Current affairs & politics

Demonetisation, Its not only about economics!


My money in your control
This is not the first occasion, when I’m trying to share, discuss and debate – the big move in my mind, which has been supplied with reaction from newspapers, the flop shows at both at the houses of the parliament, various columns from well known and respected economists, not-so-inspiring 7 minutes address from the finest mind that India has produced – Dr. Manmohan Singh and of course yes, the prime time anchors and their guest!
I have had my own experiences as well but that aside – what is it that we as a country wanted to really achieve from, what is being touted as the most historical move by the government and called most hysterical by the opposition – Let’s be honest to ourselves, in accepting that our politicians, yes that Includes Mr. Modi as well, think of political gains first, economics and GDP and people and their lives, everything else is secondary to them. After all net worth of any political party is determined by the kind of electoral success it gets .. that being the case, I twitted this a few days ago.
Handle LKstatesTwitter Handle weblink–  
Proof of the pudding is in its eating.. @BJP4India’s clean sweep in local body election of #Suraj reveals d relevance of @kanhaiyajnusu!

Findings of fiercely debated Modiapp survey,does it in any way corroborate with results of bypoll in various states&MH local body polls?

Let’s dive-in straight to the important questions that surround the mega exercise. 

Question – What could have possibly motivated Modi administration to take such a drastic and bold decision?
There is certainly this objective of trying to be seen as a party that is working towards fulfilling the promises that its election manifesto made in 2014, let’s not forget, BJP was voted to power on the promise of clean government as the country was fed up of scam stories that were spiralling out of UPA 2 cabinet every day, every new scam made the previous one look tinier – those horrific memories are not yet stale.
Modi govt has completed 2.5 yrs in office and have made considerable progress on a lot of social, economic and foreign affair matters but still hasn’t been able to create anything remarkable on critical issues like – job creation, social securities of the minorities specially the underprivileged category of the society, there is raging discontent among the Dalits, there is Patidar agitation on, on the home turf of Mr. Modi, and then there is Mr. Kejriwal who, despite his, as many would say, outrageous public remarks, continues to create a constituency for himself in India and is in fact being seen as possible number 2 party in states of Punjab and Goa – states that are due of election. 

Surgical strike was an instant hit with Indian masses .. I also felt elated by the courage that the government had shown but my feelings were soon sobered when I heard chest thumping on it and saw Modi’s poster publicising the operation in poll bound UP and when despite the big bang we still continue to hear and read about unfortunate spurt in the number of instances of boarder breach, attack on high value military installations in J &K . One could argue that every government has the right to take their deliveries to people and I have no qualms in accepting that line of agreement, it is only when the state army is involved .. given a chance I would have advised the government, otherwise. 

Putting this popular sentiment to use Mr. Modi very carefully extended the of surgical strike idiom to his demonetisation idea and called it surgical strike on corruption and black money, that, as expected, struck the right codes with people, whooping average 80% to highest  93% on Modi’s own poll, was the % of participant who supported the move despite the difficulties that they continue to face, while on one hand it goes on to prove that Indian people are most patient, benevolent and forgiving, it also is a credible evidence of the fact that people have posed their complete trust in Idea of India that PM Modi represents. Such popular leaders aren’t born everyday!
That takes me to the second reason that may have made Mr. Modi choose ‘this time’ for the roll out – three important states are due for elections – Uttar Pradesh, Punjab and Goa, while in Punjab and Goa BJP has to work towards defeating anti incumbency, to remain in power, UP is a big ticket item and a victory there, if it comes by, may mean nothing less than 60% grantee of BJP’s return to power in 2019 – so here is what it is, elections in India are not fought on fresh air and love, money plays central role in furthering the propaganda of parties, according to an estimate as much as 30K crores were spent in the last Lok Sabha elections, you can imagine, the kind of budget that these parties would have kept aside for these three states, with stashed cash valuing null post the move, SP , BSP, Congress etc have been absolutely chocked, BJP for the moment has popularity of Modi which is nothing less than the currency it needs to tide over some of the difficulties it’ll also face owing to cash crunch.
And now let’s come to the final and most important part of the reason, there are solid evidences to suggest that this move has brought about a few very strong positives.
  1. 60% of the cash in circulation has already got deposited in banks – banks have got funded well, it will have its impact on lending rates and cascading impact on real states prices and business movement.
  2. India now has a reason pressing enough to go digital with its financial dealings, which given the Adhaar infra, will go a long way in creating financial inclusion and leave as little space as possible for wrong doings, in the design. If words of Mr. Nandan Nilekani is to be believed India could now accomplish something it could have otherwise attained in not less than 6 to 7 years, in just 3 to 6 month now .. India which is only 2% on cash less transaction may take a big leap into 40ties by the end of 2nd half of the next financial year. 
  3. Counterfeit currency cleaning has been effectively done.
Given all these and many more that are being spoken about, it will still be naive to accept demonetisation as a move which will completely eradicate corruption or black money for the simple reason that not entire black money is stashed as cash. It will also be unrealistic to believe that terror funding which has surely got a temporary dented, will end forever, or that after the stabilisation of the move, we will have an economy that will come out very strong, we will still be growing around the same % mark.
We’ve to admit that if this drive has attained any degree of success it only because people of this country have forgiven poor planning and are wiling to sacrifice because they believe in their leader but nothing can take away the fact from Mr. Modi who indeed played a big and brave gamble, and seems winning too, at the moment!

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27 Comments

  • Subhash

    I also agree with the point that for politician, politics comes first but in this demonetisation even this is secondary,it's a good move.At least one party dare to think and implement out of the box for the betterment of society.Even in Kashmir,those who were hired on daily wages to throw pebbles on police force, were roaming to exchange 1000 and 500 notes..��

  • Sudipto

    Very well documented with artifacts. But we have examples of nations with demonetization where the economy crumbled. Still optimistic, at least our country has the guts to be headstrong for the virtual currency.

  • Showmick Sinha

    Well articulated & thought provoking. While decisions relating to governance should ideally be non biased, more often than not, most political parties fail in isolating party / personal gains from the greater good & while demonetization as a measure may have had noble intentions, one cannot wonder but question its timing.

    Your observations are valid & does compel one to think hard about policy & implementation.

  • Mitra K

    Rightly said, although there is facade created to eradicate black money(cash constitutes 5% of total kala dhun-rest are either invested in real estate, gold, send abroad); there has not being enough preparedness by the govt/RBI to help the helpless lot and not enough back up created for new currencies. The digitization has not yet reached/sank in the urban areas leave alone the rural population.

  • Sanjay Sharma

    Good one LK. I have a different opinion altogether we cannot eradicate black money unless and until we remove large value notes from our system. Change of currency is just a better step but it isn't the solution.

  • Aniket Sahay

    I want to say Modiji ne "Tubelight" jala diya ..ab "roshan" hoga hamara desh.
    Aapki thoughts padh ke toh aisa lagta hai – " Jag ghumeya thare(LavKush) jaisa na koi ".

    Appreciate your work!!! Superb!!

  • Arvind Kumar

    Explained each point and should be published publicly too to spread awareness what this exactly means. Every citizen would have more or less same debate going on. Thanks for the detailed clarification

  • Basudev Samal

    Good Analysis!!
    Demonitization move is a master stroke by PM Modi from various angles and Perspective. As a Politician and leader of BJP the Public perception matters. As a leader he has shown we can lead from front and tread and creats his own path. Any many more.. Starting up a project of this scale to hit at Coruption and Domestic black money is Unique and specially challenging to execute given size of stakeholders.

    Good Writeup LK.

  • nefertiti

    I like your articulation. Perhaps will need to read further to understand all angles that define a good economy. Whether eradicating unaccounted money had only a drastic draconian unplanned and yet a successful approach. If so was the case, why would only the middle class and slightly above middle class population along with the poor!!?? I am quite clueless myself but lets read. 😉

  • Mitra K

    Rightly said, although there is facade created to eradicate black money(cash constitutes 5% of total kala dhun-rest are either invested in real estate, gold, send abroad); there has not being enough preparedness by the govt/RBI to help the helpless lot and not enough back up created for new currencies. The digitization has not yet reached/sank in the urban areas leave alone the rural population.