Demonetization demystified

The truth about demonetization is out at last, as truth always is. The latest Reserve Bank of India report has virtually invalidated all the arguments adduced by Prime Minister Narendra Modi and later dutifully echoed by his Finance Minister Arun Jaitley in support of demonetization. Demonetization has failed to unearth black money, failed to stop generation of fresh black money, failed to prevent manufacture and circulation of counterfeit notes, failed to prevent terror-funding. The RBI data show that out of 6700 million 1000-rupee notes then in circulation, only about 89 million notes or a mere 1.3 per cent has not come back. It shows that black money is not hoarded in the form of high denomination notes but is invested in real estate or business.  For attaining a ‘success rate’ of 1.3 per cent, tens of millions of poor and common people were put to endless harassment for days on end which caused over a hundred deaths of those standing for long hours in queues before bank counters or ATMs. Success indeed! But this is not all. There are more ‘success’ stories. The RBI gained Rs.16,000 crore by way of old notes deposited, but spent Rs. 21,000 crores on printing new notes in lieu of the demonetized ones.
The RBI data do not disclose the number of manufacturing units closed and the number of people rendered jobless mostly in the unorganized sector but also in the organized sector like the tea industry because of the unthinking decision of demonetization. For the first time after nearly ten months the people have got an idea of the actual ‘achievement’ of the drastic step taken by the Government. Maybe after ten months or a year the people will be told about the net effect of GST on the national economy. The Government has raised cess on SUVs by 20 per cent. How many people in India buy how many SUVs a year? How much extra revenue will the higher cess bring to the exchequer? But taxation on sweets will affect the common man. Prices of most medicines have not only gone up, but many medicines have just disappeared from the market, post GST.
The Opposition has alleged that demonetization was done with the intention of putting them at a great disadvantage on the eve of the Uttar Pradesh Assembly polls. The allegation cannot be dismissed with a shrug of the shoulders. The number of cases being filed by the various agencies of the Government against prominent opposition leaders and non-BJP State Governments lends strongly to the belief that demonetization was more a political than an economic decision.

Friday, 1 September, 2017