Demonetization has not Succeeded in any Part of the World

 

 

Eighteen days after the announcement of the demonetization of Rs. 1000 and Rs. 500 currency notes by Prime Minister Narendra Modi, the initial fanatic enthusiasm and tide of nationalism is gradually dying out. The government has been compelled to mobilize the entire party machinery to launch a huge nationwide propaganda campaign including huge advertisement in print and electronic media to justify this step as an attack on the alleged black money. Those who called it a financial and political emergency, are now swearing that the effects of this step has been more pervasive and suffering caused is more massive than the politic suppression of the emergency declared by Ms. Indira Gandhi. This has unsettled the lives of almost every section of the society – rural – urban, male – female, young old, shopkeepers – public servants, labour- contractors, students – teachers, wage earners – professionals. The worst hit are daily wage earners who have lost their employment. The season of marriages caused bitter suffering in families which had to meet the expenses for marriage ceremonies. Nearly seventy five deaths have been recorded in the media caused by this phenomenon.

Many people have the view that the step is right but the implementation is wrong. It is said that government did not do proper home work before taking this step. It is also said that black money will be curtailed through this action. The PM and other ministers have attacked the opponents of the step of demonetization by saying that they are not nationalists and that they too are involved in black money. If a rational study is made about the history of demonetization in the world we will find that this step has never succeeded in any part of the world. Demonetization was done in 1982 in Ghana, in 1984 in Nigeria, 1987 in Myanmar, in 1991 in USSR , in 2010 in North Korea and in India in 1946 and 1978. In all these attempts the desired objective of abolishing black money was not achieved. In India currency notes of Rs. 1000 and Rs. 10000 were demonetized in 1946 and currency notes of Rs. 500, Rs. 1000 and Rs. 10000 were demonetized. Despite these the black money has increased. The editorial of Economic Times of 14th Nov. 2016 states that the black money constitutes 20 % to nearly 60 % of India’s economy. The experts give different data but one thing is certain that it is a sizeable portion of country’s economy. But it is beyond dispute that the step of demonetization will not be able to control more than 2% of this black money.

The argument that demonetization will be able to destroy the fake money in the economy. But the experts say that fake currency in Indian economy is not very widespread. Experts estimate it at about Rs. 400 crores. But demonetizing currency worth Rs. 14 Lakh crores for controlling this much money is not very commendable when the cost of new currency notes is going to be nearly Rs. 12000 crores.   The security features of new currency notes are in no way much different from existing currency, as stated by the RBI officials. The result is that within a fortnight of demonetization fake currency notes have come into circulation. Even terrorists who have been shot have been found possessing new currency notes.  It is shocking that the ruling party speaks of terrorists and Naxalites in the same breath. The fact is that the two cannot be compared.

The passionate appeal of the PM to give him fifty days has proved to be hollow since there is no improvement in the situation in twenty days. More problems will come on 1st December when salary distribution will take place and suddenly demand for new currency will rise. Today, banks are cashless. Many banks have imposed limits on withdrawal from personal saving banks accounts although there is no such announcement from the side of the government. The 86% currency which has been withdrawn cannot be replaced within the declared fifty days. Saumitra Choudhury, former member of the Planning Commission has stated that the capacity of minting institutions is sufficient to replenish the chests in the given time. The currency notes demonetized are 1571 crores of Rs. 500 and 633 crores of Rs. 1000. The capacity of Bhartiya Note Mudran Private Ltd. which prints Rs. 1000 notes is 133 crore pieces per month. In the place of 633 crore Rs. 1000 notes, 318 crore pieces of Rs. 2000 are to be printed. This will require at least two months. Similarly, Security Printing and Minting Corporation India which prints Rs. 500 currency notes has the capacity of printing 100 crore pieces  per month. To replenish 1571 crore arithmetically it will require fifteen months.  In this situation the excessive stress on the use of plastic money and private players like Paytm is easily understood.

However, the doubts about the ruling party’s intentions have already been aired by opposition parties. The purchase of lands by the BJP for its Party offices a few months before the announcement is being seen as fishy. The long term effect of this decision is yet to be seen but in the immediate scene the working class is the most hard hit community.

 

 

 

 

 

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