TWO years ago, the sudden move by the Government to demonetise currency partially left the nation stunned and rather anguished as mostly the common people faced the unforeseen prospect of having to make do without cash for some time. Farmers, too, were hit hard as they did not have cash in hand to deal in the post-harvest market. ‘Chaos’ was one word that dominated people’s thinking for some time as everybody grappled with the new condition when new currency notes were not fully available to the people and the old notes stood banned and banished. Allegations flew wild even as the Government defended the decision by putting forward many gains that the move would bring about. Two years later, it can be said with confidence that the move of demonetisation has had its many benefits including a massive expansion of the income tax paying population, as is clear from the stout defence put up by Union Finance Minister Mr. Arun Jaitley. He has proved on the strength of statistical data that the move of demonetisation proved successful in many ways, including protecting the tag that India is the fastest-growing in the world for the fifth year in a row.
Of course, noted economist and former Prime Minister Dr. Manmohan Singh has another view -- that the problems that demonetisation created in its wake are still unravelling. That view has a strong political undertone which even a child can understand. As an Opposition party, it is almost a compulsion on the Congress that its leaders would try to blast every move the Government made. Let alone that, on every economic parameter, the demonetisation move has proved all critics wrong and has shown how the nation has benefitted in countless ways, including removal of black-money from circulation to a great extent.
The economic gains form only one part of the big story, however. Another aspect of demonetisation is that the move shocked the slumbering economy into an instant state of alertness, something the Government had been failing to achieve for a long time. So hopeless had the condition become that the people never took the Government seriously whenever it talked of economic reforms and the accompanying social resurrection from the illeffects of poor economic management. Demonetisation turned everything topsy-turvy and woke people up with a start. The most critical gain of this boost of alertness among people was that vast percentages of people worked ever harder to restore their economic status to the previous normal level. Naturally, this added to an overall refurbishment of the economic process that helped ultimately in keeping the nation’s overall competitive spirit intact. In turn, that helped the Indian economy to retain its tag as the world’s fastest-growing economy.
There is every reason to believe Mr. Jaitley’s statement that demonetisation produced a massive spurt of 80% in the number of people filing income tax returns, massive increase in digital transactions, availability of more funds for the benefit of the poor and for infrastructure development. Those with an antagonistic political may have some other arguments to forward, but the official numbers are credible enough to be believed totally.
The worst part of demonetisation was the immediate negative impact on the common man. He was left with no cash for a fairly long time and had no solution to the problem. Once that initial chaotic state was over, things starting falling into their respective slots, giving people a sense of return to comfortable possession of cash with them. For the economic elite, nothing seems to have changed since they somehow managed to ‘buy’ new money from the banks where bankers’ morality came in serious question for having helped the elite in clandestine manner to exchange their old money with the new one. That did not talk of failure of demonetisation move, but of the banking system that had been manned by people with suspect intent. Seen in retrospect two years after, the move of demonetisation appears to have benefitted the economy more than not.