Prime Minister Narendra Modi’s sudden stroke to eliminate high denomination currency notes of rupees 1,000 and rupees 500 from midnight of November 8, 2016, ostensibly to remove corruption, black money, terrorism and fake currency, invalidating 86 per cent of currency, has given unprecedented and prolonged short-term pain to people of India with the much hyped and hoped for long term gains to the nation’s economy. Looking back, it seems, demonetisation resulted in big job losses and destroyed the basic structure for creating job opportunities that helped only a few corporate houses. With the melt-down of national economy beyond reprieve in foreseeable future, the benefits of painful exercise of demonetisation resulted in an organised loot of people’s hard earned money. The initiative resulted in worsening the plight of small and medium businesses, youth, women, farmers and poor, who suffered the most.
Regarding curbing black money and corruption, such process did not begin or end with demonetisation, or bringing black money stashed abroad to avoid taxes. Black money continues to rule the roost with subdued public display of consumerism. Attorney General, in his deposition before the Supreme Court, had stated that about a third of 14.44 lakh crore of high currency notes invalidated would be deposited in banks. However, with 99 per cent of the cancelled note returned to the banks as per a Reserve Bank of India report, a question mark over unearthing black money remains unanswered.
According to the Ministry of Finance, without demonetisation, India would have high value currency worth some 18 lakh crore, whereas it has 12.5 lakh crore in the system, thus cutting potential black money. As for curbing the counterfeit currency notes, there was a marginal step-up to 0.08 percent from 0.07 per cent earlier, according to official sources. More importantly, the Reserve Bank of India has not been able to protect its new notes from counterfeiting or counterfeiters as fake versions of `2000 notes have been detected. It is learnt that naxalism, militancy and terrorism went down by 45 per cent following demonetisation. Casualties of security personnel and others, however, went up by 82 per cent. Officially, demonetisation has widened tax base, small and medium businesses took a big hit, rendering massive unemployment.
Demonetisation paid dividends to a vanguard of digital payment providers to achieve a temporary cashless transactional economy. However, with the return of 99 per cent demonetised currency, cash transactions are back to the pre-demonetisation period. At the same time, demonetisation triggered record domestic inflows into mutual funds, gushing into equity market that pushed the key indices to multiple highs in the market economy. Overall, digital transaction dipped as cash returned to the economy.
Demonetisation also hit 10 segments of black economy, such as, politicians, hawala dealers, real estate mafias, fake currency dealers, terrorist organisations, sports betting, educational institutions, fake trusts and charities, rich agricultural land owners and film industry where black money operates largely, claims the government.
Whatever it be, demonetisation together with ill-conceived GST, its highly mismanaged implementation, misplaced priorities such as divisive communal politics, hatred, rising intolerance, increasing social tension, minorities/Dalit bashing under the NDA Government, well known for arbitrary fascistic governance, has taken a toll of the very idea of India as enshrined in the Constitution with little hopes for any reprieve during the remaining one and a half years of the Modi government. Cumulative actions of the government, so far, have proved that India’s democracy is only election-centric with no semblance of collective responsibility under the rule of law.