Cash me If you can.
My name is cash and I’m not available.
2000- Rise of an economy.
Go ATM gone.
Well Yes ! These are not the upcoming blockbuster remakes, certainly not for Bollywood or Hollywood but might be for Indian Economy!!
Wednesday 8th Nov 2016, the historical date, Government of India announced the ban on the currencies of 500 and 1000, the bank notes of Mahatma Gandhi series and Introduced new currencies of rupees 500 and rupees 2000. As a matter of fact, Demonetization has happened twice in India, first in 1946, when the currencies of 500, 1000 and 10,000 were declared illegal and second in 1978, under janta dal, Morarji Desai leadership.
So, Why Demonetization?
Here are some takeaways from Our Honorable Prime Minister, Narendra Modi’s surprise TV announcement in New Delhi :-
1) Dedicated to the poor.
(2) Corruption and Black market is a big hindrance in removing poverty.
(3) India, a big and bright spot on global economy.
(4) We’re number 70 on corruption Index, among 168 countries.
(5)Terrorism is being funded from across the border using fake currencies.
(6) Govt of India has already taken many steps to curb the menace of Black money. Some of them are :- 1) Made an SIT on black money with a retired judge of Supreme Court (M B Shah). (2) Entered into agreements with various countries to contain black money transactions,etc.
Will Demonetization be helpful in curbing the Black money and Corruption!!
Well, this would be very early to reach on any conclusion, although we can see some Pros, the advantages and Cons, not cons actually but challenges, of this historical initiative. On one side terrorism, fake note currency is destroying the country externally and on other Corruption and Black money is destroying the country internally.
How demonetization will help?
Digitization of transactions :- The whole motto behind this initiative is to bring transparency in transaction, which’ll make India to be a “Cashless economy” and eventually a Corruption free nation. The low flow of cash in market will encourage people to use digital platforms, which would be more lucid and fast. For that, Gov has introduced “UPI (United Payment Interface)” app for cashless transactions.Private firms are also promoting their brands related to cashless transactions, Such as – Paytm, MobiKwik, FreeCharge etc. Public Sector Banks are also joining the queue and promoting this cashless economy by promoting their own Digital Transactions App, Such as “Buddy” from SBI, “Pockets” from ICICI and “PayZapp” from HDFC.
To clear the speculations, that cashless economy will bring transparency in transactions and eventually will help to make a corruption free nation, here are the list of “World’s least Corrupt Nations” and the percentage use of cash in their economies.
Denmark, Rank 1, 75% of the transactions are cashless, Belgium, Rank 3, 93% of the transactions are cashless, Sweden, Rank 4, 89% of the transactions are cashless, Canada, Rank 10, 90% of the transactions are cashless.
Cons/Challenges :-
With the population of 1.2 Billion, where 68.85% (As per census 2015) of the population living in rural areas, Where just 15.1% of its population using Internet and Just 300 million people using Smartphones, It’s really a tough job to spread the wires of digital economy Or Digital transactions.
Less preparedness before bringing this initiative has undoubtedly hit the common man of this nation. Rural areas, Small trades, Labors from real estate, leather factories, textile mills, are the sections where the lives survive on cash or daily cash paid wages. Administration could have done more preparation for them before bringing this surprise ban.
Some speculations are also been drawn on the reduction of GDP growth rate of India from 7.3% to 5.8% due to less foreign exchange rates, But predicting something that much big is too early for now. No doubt, there’ll be some temporary affects on our economy but It can be dealt with time passes on.
The whole process of cash circulation is directly related to corruption in our country impacting the lower classes of our society.
To conclude, While demonetization has boosted the opening of India’s digital economy and there is no turn back now. Will It close the final chapter on black money? More, Will India go totally cashless?
We hope so, but remains to be seen!
Saurabh Kumar 