Pros and Cons of Demonetization:

On November 8^th, Prime Minister of India, Shri Narendra Modi, announced that Rs.500 and Rs.1000 banknotes will be demonetised from 9^th November 2016.  When this huge news broke out, majority of the public were thrilled about it, and everyone considered this as a bold move by the Prime Minister. I was also excited and supportive of this economic decision which is mainly aimed to bring more security features to the currency, in order to curb fake tender; wash out the stock of black money and bring more accountability to enhance cash rotation. However, lack of adequate planning has affected most of the working adults in India. Let us analyse this huge economic decision in detail.

Firstly, I am a supporter of Narendra Modi’s vision for our country, but good vision alone is not suffice to execute various economic strategies, should be backed up with detailed planning. This move of demonetisation, albeit was planned few months in advance, lacked detailed strategising. The government did not give adequate focus on minute detailing such as the length of the new currency. The size difference between old and new currency are different, and hence, the ATM’s were not able to dispense the new tender, and it has to be recalibrated. The recalibration process is still ongoing, and in many cities, most ATM’s are shut and are yet to be recalibrated. In ATM’s that are recalibrated, money goes out of stock in few hours, due to huge demand.  Secondly, majority of the black money holders does not belong the have nots category, and hence, I do not support the idea of general public who do not possess black money to suffer immensely to cash out their hard earned money from bank. There are still queues outside ATM’s and banks after 4 weeks of demonetisation and most of the people waiting are from middle class and lower middle class of the society.  Government of India, should have spoken to the leading manufacturer of ATM, prior to demonetisation decision, therefore, the size of currency could have been addressed.

Secondly, the government should have planned to print new Rs.500 tender first instead of Rs.2000. Majority of the vendors find it difficult to provide change for the smaller transactions when the trade happens with Rs.2000. This has impacted majority of the medium and small business, including the farmers.  For instance, if someone buys vegetable for Rs.500, and provides Rs.2000 tender, then a small vendor might not possess the change of Rs.1500 to return to the customer. Moreover, these strategic errors can have an impact on the GDP in the coming quarter. Shri.Narendra Modi, I feel has been led down by the Financial Ministry, as these above issues should have been considered before taking the decisions, and also they should have consulted the chairperson of nationalised banks regarding banking transactions and currency requirements.

On the flip side of the coin, there are plethoras of positive outcome that are evolving due to the demonetisation. Numerous businessmen, who have evaded tax, are coming forward to declare their unaccountable money, and are paying tax for the same and ensuring that they get away from warrants against them.  This will surely have a positive impact on the micro economics, but it is uncertain to predict the impact on macroeconomics at this juncture. Furthermore, the Income Tax department, are regularly checking the accountability of bank deposits of more than Rs.2 lakhs, and the department are reviewing any major benami asserts and transactions and; are assuring to take action on such cases. In addition, this move also will help to curb purchase of illegal purchase of weapons around the line of control areas by the terrorists with counterfeit currency.

To conclude, I appreciate the move of demonetisation, however, with better planning this move would have had good impact on public and the economy. We are yet to see the great positive outcome of this strategy, and I am hoping people under poverty will get monetary benefits or atleast get to see the positive outcome soon, hence, eventually they will forget the sufferings they are encountering, and hoping their economic plight improves, if not BJP will have huge vote swing against them in the next general election.