Monday 28 November 2016

And the debate continues......

It is more than twenty days since demonetisation was introduced that the debate is still on - if this is going to bring down the black money in the system. The suddenness of the initiative and the untold hardship it has caused to the populace especially at the lower strata of the society is the talking point. The unpreparedness of the government while embarking upon such a huge exercise is too evident and it has given some ammunition to the opposition parties to make some noise. While the government says that there is bound to be some inconvenience to some when an exercise of this scale and magnitude is undertaken, the opposition discounts and counters that it is too big pain to achieve too little. According to the estimates of the experts black money kept in the form of cash is a very small percentage - it varies between 6-15%. To achieve this little by the government, the amount of hardships that the common man is made to endure is too big. There is a possibility of businesses being shut down, economy being thrown out of gear, people rendered jobless mostly the labour class in the unorganized sector are the direct and worst hit. The common man is undergoing the ordeal of cash crunch willingly with a hope that something good may happen to him and the country as promised by Modi after sometime in the future. With this expectant hope he is enduring the hardship without murmur. That's why the so called Akrosh divas organized by the opposition was a damp squib. Every body willingly cooperating with the government in that hope of something good will happen sometime in the future. The hope that has been raised is keeping the country calm amidst what could have been a catastrophe otherwise .

Demonetisation by itself may not bring in the desired effect of eliminating black money. It has to be accompanied by a package of  whole lot of other measures. Of course, Modi has indicated that these will follow soon. Benami transactions, accumulation of gold, money laundered in foreign tax heavens, real estate reforms are some of the areas of next focus. Electoral reforms are conspicuously missing in this laundry list. These measures will have to be necessarily pursued and sustained till the ultimate goal is achieved. While sustaining these clinical or surgical measures (whatever one calls) it is absolutely essential to push the country towards cashless economy to contain the origination of black money. The benefits for the common man could be immense once it is stabilized and gets going. No doubt it will change the discourse of the country itself. It is a huge, huge challenge for Modi and his government. An honest citizen will definitely support him in this nation building endeavor. Modi has to be congratulated for the bold step he has taken to eliminate black money and the ills of it the country is facing. It is a challenge not only for the government but also for the banking system. Banking will surely undergo a metamorphosis of sorts. It is a challenge as well as opportunity for the Banks.

Let us all hope for the best.

Friday 11 November 2016

Rs 500 & 1000 notes demonetisation.

The withdrawal of 500 & 1000 rupee notes from currency is a welcome and most needed step in choking the black money circulating in the system. The size of the black money in the system is too large that came to be called as parallel / shadow economy. The presence of this dirty money in the system was too well known and for too long. Every big transaction whether it be in real estate or gold or while acquiring /creating a new asset or conducting an event of mega size of social /cultural /political will happen with black money. Without this unaccounted money these events /transactions could not have happened simply because of the magnitude of these events and dearth of white money. The presence of this dirty money has pushed the prices of the commodities and services beyond the reach of the common man and to ridiculous levels. Also this has deterred the clean men from entering electoral fray thus leaving the electoral space for criminals, rowdy sheeters and other people of disrepute. This created a situation of inequal distribution of income /wealth in the country. By the act of this dirty money the wealthy are becoming wealthier and the poor are  further getting impoverished. Many services /commodities have remained a mirage and out of reach for the common man by the artificial push in the prices. In the process a division of class in the society has been created - haves and have nots.

There is a debate going on in the country about the efficacy of the present move in curbing black money. That is for the economists to sit in judgment over the issue. Politicians are toeing their party's line of looking at the issue which is only expected because there are no statemen in any political party today who can rise above politics. There is also allegations /charges of selective leakage against the government. There are unsubstantiated whispers that the privileged persona grata have got wind of this move in advance. The timing is also said to be aimed at deflating and impoverishing the political adversaries on the eve of UP election. All said and done the havoc this dirty money is playing in upsetting the entire economy, the corruption it proliferates and above all financing terrorism from across the border are too well known and are to be acknowledged as the greatest danger to the nation. They are eating into the vitals of the nation. The move to demonetise therfore has to be looked from the prism of national interest rather than petty political hairsplitting.

Having said that, the government it appears going by the experience of the ordinary citizens is ill equipped for this gigantic exercise. Having sucked the dirty money from circulation at a lightning speed, replenishment of clean money is not ensured with the same speed. There is a wide gap and mismatch. At least Banks are not tipped of this so that they could have been well prepared. it was a sudden sunami like situation for the banks. Bankmen as usual are taking the brunt and slogging day and night. And the irony is, after so much of hard work toil and stress they only get brickbats from the irate public because public are not aware of the tremendous constraints of both cash and people under which they are working. Citizens are struggling to access their own money. Common man who has no sophistication / luxury of access to cashless channels of payments is the worst hit. If the situation is not addressed with highest priority and swiftly, the common man will  be pushed to the end of the tether and the good will generated by this move will turn out to be a wrath.