Economic surgical strike

Prof.A.N.Sadhu
For over two weeks now, the country is witnessing the implementation of the sudden decision of the Prime Minister on demonitisation of the Rs. 500 and Rs. 1000 notes as also the public response to this bold decision of the Prime Minister. The announcement was sudden, of course, but the planning to streamline the money matters was initiated soon after the new Government assumed office at the centre. One of the major planks of the BJP during the campaigning for 2014 elections was elimination of black money from the market. The parallel economy has grown in size and black money has multiplied several times, jeopardizing the functioning of the regular economic system. It has also contributed to the rising mafia power threatening the very law and order fundamentals of the nation. The black money supplemented by the counter feit currency has also nurtured terrorism in the country,  on the one hand and vitiated the normal electoral process, on the other.
Eliminating black money and restraining the parallel economy has become very essential and urgent, to allow the economy grow faster and facilitate the revenue and investment augmentation in the country so that more jobs can be created to realize the demographic dividends. The hue and cry raised by some opposition parties is not bereft of logic or substance but all that they have been saying is an overstatement and an exegerated exhibition of its negative effects.
From the economic point of view, it would be rational to prepare a balance sheet of this historic decision which, though needed much earlier, was not taken by the earlier Governments for lack of courage. A very simple and easily intelligible balance sheet can be presented as under :-
A Plus points :-
* Elimination of Black Money
* Elimination of counter feit currency
* Elimination of terror finance
* Enhancing Government revenue
* Augmenting investible funds
* Restraining parallel economy
* Check on crime money and tax evasion
B. Minus points.
* Slow down
* Public unrest
* Hardship to rural and unorganized sector
* Hardship to farmers and petty retail traders.
* Inconvenience to general public.
This revolutionary  step can bring about sweeping reforms in Indian  economy. Checking black money is essential as it gets used in different ways, in nefarious activities such as corruption, financing of crime and promoting anti-national activities. It works to the deteriment of honest persons and the poor people. A significant  proportion of black money got invested in real estate resulting into abnormal escalation of property prices in the country. It made it almost impossible for the honest and hardworking people of  the country to own a small house for themselves.
Our hostile neighbor is known to have printed large scale fake currency  which besides playing havoc in the economy, has financed terrorism on a massive scale.  It has also duped many a countrymen of their hard earned money by sucking the genuine legal tender and replacing it by the fake currency. Return of huge amounts of unaccounted money to the banks would significantly increase their capacity for supply of development finance at cheaper rates to boost trade and commerce, productive resources and other developmental activities relating to physical  and social infrastructure. It will equally contribute towards enhancing the tax revenue of the government which besides controlling deficit financing will enable the Government to invest in massive industrialization and social welfare activities.
Restraining parallel economy is equally important to give boost to the  regular economic system and promote the economic investment in a planned manner and ensure ethics in business. This will not only enhance the quality of the product but will go a long way in checking adulteration and sub-standard products. With the help of black money, lot of trafficking of drugs has taken place which has spoiled many a lives and created a large scale drug menace in the country.
Even when the decision to demonitise the high demonination  currency notes has been widely hailed, some of the adverse aspects of such a move, can’t be overlooked. It will definitely result into slow down of the economy and may even dent the rate of growth of GDP in the near future. It may be only a temporary phase but its occurrence can’t be stalled. The production potential of some of the vital commodities may also be hit because of with-holding of private investment in the sectors of cement and other construction materials. There is likelihood of slow down in trading sector as well which will hit the traders and consumers alike. The supply of goods and services may also slow down because of cash crunch. The country is not adequately equipped for digital system and scarcity of cash circulation will definitely produce an adverse impact.
Public unrest/inconvenience can’t be ruled out and, infact, it has  been witnessed during the previous weeks. Long ques on bank counters and ATMs have put people to considerable inconvenience, particularly, the travelers, pilgrims, students and people who had to perform  Some social ceremonies such as marriages etc. Petty traders who had to struggle to arrange the required cash for day to day transactions also faced difficulties. Farmers faced inconvenience and so did the people in the rural areas. The country is primarily a rural economy and the size of unorganized sector is very large and people, by and large, are not familier with digital system and on line business transactions. On the whole, the general public also faced some inconvenience in one or the other way.
However, while assessing the balance sheet of the governments  sudden decision, it appears that the positives far outweigh the negatives. Building a sound system is not like chewing a lolly pop and well meaning people do understand how unavoidable it is to swallow a bitter bill, at times, in the larger interest of the nation building. The country men need to be tolerant to allow some hard decisions to get optimally operationalised to bear the desired fruit in the days to come. Merely criticizing the government decision without offering any viable alternatives does not serve any purpose. The country has been demanding that the black money is wiped out of the system and all political parties have been promising to do so but nothing happened till date and if now a bold step has been taken in this divertion, the approach of the critics should supplement the efforts rather than cry for a roll back. The wisdom demands that short term pains be suffered silently for achieving the long term gains.
The argument that there has not been the required preparedness  is not bereft of substance. There definitely has been a management failure on the Governments part. The process of taking such a sudden and revolutionary decision needed to be backed up by adequate arrangement of new currency management so that the unnecessary cash stringencies could be avoided. However, a deeper analysis of the Governments sudden decision may indicate some exigencies on the part of the government, which warranted it. May be that, in the days to come, we may learn about some valid grounds which compelled the Prime Minister to make such a sudden announcement. The opposition and other critics are within their rights to raise a hue and cry about the inconveniences that have been caused to different sections of the society but they would not ignore the public feeling or seek to interpret the same in their own way.
The Government should be appreciated for the remedial measures  it has taken to ease the situation and it should not be too long before we witness the full flow of new legal tender to let the economic system to work with full swing.
However, the Government should not rest here. Some legal  framework has to be worked out to check corruption, which is the feeding ground of black money. The steps will also have to be taken to expedite the process of getting back the black money stored in foreign banks and equally important will be the launching of safeguards against the possibility of creation of black money in future.
All said and done, this economic surgical strike, should be  welcomed and cooperation rather than confrontation should be the way ahead.
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