Demonetization or demonization?

This is the hottest topic of the day, just sizzling down a bit, but the tamasha is still on, with un-abating long queues in front of the ATMs and Bank branches.

Today, just 15 minutes back, as I went out I saw a few people standing near an ATM and quickly got on to the line. Luckily, I was the 8^th person in the queue and got my first new Rs.2000 very fast. That was amazing. By the time I got out of the ATM, the queue had become serpentine.

I walked on to buy some fruits from the cart-fellow from whom I usually buy. He was so down-hearted, saying people ask for less price while in the whole sale Market he is not getting any such concessions. I wanted to help him and bought some over ripe bananas and sapottas for a hundred rupee note and walked back home, ruminating.

What really was the reason for the Prime Minister (PM) Narendra Modi to bring out this demonetization move? What a lot of suffering for the common man! Did he think about it all, as he is busy flying around the world, seemingly signing important deals and treaties.

To give some background, it is well known that corruption is endemic in India. India, as per Transparency International’s ranking on Corruption Perception Index, stands 76 out of 165 countries. The World Bank’s survey of ease of doing business places India at 130 in the list of 190 countries. Quite a bad show.

India’s shadow economy or parallel economy fueled by black money is supposed to be 19-20%of the country’s GDP (Gross Domestic Product). Only 2.5% of Indians ever pay Income Tax to the government! The rest are all outside the nation’s tax net.

This is precisely what the black money is all about. It is the money that is not accounted for, for which no income tax has been paid and which gets spent on lavish lifestyles, to fund illegal activities like smuggling, drug dealing, arms transactions, and to support terrorist activities.

More statistics. It is figured that 86% of the money that is in circulation in India is in the higher denominations of Rs.1000 and Rs.500 notes. Obviously, it is these currencies that circulate as black money. It is easier to deal with bigger currencies, for example, while paying a bribe, as these could be stacked neatly in a small suitcase!

So, Modi struck on the higher denominations of Rs.1000 and Rs.500 while demonetizing currencies on 8^th November 2016. So far so good. But can black money be removed from the country by this measure alone? Definitely not.

The rich and the tax-evaders are not going to keep their ill-gotten wealth stacked in their houses. They would have invested in real estate, land and houses, and gold and jewelry.

Also in offshore tax-haven countries, including Mauritius, where they could hide their money, and from where it returns to the country as Foreign Investment, undergoing a transformation from black to white money in the process. 

There could be medium rich business people, who have kept money in gunny bags and sacks in their houses and such money would be rendered valueless with this demonetization move, unless they declare and pay the penalty and the tax due to government.

In this process, Government would garner some money as tax and this could go to fund the projects to spend on the poor.

It is also said that the across the border terrorism from Pakistan, from where fake and counterfeit Indian money are smuggled into India and used to fuel strife in Kashmir valley, will end, as it is mostly composed of higher denominations. 

But restrictions on withdrawals and exchange of old notes for new have shrunk money supply in the market. Every seller of a type is facing the brunt. People do not have money to buy things and so shops and malls are losing out on their business.

Contractors are not able to pay and keep the workers, with the result workers are returning to their homes in villages in different States. Small business men like fish-vender, vegetable venders and small grocery shop owners suffer the most.

Government had kept the withdrawal of notes a well-guarded secret from the public and hoarders, but failed to make adequate arrangements for exchange of old notes to the new.

After 12 days, people are still standing in queues. Daily-wage earners are wasting their precious time, when they would otherwise be earning their livelihood. It took more than 10 days for the ATM machines to be calibrated to supply the new notes.

Bringing out the new Rs.2000 note first was another disaster, for who is to give change for the Rs.2000, with Rs.500 notes withdrawn and Rs.100 being in short supply? You have to buy vegetables and fruits for full Rs.100, even if your requirement was only for Rs.50.

I am still wondering what to do with the Rs.2000 I just drew, for who is going to give me change for that in 100s? The new note is as good as useless.

The GDP growth of the country itself is assessed by some to be reduced by 1 to 3 %. In the long run the move might be beneficial and the public might move towards cashless economy, which will bring down corruption.

But I am wondering how will the politicians, including that of BJP, the PM’s party, get money to fight their elections! An impossible scenario, for in Indian elections money power plays a major role.

I am also wondering how did the government allow a politician in Karnataka, Janardhan Reddy, to celebrate his daughter’s wedding on 16^th November 2016, spending Rs.500 crores over five days? PM’s talk about the sacrifices the common man must make to make the country corruption-free, does it not apply to rich and influential politicians?

I am afraid, no demonetization move will really cure the malady of corruption in India, unless the demon inside, that of not considering corruption as a wrong thing, is evicted and banned.

And I am not so sure that this mind set of Indian people can be changed by any demonetization move. It will only turn out to be what it has turned out to be now, a demonization move, for the poor and the needy and the common man. The rich and the wealthy seem to have escaped it all.