Good move but relieve short-term woes

Good move but relieve short-term woes

FPJ BureauUpdated: Thursday, May 30, 2019, 11:24 AM IST
article-image
New Delhi: People queue outside Bank of India to exchange their old Rs 500 and 1000 notes in New Delhi on Friday. PTI Photo by Kamal Singh(PTI11_11_2016_000098B) |

The Narendra Modi government’s sudden freeze on Rs 500 and Rs 1,000 currency notes through demonetisation is in principle an exceptionally bold and worthy move, but the hardship that it is causing to people at large in the short run was at least partially avoidable. The motives behind the demonetisation are indeed unexceptionable—unearthing black money which has assumed menacing proportions, making the enormous amount of counterfeit currency that neighbour Pakistan has pumped into India worthless overnight and hitting at the root of terror financing. But the government needed to foresee the problems in the short run. The net result is that at least for now, there is chaos on the money front—a lot of people are in a state of panic left high and dry by a system that did not think about how they would manage in the short run before things stabilise.

In the metros in particular, long queues were witnessed at banks and ATMs, which opened after two days, as people rushed to get new bank notes in lieu of their old defunct ones. Many ATMs ran out of cash in a couple of hours as there was heavy rush to withdraw lower denomination currency. Banks said that they were trying to recalibrate their machines for higher denomination notes. Predictably, it will take some days before they start tendering new high security Rs 500 and 2000 notes expected to ease pressure. Had the government printing presses printed huge volume of Rs 100 notes and had banks stocked these in ample measure, the kind of exasperation that was experienced would not have happened. The hard reality was that millions of anxious people with Rs 500 and 1,000 notes mobbed banks across India throughout Thursday to exchange or deposit them after the government declared them illegal tender. For most people buying even simple daily essentials became a nightmare. The government had said Rs 4,000 worth of spiked currency could be exchanged daily but most banks halved this amount to cater to their myriad customers. For many who managed to get hold of the new 500 and 2,000 rupees notes, it was like a war won.

With a whopping 84 per cent of India’s currency notes now out of circulation, traders face severe hardship in the short run till such time the demand and supply gap in floating cash is bridged. According to Reserve Bank of India (RBI) data, the total value of currency in circulation in the country is Rs 17,54,000 crore. Out of this, Rs 500 notes account for 45 per cent and Rs 1,000 notes account for 39 per cent. Thousands of weddings were planned across the country today, considered one of the most auspicious days to get married this year. But the cash crunch hit the wedding planners hard. Flower sellers, wedding bands, horses for grooms on rent and buses to ferry guests were all paid in cash and many of these merchants are refusing to accept cheques.
No tears need be shed for the privileged and for hoarders and purveyors of black money who have bled the system white and looted the country’s economy with no concern for anything other than their self-interest. But it would be a tragedy if the common man is hit beyond the immediate short run. It was not for the government or the Prime Minister to warn people of the consequences of black money hoarding. But Prime Minister Modi did hold out a warning that not many took seriously. Talking about the Income Declaration Scheme, which ended on September 30, 2016, Modi had been quite forthright: He had said: “For all those who are still willing to come in the mainstream, I have said this in public that 30th of September is your last date. You may have made mistakes with whatever intentions. Whether it has been done willingly or unwillingly, here is your chance. Come into the mainstream…no one should blame me if I take tough decisions after 30th September.” Eventually, more than Rs 65,000 crore was declared under the scheme, which is expected to yield tax collection of Rs 29,400 crore. This was considered not enough. Not many realised how true Modi was to his word. They were indeed left rueing why they had disbelieved the Prime Minister.

The government has indeed proved its credentials by striking at the root of the parallel economy. But there still is a long way to go in making a glorious success of the demonetisation move. A tight watch would need to be kept on the sections that have been habitual offenders and there is no mistaking the fact that politicians have an awful record on black money. More and more people need to be brought under the tax net. While the Modi government legitimately wields the big stick it is vital that the honest tax payer be rewarded right and proper. At the same time, the war on black money and on counterfeiting currency must be unsparing and unrelenting.

RECENT STORIES

Decentralisation Can Build Better Cities

Decentralisation Can Build Better Cities

Analysis: Elections Are The True Test Of Democracy

Analysis: Elections Are The True Test Of Democracy

Analysis: Crucial Questions About Navayuga And The EBs

Analysis: Crucial Questions About Navayuga And The EBs

Editorial: Too Few LS Tickets For Women

Editorial: Too Few LS Tickets For Women

From Mandir To Mandi

From Mandir To Mandi