The debate over the relative advantages and disadvantages of the demonetization of 500 and 1000 rupee notes by Prime Minister Narendra Modi has been the talk of the nation ever since the policy was announced on the 8th of November. The measure, termed ‘draconian’ by most Opposition parties, was a bolt from the blue for the masses, and the shock effect has left the country reeling at its wake.
The measure, ostensibly taken with the intention of clearing the country of black money, has been condemned by many as no more than a political gimmick, with many speculating whether the step was taken with the underlying intention of inconveniencing opposition parties in the upcoming elections in two north Indian states, who depend on cash incentives to garner votes.
Be that as it may, the official intention of reining in the parallel economy on which India thrives is undeniably a very laudable one. What remains to be seen is how far the measure actually helps further the proposed cause. More importantly, one has to wonder whether the extent to which the ordinary Mr.Sharma is inconvenienced and harassed by the sudden decision at the Centre is really worthwhile in the long run.
Immediately after the demonetization was announced on the evening of the 8th, long queues were formed in front of ATMs and petrol pumps where people tried desperately to spend and deposit the currency that was going to get invalid in a few hours. The banks remained closed on the 9th, and from the 10th, snaking queues could be seen in front of banks and ATMs (which opened on the 11th) from early in the morning.
This is pretty much the scenario that is continuing even now, 12 days after the announcement, and will probably continue over the next few weeks, as people flock to exchange the old currency for 100 rupee notes and the newly circulated 500 and 2000 rupee notes.
The Prime Minister insists that these are “minor inconveniences” that the public should accept with good grace for the grander prospect of ridding the nation of corruption and black money. But are the inconveniences really minor? Every day people are spending hours in front of the banks, often to be told that the branch has run out of cash and has to close down for the day.
Most ATMs have not been recalibrated to supply the new currency notes. Those which have are running out of cash in a matter of hours. Many individuals with no connection to the black economy have been caught at a loss. The elderly and the infirm are facing the music due to no fault of their own. Many who had drawn their monthly pensions in the old currency are now left helpless.
Many roadside vendors are going through entire days with no customers. These daily wage earners, who often earn Rs 500 a day, have no money to take back home. Their meagre savings of a couple thousand rupees – all in the old currency – are now nothing more than a wad of paper. In a country like India, where large sections of the population are still outside the ambit of the banking system, and where daily wages in cash mark a difference between survival and starvation, the present demonetisation policy has come as nothing sort of devastation for the poor masses.
Much of the small and medium trade that traditionally deals in cash have taken the worst hit from demonetization. Burrabazar, one of the biggest wholesaler markets of Kolkata which is always milling with people, traders and regular shoppers alike, has been eerily empty since the announcement of demonetization. Many traders claim that it will take at least a year to get over the losses they are currently facing. With the passing of days, the effects of the cash crunch are being felt in rural agricultural India.
With big farmers running short of new currency, their inability to pay wages to labourers means that the crops cannot be harvested. The strain may soon be felt on the food chain and give rise to artificial food crises and hence, inflation of prices. This has already been noticed with the rumoured shortage of salt pushing up salt prices to anywhere between Rs 70 and Rs 300 per kilogram in some parts of the country.
In the meantime, some of the horror stories across the country give lie to the claim of the public facing minor inconveniences only. A woman in Karnataka committed suicide under the misconception that she was to lose Rs 55 lakh that she had gained from the sale of her land. A newborn baby in Mumbai died after the hospital refused to accept old currency notes for admitting the baby. The elderly have suffered heart attacks while standing in queues outside banks and ATMs.
These are not stray cases: the death toll as a direct result of demonetization is well over 55 in the last twelve days.
This also includes a bank employee who died of a heart attack while struggling to handle the overwhelming rush of customers. The inhuman strain that bank employees are currently under is one of the less talked about aspects of the government’s policy. A few days ago, a banker wrote a moving post on social media about the conditions in rural India, after the demonetization scheme. While many of us are brushing away the serious issue by bringing in the nationalist sentiment and drawing a parallel with the soldiers, this banker provides a fantastic insight into the perils most of our citizens are facing. Sorry to burst your bubble. You can find the post here :- Banker’s moving letter.
The trouble does not end with the acquisition of new currency notes. The 2000 rupee notes are impractical at best and an abomination at worst, and not just for how they look. These notes are of no use to people in their day to day transactions. No shop is ready to accept a 2000 rupee note for a purchase worth a couple hundred rupees. Asking people to make payments via plastic money is ludicrous; vegetable and fish and meat and dairy products – daily essentials bought from small roadside vendors – cannot be paid for with credit or debit cards or cashless wallet services like Paytm.
So what exactly does the ordinary citizen do? Starve for the greater good of the country?
Last year, we rejoiced when our nation took over China as the fastest growing major economy in the world, with an annual growthrate of 7.5%. In short, you can forget about that this year. Economy has dripped down to a standstill, and many economists have already predicted that if this situation isn’t dealt with within March, we might be looking at an economic slump. You cannot take tackle 80% of the state’s cash, without implementing proper reforms to deal with the issue.
Where are the micro-ATM’s?
While the intentions of the Prime Minister are to be appreciated, the policy implementation has been slipshod in the extreme, and is pushing the nation towards a state of financial crisis. The long term effects of the policy do not outweigh the immediate problems that the public is facing. One has to wait and watch to feel the promised effects of black money reduction. In the meantime, the best one can do is hope that the ATM does not run out of cash before one has the chance to draw some money from it.
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