Demonetization- a lay person view
I am no economist or political analyst.
I am a layperson with some interest in politics, social life and economics. I was in deep slumber unaware of what this country is undergoing when WhatsApp messages started flooding on the night of November 8th. I am an urban middle class woman, living in IT capital of India and so no personal worries about what I would do without cash. I might need few thousands in cash to buy vegetables, pay the tailor, milkman and my maid.
The first question which came to my mind was- what would people do without cash in hand? Facts revealed that 86% of the money is not worthy. We are a cash-based economy! You know that street food/ vegetable/ grocer/ daily wage/ eateries… the list can go on… all deal with cash. You know that many do not hold bank accounts. I guess it is common-sense.
I was not sure how this would help curb black money (as claimed)- one, can guess that the money is stashed in Swiss account, as Benami land registrations, as gold, as dollars or any other foreign currency. Is this a way to curb black money? There are loopholes. One could see reports on Jan-Dhan accounts getting activated and money credited suddenly (upto 21,000 crore), deposits in Benami account, cash being burnt and so many stories. So who is standing in the Bank queues? People with few thousands or may be a lakh or two. Women who do not have personal accounts, poor and the middle class. Is that black money? My maid who has saved few thousands, my mother over years who has saved few thousands. Is that black money?
After two days you understand that ATMs are not recalibrated for these new 2000rs. notes and they are still printed! One wonders how would anyone- being a P.M, in a responsible post, representing the entire nation takes such hasty decisions. Were there any consultations? The RBI is baffled, bank staffs are over worked, and the Supreme Court is raising questions (on the PIL filed), there is chaos and the common people are inconvenienced.
After two weeks one hears that GDP would be reduced and business are affected. Goldman Sachs has forecast a deceleration of GDP from 7.6 to 6.8 percent. The All India Motor Transport Congress (AIMTC) reports that goods movement are affected. Jute, tea and garment industry is affected, sowing and harvesting are both affected. One might hear more. There are opinions that recession is a possibility and economy would take a year or more to regain with cash flow and liquidity.
Surprisingly, centre claims that it is a success and the middle class assume that the problem is only about standing in a queue and generally favour the move.
Written by a critique who is termed ‘pessimist’.
This is second in the series on Demonetisation by YourCoimbatore.com, you can read the earlier one here.