Friday 25 November 2016

Are people really upset with Modi's demonetisation decision?

Initially people welcomed demonetization as it is said to curb black money, but later developments and reports have changed the initial response for a vast majority, including me.
Some still believe that, though they suffer it might eventually bring results. The idea that it is war against black money makes them feel that they are engaged in a patriotic mission. But majority including me, have come to a conclusion that it could be a futile attempt and that too executed with poor planning as the new currencies are non-compliant with the existing ATM machines.
  • The worst hit are those who are not on plastic money and have to take care of urgent medical expenditure.
  • Private hospitals and chemists are not accepting old notes nor extending credit. The Rs 4,000 limit that has been imposed on withdrawals from banks mean it is a hand-to-mouth existence for many who are already in trouble.
  • Manual laborers and daily wage workers are unemployed as their employer lacks money to pay them in cash(online is not sufficiant).
  • Near panic in local markets. Number of transactions drop by more than 50%.
  • The people in rural areas and the farmers are also facing a great deal of hardship. Many of them do not have bank accounts or own a debit/credit card. The concept of internet banking is far removed for them. These people may be induced to rise in revolt. Already the case of looting of a fair price shop by the public in Madhya Pradesh has been reported.
  • Deep Deflation. The amount of money in circulation will drop dramatically while supply of goods will remain stable - hence prices of goods will drop. Gold prices, stock prices, commodity prices will drop.
  • The public is inconvenienced because they don’t have the cash with which to buy daily necessities.
  • Families who were holding marriage ceremonies were the one of the worst sufferers. Similarly, the budget of every common man has crashed due to the ban.
  • Senior citizens are put to grief, having to stand long hours in serpentine queues. A 73-year-old man, Vishwanath Vartak, collapsed while waiting in Mulund in Mumbai and died.
  • Foreign tourists who have withdrawn money after landing in India are among the worst hit. Instead of enjoying the sights and sounds of India, they are scampering around in an alien land, trying to secure legal currency. Incredible India indeed. The negative feedback to the tourist industry which will affect its reputation.
  • With less potential buyers in the market and fewer people having white money, the demand for the land goes down and drives down its price. (As people get black money in the future, they will be afraid of holding on to cash and would want to convert that right away into other assets, such as land and gold. This increased demand for land holding, as a form of store of value, might drive property prices higher in the future.)
  • 16 People Have Already Died After Demonetisation And It Has Only Been Five Days
  • The trader class, is affected given that most wholesale shopkeepers choose to keep liquid cash to buy material every day. Very few of them deposit money in a bank. Many of them have incurred losses because of the liquidity drying up in the market.
  • More than a quarter of a billion people in India do not have access to the formal banking sector, which means that a cashless society would be truly perilous.
  • Cores of working hours gone waste. Everything is in a frozen mode.
What solutions do you recommend for people innocently affected by currency crunch after currency ban in India?

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People have started to loose their trust in the demonetization due to various reports which contradicts with the claims of government. This has lead the Citizen’s of India to be divided into skeptics and believers in their view about demonetization.
  1. Cash recovery has been less than 6% of the total undisclosed income seized from tax evaders, shows an HT analysis of data from tax raids from financial year 2012-13 onwards. In addition to cash a great deal of black money is converted into gold and jewellery, real estate including land, share holdings and so on. The present demonetization scheme does not have an impact on black money held in those forms which do not constitute cash holdings. Why govt’s demonetisation move may fail to win the war against black money
  2. If the demonetization measure introduced by the government has to be successful it should result in immobilization of a large amount of black economy. The large volume of cash deposited by the public during the last few days in banks is actually white money.
  3. More than NDA or UPA we believed in Raghuram Rajan(who was the RBI Governor till September 4th). He had said that demonetization may not help in rooting out black money. Here's What Raghuram Rajan Thinks Of Currency Demonetisation
  4. History of similar measures in various parts of the globe gives a different picture. A brief history of India pulling bank notes from circulation [Distrustful citizens and canny black marketeers: Lessons for India from the history of demonetisation]
  5. It was said that the move will crush fake currency, it too is put to question. There were currency notes worth about Rs17 lakh crore in circulation across the country, and according to the RBI, about Rs400 crore of this was believed to be fake currency. So basically to destroy Rs400-crore fake currencies, the circulation of total Rs17 lakh crore was blocked. While the black money converted into white may come into the banking system, how much of the fake currency will get weeded out? If the fake currency is already in circulation, it only means that one or two of the notes that you or I deposit in the bank, will turn out fake. Who takes the hit in that case? The common man. ‘Counterfeit notes account for just Rs. 400 crore’’
  6. The poor have become mules to turn the black money of the rich into white as they charge a premium to do so. Poor people become black money mules for rich
  7. The super rich are left unscratched.The List: Who’s Who & How Much
  8. It is said to be politically motivated. PM using it in election campaign almost confirms this fact. 10 Reasons Why BJP's Demonetization Move Is An Unmitigated — And Politically Motivated — Disaster
  9. There were reports that the currency had added security features which is said to be hoax. It was reported that the new magenta Rs. 2,000 notes have all been printed at a facility in India but, barring the design, the security features remain the same as the old Rs. 500 and Rs. 1,000 notes, a senior government official. No time to add new security features in notes says official
  10. In January 2014. The Congress-led UPA government had announced that all currency notes issued before 2005 would be withdrawn by March 31 that year and must be exchanged for new notes with more safety features. The BJP's Meenakshi Lekhi had ripped into then Finance Minister P Chidambaram."The latest gimmick of finance ministry to demonetise the notes before 2005 is an attempt to obfuscate the issue of black money stashed outside the country... This measure is strongly anti-poor," Ms Lekhi had then said.'Anti-Poor' Said BJP When Congress Government Had Announced Note Ban
As days pass by the number of skeptics is increasing. Malayalam proverb ‘എലിയെ പിടിക്കാൻ ഇല്ലം ചുടുക’(Eliye kollan illam chutuka) best explains the thoughts of many of us(skeptics). This can roughly be translated as ‘Burn the house to kill the rat’.
The demonetization scheme introduced by the government is a well-intentioned one. But poor implementation and poor planning has caused a great deal of inconvenience to the public. There is also no guarantee that the problem of black money will go away forever. It is possible that after a passage of time the people will revert to their old bad habits and the black money problem will reappear in society. Moreover the present scheme only covers the cash component.
More than anger people are confused as they don’t know whom to believe, and what really awaits them. The sentimental approach by PM is not enough to address the concerns. It will be helpful if government is able to provide logical answers. Demonetization can not be undone; only option we have is to wait and hope that it somehow helps our economy.
Edit
Demonetisation Death Toll Rises To 25 And It's Only Been 6 Days
Open letter to PM Modi questions demonetisation, taxes

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