Er Jaleel Wani
Demonetization, a tool of public policy used to strip a currency unit of its status as legal tender. One can also refer it as a retirement of old currency and placement of new currency unit. In India, section26(2) of the RBI act 1934 empowers center to declare that, any series of bank notes of any denomination ceases to be legal tender. Historically speaking, it was used in the world by various countries in the past and by India as well in order to achieve different purposes and prospects. Therefore present coalition government in India has not discovered something new innovation.
In the history, India went on three times for demonetization. Firstly in 1947 when India was still under British, stripped off Rs 500, Rs 1000 and Rs 10000 notes but later in 1954 RBI reintroduced these notes. Secondly in 1978, Janta Govt. took initiative to strip off Rs 500, Rs 1000 & Rs 10000 notes which amounts around 10% of the value of total notes in circulation at that time. Lastly on the hour 9th nov 2016 NDA government demonetized Rs 500, RS 1000 which accounts almost 86 % of the value of total notes in circulation and reintroduced new Rs 500, Rs 1000 along with denomination of Rs 2000. The purpose for which this tool was accessed in the world by the countries was either to control inflation as in Weimar Germany or when windfall profits were made as in British industry during world war 11.
In India no such situation prevails, inflation tends downwards and private sector under balance of crisis. The present Govt. in India defending itself on the grounds of (a) purifying the economy and corruption , as world bank estimated 23% of GDP is in shadow economy. (b) Delegitimized certain proposition of counterfeit currency, which have increased in circulation in past few years, helps in combating from terrorism and inflation.(c) In order to regulate unaccounted money which is present in significant proposition ($467 bn as per Crisil rating agency). (d) A step towards cashless economy helps to boost Indian economy, as many economists are of the view that cash has created serious problems, like Kenneth Rogett in his book “The crush of cash” argued so.
But the counter allegations by various economists , political parties both from national as well as regional, even their own few coalition partners called it as policy of fraud , on the ground of (a) it will not be helpful if the unaccounted money is held by Indians in the form of foreign bank accounts. (b) unaccounted money held in 500 and 1000 denomination is pretty much less, people have kept black money in the form of land, building or gold or kept abroad.(c) No measures in it is in order to either control or remove black money in future.(d)Only Rs 400 bn crore worth fake circulating in the economy , which is merely only 0.025% of the total budget outlay of RS 19.7lake core announced this year.(e) India is largely a cash economy. The cash transactions in this economy are far more than the total number of electronic transactions done on daily; result? People are facing serious problems. (f) Few even have gone a step ahead by saying that it will reduce 2% of GDP because of its impact on various sectors of the economy.
Keeping this thing in view I too will say, the stroke of the hour on midnight of 9th nov 2016 as a PM’s historical step and should be supported by all. No doubt there was/is some implementation problem which may hurt our economy to some extent this year but one can look it as a policy that would fetch good results in the long term. This step has also killed more than 60 people but again one should keep into mind,” let small loss happen in order to prevent a big loss”.
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