Sarah Khan
Modi is increasingly becoming unpopular in India due to his unfriendly policies targeting lower and middle class Indian. Renowned for maltreatment of minorities and massacre of Muslims in Gujarat, Modi has taken a step to economically butcher ordinary Indians. On 08 November he announced that 500- and 1,000-rupee notes – making up 86% of the cash in circulation in India – were no longer legal; people were given 50 days to deposit them in bank accounts or exchange them for new notes at banks and post offices. It has been noted that only half of Indian adults have bank accounts. Beyond a fairly low threshold (under $4,000), people will be required to explain the source of their cash holdings. The step was interpreted as Modi led BJP targeting lower class Indians because poor keep their money in cash, the rich park illicit wealth in Indian and overseas real estate, shell companies, shares, gold and overseas bank accounts. Only 5 to 6 percent of India’s illicit wealth is estimated to be held in cash components. Demonetization attacks the stock without touching the flow of black money. Cumulative illicit outflows from developing to developed countries increased from $369 billion in 2000 to $1.26 trillion in 2008. The policy also highlights several pathologies of India’s governance. It protects the power of economically illiterate politicians and heavy-handed bureaucrats to control a hefty economy. Few citizens have encountered the tax inspector as a paragon of efficiency and probity. Forcing people to stand in line for unending hours and answer humiliating questions is an attack on property rights that puts restrictions on the people’s ability to earn, access and use money.
Leading economists have opined that a major cause for the persistence of poverty and the growth of corruption in India is regulators and tax inspectors who harass entrepreneurs at every rung of economic activity because of the maze of regulations and the thickets of red tape. Shock therapy without institutional transformation enlarges government while minimizing governance; more government equals more corruption. Demonetization cements the Indian government’s reputation for capricious and arbitrary economic actions.Cash transactions have virtually come to a standstill and the country’s GDP is expected to take a hit in the current quarter. Abhirup Sarkar, economist at Indian Statistical Institute stated that “Actually, the very premise that demonetization will help in removing the (black money) menace is wrong. That’s because people don’t stack black money in cash. Rather, they stash it in undisclosed accounts in Swiss banks. So demonetization won’t affect the big fish.”
Modi’s steps won’t really make sense to end the use of counterfeit money. Economists Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, said, “Sadly the argument that counterfeit money will be wiped out is going to be very short-lived, as counterfeiters worldwide have shown high levels of sophistication and ability to rapidly reproduce the latest banknotes.” This has even occurred in the EU where the European Central Bank has very advanced technology for producing Euro banknotes. Many leading economists have interpreted that it is likely that counterfeit new banknotes will soon proliferate. So how will the government respond-will it demonetize again every six months?” Prabhat Patnaik, economist and professor emeritus at Jawaharlal Nehru University said, “Counterfeit currency is going to be flooding the Indian market in the next day or two.” New notes carry same features. There are no new security features introduced in the new currency notes.
Despite tremendous economic fallouts, the said announcement by Modi resulted in huge ques outside banks. So far more than 100 people already died due to Modi’s erroneous decision. As per estimates, India lost cumulative business of 15 lac crore; which is equivalent to total high denomination of Notes available in Indian economy. India may need 8-10 years time to recover country loss. Common Indians have lost the confidence in their money; and they are detaining lower denomination note with them. And above all, people are losing faith in world biggest Democracy.
