Wednesday, December 21, 2016

Demonetization - Boon or Bane

As the world is getting ready for the end of yet another year, it so seems that an average Indian is awaiting the end of nightmare as created by the Demonetization drive by the Government lead by Prime Minister Narendra Modi. From November 9, 2016 till date it doesn't seem that the country has been provided any scope to breath afresh for the queues and the fights for the wait to have own money exchanged to valid denomination. 

The biggest question that the critics are posing for the GOI are - 
  1. Did Prime Minister ever consult anybody before declaring the demonetization drive to invalidate Rs. 500 and Rs. 100o denominations? 
  2. Did Prime Minister take a decision too much in haste or was it deliberate to cause the panic in the country? Apparently some 55 or 60 deaths have been linked to this demonetization drive 
  3. Did Prime Minister over looked the Constitution of India while taking the bold move? Thus voiding the Right to Property and similar other rights? 
  4. Did Prime Minister ought to have discussion with the opposition and should he have moved by passing a motion in the Parliament to ensure every law maker would have been informed? 
Though the list may go on and on and on, these are some of the more so common question that need to be discussed to decide if the step to Demonetization is Boon or Bane for the country as a whole. Oh well, I am deliberately skipping the points on controlling Black Money and Corruption, because I feel that the trait that we inherited from our rulers for ages, would not end with this one time drive unless there is a 360º approach to curb the Hawala, Gold, Property and other means of hoarding (Hiding) Black Money.

So coming back to the 4 questions listed above, now let's take a closure look at them one by one in chronological order - 

  1. It is for sure that there was a group of few senior and young officers including economists who were involved in the overall decision making process. So the decision to me seems as well thought off and well discussed. Though it seems to have failed miserably when the Risk Evaluation would have been done where the core group missed evaluating the honesty of Bank Employees and the ATM refill Organizations. That appeared to have misfired and caught the GOI on Back foot. Rating - Proves to be Bane: 
  2. Prime Minister should have taken the decision to bring the execution with a shocker and without giving time to the targeted people much time to react. However, the communication that went down the line to the masses wasn't handled well and the overall execution also failed to create that long term public interest in the outcome. Though the public sentiment is in favor while they talk in open, but the overall sentiment in closed circles is not in favor and the pain is quite visible for the common bread earner. Rating - Neither Proves to be Boon nor Bane 
  3. Regarding the anti-constitutional decision, I would stand by and wait for the decision by the Supreme Court of India since this particular question is being evaluated by the bench. However, I am not sure whether Demonetization can be called as hampering Right to Property. Rating - Doesn't qualify to address Boon or Bane 
  4. If Prime Minister would have had moved through Parliament, then the biggest motive of Demonetization drive would have been lost. The millions of unaccounted cash that has now made its way to the Banking channels would have disappeared and the culprits would not have been reported to the law as they are at this time. The mechanism to go with that surprise really helped GOI. Rating - Proves to be Boon 
So when we look at the 4 questions, then the Overall decision provides some 50:50 results. The major point that would prove its worth is the overall impact it would have on the economy in a longer run. The longer run here would be counted for at least 2 years from now. That would be just the right time for the next general elections. 

As for the immediate results, we would soon see it early next year with the results of elections in UP and Punjab. Though the by-election and municipal elections have been voted in favor of the ruling party - BJP and its coalition partners, the acid test would specifically be the election results in UP.

So, Demonetization whether is a Boon or Bane is something that totally would depend on the overall perspective with which it is presented or dissected. We know that the SOLD media would create all the hue and cry to oppose the GOI, but then we need to be wise to actually understand the truth and the actual effect rather than what we see or hear on superficial level.

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