BENGALURU: It is said that, ‘Change is the only constant’. But, how do we justify this rather unanticipated change of demonetization in the Indian economy as constant? On November 8, 2016, late in the evening, Prime Minister Narendra Modi announced that the most circulated currency Rs 500 and Rs 1000 would stand illegal from midnight of that day. The decision came as a shock as Rs 14.16 trillion (as per RBI) of total cash circulations in the economy will no longer stand as legal tender.
Prime Minister Modi gave a number of reasons for this change. He claimed that ceasing of old notes from Mahatma Gandhi Series and issuance of new Rs 2000 and Rs 500 notes will help combat corruption, terrorism, issue of fake notes, eradicate black money and all in all stir the economy towards a cashless one.
So, those hoarding sack full of unaccounted Rs 500 or Rs 1000 notes were in serious trouble. Now, let’s break the whole situation down for a better understanding.
This momentous change in monetary functionality has had serious implications in the life of a common man. While the drive claims to exterminate black money, it has conveniently neglected that 22% of Indian population lies below poverty line. In 2012, it was the Indian Government who made this official statement. This share of population finds it difficult to meet their day-to-day requirements. Hence, more than one third of the economy is more than incapable of hoarding black money.
If we talk about the middle class in India, according to Global Health Report 2015, they have only Rs 5,070,000 crores share of country’s total wealth. The sections above middle class have the majority of 64% of total wealth. Hence, it is highly likely that this section possesses a majority of black money in the country. So, technically the upper middle class and the rich class should’ve been under strict purview for black money elimination.
Moreover, targeting only cash flow in the economy for this cause is loosing its purpose as the illegal money could’ve been in forms of gold, foreign currencies, land, buildings or even Bitcoins. It is an obvious fact that people like you and I, who have been following the updates closely and already have access to ATM, Debit and Credit cards, have stood for hours and still have to spend time in queues at the ATMs to withdraw money. But, if we think from a broader angle, the 22% who are extremely poor are the ones facing immense difficulty. Most of them are unskilled labourers or farmers, who earn their daily wage in cash. With the shortage in supply of cash, they’re either paid in old currency notes or laid off. The sectors that were severely affected by this were construction, agriculture and automakers. All of them work on daily wage basis. Almost 130 crores of people have suffered due to this cash crisis unanticipated move of the government.
On the other hand, it is also vigorously challenging to make the 287 million illiterate adults switch to shiny plastic credit and debit cards. The introduction of Rs 2000 currency note is negating the whole concept of ‘going cashless’ in a cash economy like ours. In fact, it is simplifying hoarding money, as storing Rs 2000 notes will take lesser space than Rs 1000 or Rs 500.
In order to make India a digital economy, the government is in support of cashless transactions to an extent that it almost looks like Paytm is the brand ambassador of demonetization. Rather than using card swipe machines and owing interests to banks, the small (and big) shops have agreed to ‘Paytm karo’ (use Paytm). It is effortless for both, consumers and retailers. Today from sellers at temples to panipuriwalas and auto autorickshawwalas, everyone is trying to figure a way out and getting a hang of this new concept in India. Paytm, in today’s date, has almost become a less complicated and conveniently available version of a bank. According to Business Insider India Bureau, with over 124 million accounts already existing, Paytm has witnessed 7 million transactions, which amounts to Rs 120 million per day within 12 days from announcement of demonetization.
The highly controversial ‘type’ of money, Bitcoins (a form of digital currency that is created and held online) have also had their share of profit. With its establishment in India in June 2013, many Bitcoin startups are on a roll of making big bucks since demonetization. The value of bitcoins has exceptionally risen from $757 to $1,020 (per bitcoin) whereas in the USA it hovers around $770 each. This suggests that certain section of the society finds Bitcoins as a more valuable investment than the ever fluctuating gold or real estate.