Demonetisation Dilemma

The demonetisation drive was one singular event that put India on the world map mostly because of the uncertainties it carried with itself. People didn't have a clear cut blue print of as of what to expect and later it was found that even the ones responsible for it were equally clueless. Cashless and clueless, all at once.

The initial stated agenda was to devalue all the ₹500 and ₹1000 notes that were in circulation back then. That resulted in 86 pc of the total currency going defunct in an instant and exposing the nation to new set of problems. They were reduced to worthless pieces of paper and people were told that it would curb the menace of black money, thus attacking the parallel economy in a sharp manner. The initial public reaction was divided as usual and it became much more complicated later on.   

Cut to August 2018. As per the RBI reports, it is said that almost all notes that were in circulation have come back, thus nullifying the initial agenda set by the ruling party. The untaxed wealth couldn’t be flushed out and hoarders still found a way to settle their monetary scores. The black money is still there, either in a different form which was unaffected by this drive or it was tactfully put back into the system. Darkness turned to light, black finally became white.

Another parallel agenda put forward by the decision makers was urging the nation to lessen dependency on cash and go ‘cash less’. That put tremendous pressure on the banks and payment processors and India still doesn’t possesses the minimum digital literacy required to go full cashless and neither is it on its way to that point. For a brief period of time there were stickers and pamphlets of a Chinese owned company with a blue-white logo all around the nation, to which people turned to make their ‘pay’ments and the urban class were flaunting their cards and struggling with the PoS machines. For a brief period of time it almost felt like India was actually going to go cashless, but that wasn’t the case. More currency notes were printed and were pumped into the economy. The amount of currency notes in the economy right now are higher than the pre-demonetisation phase. Change isn’t easy. In India, the difficulty level is much higher.

Post the after effects of the demonetisation drive, all the long lines in the ATMS (126 different withdrawal rules in 43 days), the Indian economy managed to bounce back. It gained only a little bit though. The only upside being the cash that was initially stored elsewhere became accountable and made its way to the formal system. Cash was where it belonged: on the other side, in the bank. But this exercise came with a different cost, something which was unprecedented. Loss of jobs, deaths and the GDP taking a hit and that too a big one.

15 lakh jobs went into oblivion, the GDP went down by a staggering 1 percent, there was a deflationary trend all around and the economy went into a darker phase. As of now, the black money is still there. Counterfeiting is still there. The 'evils' of the financial worlds are still there. It just brings back one question: What did the demonetisation process actually achieve and at what cost?