It has been a year now, since Prime Minister Modi’s initiative to curb black money by invalidating the two highest denominating currencies circulating in the system came into being. These notes accounted to 86% of cash flow in the society. Let us introspect the aftermath of demonetization in the country and see how exactly it has fared through this time.
Inconvenience to people
India is country where majority of the financial transactions— approximately 97%— take place in cash. The decision of invalidating Rs 500 and Rs 1000 denomination notes without any prior notice to its people crippled the economy drastically for many months that came after the hasty decision.
Most of the people in India were not prepared to accept the digital payment overnight, as they are not literate enough to understand its concept and working. Many who were literate enough had inhibitions prevailing around the safety of digital payment.
Many ATMs all over the country were non-functional during the crisis and it fueled the agitation of the people. Some of them are still non-functional to this day!
Not a digital economy yet
The ambitious drive to a digital economy was not very fruitful either if we look at the figures put down by RBI and NCPI for UPI (United Payment Interface) and BHIM (Bharat Interface for Money) transactions. The data shows that UPI transactions grew almost 90 times from the previous year and BHIM, which was only introduced in December 2016, grew 3 times after its inception. However, only a rise of 1% was recorded in the use of UPI transactions compared to ATM withdrawals and only 0.01% of the 300 million smartphone users in India used BHIM! Having said this, people made extensive use of their debit cards for purchases and a rise of 65% was recorded.
Affected government’s reputation
Image Source : media2.intoday.in
The confusion caused by the implementation of demonetization was one of the major problems faced by the people during the first few months. There was an unnecessary holocaust like situation prevailing throughout the country. The banks were not of much help in the cities, let alone the rural areas! All this unrest got the people to detach themselves from the good cause put forward by the Modi Government.
People took Prime Minister Modi’s word that he will make the situation better after 50 days, but there was no considerable change in the situation for many months that followed.
First few days of the demonetization saw people with the new Rs 2000 notes in their hands running around to get smaller denomination notes for every day transactions; these situations were adverse in rural areas opposed to metro cities where people already had means and knowledge of digital payment.
Achieved only a part of the purpose
One of the purposes of this hasty demonetization was to counter the flow of black money in the system, that was used for funding terrorism and the parallel economy was a major hindrance to the progress of the nation. In reality the super-rich who evaded tax, hoarded their money in off shore accounts and in realty. Moreover, demonetization made way for a new crime wherein, ordinary people were used to exchange hoards of cash through their accounts. Basically, most of the black money were accounted and came into the system!
Curbing fake notes which was in circulation was another major agenda of demonetization. However, the re-monetization of Rs 500 and Rs 1000 into new Rs 500 and Rs 2000 currency notes did not see any change in production of fake notes; there were news of fake Rs 2000 notes being caught all over the country. Once the fake note reaches ordinary people’s pockets and starts circulating within the system, it is as good as a real one. It would have been easier to just take an account of the amount of fake notes in the system and pull out that much value of it from the system than demonetization itself!
In short, all those days, weeks and months we went on stringent withdrawal limits of our own hard-earned money was futile; history repeats itself- demonetization cannot stop corruption, nor curb black money. For encountering fake notes, the government should seek better technologies in note printing and there should be regular updating of printing methods.