Demonetisation: Present and Future(?)

         "12 noon onwards currency notes denominated Rs.500 and 1000 will ceased to be the 'legal tender'.." decision declared by the Prime Minister on November 8th, 8 PM. Whole nation was shocked. This is a blunt and bold decision. There have been various aftershock incicendeces, political, social, economic. Various types of people gave various opinions about the decision, applicability and Future consequences. Whatever it might be. What are the reasons behind this? Why this decision has been taken, especially when, Indian economy is going through the phase of growth at higher rate. India is 'World's fastest growing large economy ' despite of this why this decision has been taken?

        The central bank of India i.e. Reserve Bank of India keeps the track record of printing of currency notes, circulation in the economy. Considering this fact, the following figure gives severe shock. The difference between actual currency printed and-injected in economy and actual circulation is near to 2.5 trillion dollars. More than the size of Indian Economy. Where all this money has gone? It has went abroad the Indian shores. India having Rs. 100 lakh crore economy in GDP terms, 30% of it is the size of Black money or unaccounted money or parallel economy. Families, temples & other religious institutions own thousands of kilograms of gold, silver and other precious metals. Which are kind of dead asset. The value of such assets do not come in the investment cycle. Huge corruption. Last but the most important, the fake currency notes, injected by enemy/ neighbourhood countries. The injection of fake currency notes is as massive as a nuclear explosion at a time  all over the country. Considering the various facts, the decision of cancelling of high denominated currency notes is going to impact the economy in many aspects.

        First, immediate impact. The cash crunch. 86% of the currency that was in circulation was in 500 & 1000 rupee notes. India, being second most populated country, fastest growing large economy has not achieved 'Financial Inclusion ' even at 'One Family One Bank Account.' 'One Individual One Bank Account ' would be too ambitious. Rural economy, unorganised industry-service sector mostly work in hard cash transactions. Labour in unorganised sector, farmers who had earned money in those currency notes, overnight it name came worthless. Not having a bank account or otherwise, what they should have done? The central Government have been taking steps towards 'Financial Inclusion ' Introduction of 'Pradhan Mantri Jan Dhan Yojana', more than 12crore bank accounts have been opened. The number is rapidly growing after the decision. 'JAM' ( Jan Dhan, Aadhar, Mobile) trinity, application, implementation of it will bring magnificent change in the economy. Considering the currency crunch, central Government and RBI took wise decision of rationing of the currency notes. 

           Overnight, currency available with the people became worthless. Result, sudden decrease in consumer goods demand. It is bound to happen. In the short run ( 2 months as specified and asked by RBI and Government to recalibrate ATMs and Branches.) There will be decrease in demand. Would it affect the GDP growth rate in ongoing and subsequent quartets? There are various arguments on this point. Because in rural areas many consumer goods suppliers are agreeing on the short term credit transactions. The demand for e-wallets is increasing in the small towns. In metros people are preferring POS (Point of Sale), online transactions. More than Rs. 9 lakh crore have been deposited in bank accounts. It will help the banking sector to strengthen their balance sheets. Black or Unaccounted money was the major concern behind the decision of Demonetisation. Various decisions are taken to deal with it. Immediate being, requirement of PAN and disclosure of source of income for deposits over Rs. 250000/- . Another decision/ Scheme, 'Pradhan Mantri Garib Kalyan Yojana', could be called as an extension of fairly successful 'Income Declaration Scheme ' PMGKY gives opportunity to people to deposit their undisclosed money. It will be taxed at 50%. 25% of the remaining 50% would be locked for 4years and used by Govt. For welfare schemes.

       There are various social, political and economic impacts. Political, people who opposed the decision are being criticised as involved in black money transactions. Stances taken by political parties &leaders like Mamta Banerjee and Arvind Kejariwal, Lalu Prasad Yadav ia suspicious. On the other hand having politically distant views, some leaders have supported the decision. Ex. Nitish Kumar, Navin Patnaik etc. Surprisingly these leaders have a 'clean' image. Use of cash in the elections, some effect is seen in local body elections, which occurred immediately after the decision. Social, psychological impact of this blunt, bold decision is huge. Poor people, are happy with the decision. They face problem with gathering the daily meals, but they are happy, knowing that people earned huge black money has money has become worthless. ( Could be called as hidden Marxism??) There are various arguments in this regard. Media is covering the entire issue in negative perspective. Despite of all these, what would be the future?

        Dhasai. A small village in Thane district   Maharashtra is going cashless. Youth in village, Banks have helped the small sellers, traders with POS machines and other means. India. railways introduced POS machines. Implementation of JAM with POS machines in APMCs would be revolutionary. 'Make In India' 'Digital India' 'JAM' 'PMGKY' implementation, adoption by the people in masses, would lead the country towards 'Ek Bharat, Shreshth Bharat...'