It took some time for everyone to settle down, but the impact was no doubt phenomenal.
Essentially, this was a war against black money, and tax evaders, and the results were hotly debated. Out of Rs 15.44 lakh crore demonetized currency, around 98.96% or Rs 15.28 lakh crore came back into the system within 9 months.
On the occasion of the first anniversary, we discuss some of the good, bad and ugly effects of demonetization, as we try to examine its objectives..
Demonetization: The Good
As per official data, e-filing of income tax increased by 17% post demonetization, as businesses which avoided tax earlier, had no option but to come into the tax net.
Around 26% more people identified themselves as tax-payers, after demonetization kicked in, and this was indeed an important achievement.
As per official records, 0.00011% of the country’s elite deposited 33% of the overall cash in the country, and this has been hailed as a masterstroke.
Digital transactions witnessed massive increase, as total of 138 crore cashless transactions were reported after November 8th, 2016, against 87 crore in August, 2016. Massive number of PoS machines were also deployed.
Govt. has also claimed that incidents of terrorism decreased, as demonetized currencies broke the backbone of anti-social elements, even as 7.62 lakh counterfeit notes+ were identified.
Around 2.4 lakh companies were de-registered, 35,000 shell companies identified, and essentially, black money market crashed.
These results suggest that overall, demonetization was a success.
However, not every story has a happy ending.
As per Centre for Monitoring Indian Economy (CMIE) estimates, around 15 lakh lost their jobs between January to April this year, and this massive job loss is seen as an indirect effect of demonetization.
As the flow of cash stopped, several industries and businesses found themselves staring at an uncertain future. And this resulted in loss of business, and loss of employment.
Besides, Govt. data also proves this fact. Under Govt.’s flagship scheme Pradhan Mantri Kaushal Vikas Yojana (PMKVY), total of 30.67 lakh candidates received training, but only 2.9 lakh, or one-tenth received any job offer.
Industries such as Manufacturing, Construction, Trade, Transport, Education, Health, Accommodation & Restaurants and IT/ BPO witnessed massive job cuts.
And job loss and less business led to slow economic growth, and the cycle repeated for a year.
Around 100 people died directly or indirectly due to demonetization, and this, according to us, was the ugliest aspect of demonetization. (note here, that there has been no official report on deaths due to demonetization, as tabled in the Parliament)
Majority of these deaths occurred due to mindless, unnecessary panic as people stood for hours outside ATMs. Several deaths occurred due to health complications, and some of the deaths were actually suicides, as jobs vanished overnight.
As per observers, around 3800 people die every month in India due to snake-bites, but in reality, these deaths occur mainly due to lack of anti-venom.
Maybe the demonetization drive could have been arranged more seamlessly, arrangements could have been made to ensure smooth flow of new currencies, and maybe our political leaders could have ensured better communication, and more transparency.
Maybe then, things could have been less ugly.
What is your take on the 1st anniversary of demonetization? Do let us know by commenting right here.