Prime Minister Narendra Modi, at his government’s half way mark, has played a great gamble with the currency swap for high denomination notes-striking at black money, robbing rival political parties of their liquid cash that they could use in the forthcoming polls. Besides, Modi hopes to reap multiple intangible benefits on peoples’ perception about black money, terrorism, Naxalism and so on.
One of the main aspects of withdrawing Rs 500 and Rs 1,000 denomination currency notes is the economic benefit of flushing out black money and getting more people to use banking and digital channels for their transactions. While one can claim many brighter sides for the demonetization, our economic system is now facing convulsions, may be temporary, apparently due to lack of preparedness. The move could have been better prepared, given the peoples’ daily needs.
Leaving apart its fallout on political parties and electoral prospects of any party, people who work on cash transactions has been hit the hardest with the sudden withdrawal of 86 per cent of currency. With the number of bank branches and ATMs, none will agree that are sufficient to cater to the need of a population of more than 1.25 billion.
Demonetization has brought to limelight the genuine sufferings of a vast population as people are unable to withdraw their own hard-earned money from banks because of the restrictions. It’s not just the black money that got deposited in banks. Mostly, it’s the money that was lying “blocked” that flowed into banks as Indians have the habit of keeping cash in their houses for various purposes. Imposing restrictions on withdrawal of cash and applying indelible ink on bank customers are innovative ideas that have never been heard of anywhere in the world.
Modi’s success on this so-called surgical strike on black money, however, will depend on how quickly it would mitigate the genuine sufferings of the small traders, the labourers and the farmers. The threat of job loss is looming large. Larsen & Toubro, one of the biggest engineering firm in India, has removed its 14,000 employees, or 11.2% of its total workforce, in one of the biggest corporate retrenchment exercises in the recent times, in the face of a business slowdown. Many other industrial units, which are already facing recessionary trend, have been right-sizing their staff-without making any formal announcement as they want to be politically correct and didn’t have to antagonise the government. In the unorganised sector, a large number of people are losing their jobs.
The overall success of Modi government’s currency measure would now directly depend on how it tackles the situation to bring it back on the track. If the situation continues for another couple of months, history will not be kind enough to remember Prime Minister Narendra Modi as an intelligent leader who promised to bring “Achhe Din”.