On the 8th of November, 2016, in an attempt to clamp down on black money, Prime Minister Modi announced that 500 and 1000 Indian rupee currency notes, which made 86% of the currency in circulation, would cease to be legal tender, throwing the entire nation into chaos. What followed was a series of flip-flops both by the Reserve Bank of India (RBI) and the Government of India.
Over the next 50 days, in a period asked to achieve normalcy by the PM, pro-government supporters made every attempt to justify the action, while those against attacked it. A large section consisting of those whose day begins and ends with the same question of where to get the next meal from and those who unable to call a spade a spade, were left to think of ways of how to tide over the situation. For them in particular, a Congress-led UPA or a BJP-led NDA didn’t and doesn’t make any difference. What positive difference to their lives the people in power bring is what they are interested in.
As we stand today, 50 days have passed. Has the intended purpose of demonetization been achieved or would the demon of demonetization and its cousins come back to haunt us just as we take flight to be an economic power? Has demonetization clipped the wings of the corrupt and black money hoarders? If yes, to what measure? If not, was this debatable exercise completely futile, given the innovative means the corrupt have resorted to to save their possessions? I shall leave the experts and economists of repute to judge. The only question I am interested in, is could have this been managed better?
Below is a two point plan that I would have implemented.
- On the 8th of November, 2016, I would announce that from 1st of January, 2017, 500 and 1000 rupee notes would cease to be legal tender making the humble 100 rupees note the highest denomination in the country.
- Transactions of over INR 10,000 would compulsorily have to be performed online.
By the Prime Minister’s so-called surgical strike, the entire nation was thrown into a state of frenzy. Pictures of people standing in long queues became the highlights in the papers. The flip-flops only led to more anxiety, confusion, stress and in some cases, suicides. If the above two point plan had been implemented it would have:
- Given people time till the end of the year to exchange their money for 100 rupee notes
- ATM’s across the country wouldn’t have to be calibrated to accommodate the just-played-Holi 2000 rupee note
- Since no new notes of 500, 1000 and 2000 would have to be printed, the production of 100 rupee notes would have increased
- Hoarding 100 rupee notes would become a greater challenge for those indulging in black money, thereby nipping the bud at the source
- India, just like most of the developed countries would have the highest denomination as 100
- It would push people to transact cashlessly in a gentle and ethical way rather than force them
Cashless transactions are the only way the menace of black money would get eradicated. But this comes with a caveat. Aadhaar-based transactions, which is an amazing fit for India, makes the citizen transparent to the government but doesn’t make the government transparent to the citizen. Unless the aadhaar number of the recepient or the signatory authority is noted, misuse of KYC documents and the system would be rampant. It is important to fix this loophole before taking strides.
This would have a similar impact on the corrupt as it is now, minus the pain caused to the thousands of honest tax payers. Unfortunately, the government’s action completely showed it’s indecisiveness, unpreparedness and clarity of thought to undertake such an exercise. It seemed, in an attempt to do something they took the literal meaning of something must be done, forgetting the deeper meaning of something sensible must be done. I don’t doubt Mr Modi’s intention, but his modus operandi was terrible. Hence it wouldn’t be wrong to say, earlier we had a PM who didn’t speak, and now we dread every time he does.