An anniversary to remember: Happy Demonetization Day

Many of the husbands forget to wish their wives on their birthday or marriage anniversary. Well, I need not explain any further as to what the reactions will be every time they forget their wives birthday or their marriage anniversary or what providence has got for them! But I am sure many men will never forget this anniversary and a special birthday of demonetization in the history of Bharat. 

It has been a year since demonetization and those who are in support of it are celebrating the anniversary of “Anti Black Money Day” and those opposing the same are celebrating an anniversary of “Black Day”. Whatever it may be, one year has elapsed since a historic decision on withdrawing legal tender to Rs.500/- and Rs.1000/- notes was taken by the Central Government.

            Many people said that they are happy that they did not lose rupee in demonetization scheme. Among them there are two kinds of people:-

1. The Honest tax payer who felt proud for the first time to declare that he has nothing to fear and boost to boost of his honesty.
2. The tax evaders who helplessly had to show that they lost nothing, else they would lose their face along with their money.

      Why is the demonetization or the withdrawal of legal tender of high currency notes in Bharat a historical decision? First of all, the high value currency notes that were demonetized formed around 86% of the money in circulation at the time of demonetization.

Now in a country:

•  of the population to the tune of 1.25 Billion,
• with a psych to deal only in liquid cash,
• with 22% of the population below the poverty line, and
• with a criminal-political nexus and colluded circles of opulent tax evasive population, 

even the thought of flushing out 86% of the money in circulation is a devil’s dream. The decision was gutsy, and no doubt in that. 

There are number of statistics going through as regards to the success and failure of demonetization. One of the leading arguments for the failure of demonetization is that 99% of the scrapped currency was back. This either meant that RBI data on money printed and money in circulation was wrong, or almost all the scrapped currencies came back to the system. With 99% coming back to the system 2 major disadvantages are seen:

1. As of now, the so called tax evaders and fake currency dealers/owners have been able to sneak in their money into the system.
2.  The Central Government lost of the major dividend that it might have gained from RBI due to the shortfall in receipt of withdrawn currency notes.

“Look at the kind of people opposing demonetization. This will prove that demonetization was a correct move” – this is a reasonable logic, but not sufficient. Lakhs of people should in long lines for hours and wasted their so called previous time just to deposit their ‘own hard earned money’ into bank accounts! After 1 year, we do not see any arrests or any media news of big time corrupt politician or businessman being caught for hoarding black money or tax evasion. Was it worth the sacrifice? We shall see it!

Before making an ephemeral study of 1 year of demonetization, let us see some data for the past 1-3 years.

GOI Statistical Ministry Data (Rs. In Billion)

Year	Growth at 2011-12 prices			Growth at current prices
GDP	GVA	GNI	NNI	GDP	GVA	GNI	NNI
2016-17	7.11	6.67	7.17	7.24	11.52	10.43	11.60	11.61
2015-16	7.93	7.83	7.93	7.96	9.99	8.56	10.00	10.24
2014-15	7.18	6.94	7.25	7.17	10.65	10.65	10.72	10.71
2013-14	6.54	6.21	6.46	6.16	12.97	12.61	12.89	12.90
2012-13	5.48	5.45	5.17	4.59	13.86	13.55	13.52	13.28

BSE DATA

S&P BSE SENSEX Data

Date	Index
08/11/2017	27591.14
30/11/2017	26,652.81
08/11/2017	33,218.81

SBI Data

Interest Rate Chart

Type of Loan	2015	2016	2017
Base Rate (RBI)	6.75%	6.25%	6.00%
Auto Loan	9.30%	9.75%	8.95%
Student Loan	14.05%	11.15%	10.325%
Personal Loan (On Avg.)	15%	14.025%	13.00%
Home Loan	9.30%	9.40%	8.45%
Overdraft	17.55%	16.65%	13.40%

 

Note: 

1.  On occasions where a range of interest rates are given for different schemes within the loan category, the average rate of interest on all loans of that category are taken.
2.  The Interest on demand and time deposits with Bank also reduce with the decreasing Bank Rates and lending Rates. Decrease in deposit rates are not recorded here.

Inflation Data in Bharat

Type of Data	2015	2016	2017
Consumer Price Index (CPI)	5.88%	4.97%	2.07%

GDP Data (RBI) [Rs. In Billions] (RBI Data)

Type of Data	2014-2015	2015-2016	2016-2017
Per Capita GDP	89796	98225	106641

Exchange Rate Data

Month	INR/USD
November 2015	66.462
November 2016	68.598
November 2017	65.075

            

 Some of the other Government data include increase in Tax compliance (Both Tax payments and returns), increase in digital transactions, etc. Interest data like reduction in stone pelting by 75% in Kashmir, and more 20% reduction in Naxal activity post demonetization was noted. The striking off of the names of around 2,24,000 shell companies (dummy companies) was definitely another good move. The free movement of dirty cash in the system and their conversion into clean money through investment in shell companies came to dead end.

            In my view, the most surprising, if not alarming, data released by the Central Government is that- ‘a mere 0.00011% of the population deposited around 33% of the total currency in the country. This data clearly shows how badly the past Government’s governed this country and favoured only a select few people to keep their nexus going. The conniving middle men lost their business post demonetization. 

            Under the Black Money Declaration Scheme announced by the Government of Bharat, around Rs 65,25,00,00,00,000/- of black money was declared post demonetization. There is no doubt that tax compliance and tax receipts of government have increased post demonetization. 

Innumerable number of data sets may be given, and countless arguments can be made on both sides of the case. Yet, the impact this move has had on our economy cannot be ignored. Many economists have opined that Bharat will benefit richly in the long run due to demonetization, and that the short term benefits are minimal in comparison to the long run benefits. Whether or not demonetization was a success, it proved one thing for sure, the people of Bharat will support any move, act, or decision that they believe is with good intent and shall do good to the Nation, even if they have to sacrifice many personal things. And why not? This Nation has seen exemplary examples of sacrifices in impeccable personalities.