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Demonetization: Common Man, Uncommon Problems

Much has been and is being said about the big decision on demonetization of higher denomination that the government took on November 8, when Prime Minister Narendra Modi made a clarion call to the nation to assist him to kill the demon of black money once and for all. Black money is indeed a demon that needs to be slayed but the question here arises is that should the common man be involved in this fight and what would he get out of it? As 86% of the nation’s cash is useless now and the banks and ATM’s are facing a huge cash crunch, the public is facing some uncommon problems arising due to a decision dubbed by many as the boldest in independent India’s history. Most of them have been supplemented by facts and figures wherever possible to make them clearer and decisive.

  1. The government may have been able to drag people to banks and deposit their money with them, but it is not a long term solution for the distrust on banks that the poor and lower middle class have. This would not turn into a habit which is really unfortunate. Although almost every household in India now have an account thanks to the Jan Dhan Yojana, more than 70% of them were lying dormant before this decision and would probably continue to do so after the situation eases with time.
  2. The timing of the decision could not have been more wrong. One reason is that the Hindu wedding season has started and thousands of wedding are lined up in the next couple of months. And weddings in India are all about cash, in case the government needs a reminder. Another vital reason is related to agriculture. The Kharif crop is ready to harvest. Farmers need to sell their produce and buy inputs for the Rabi season starting from December. The market is flooded with a large portion of the 135.03 metric tons of Kharif production but sales are abysmal. Situation is more depressing in case of perishable items like vegetables and fruits, a large quantity of which is in danger of being spoilt. This wastage is something we can’t afford when we languish at 97th position in the latest global hunger index.
  3. It has also adversely impacted the informal credit sector that accounts for around 62% of all credit in the economy. Around 80% of the small and marginal farmers are depended on this informal credit for their needs. These moneylenders and shopkeepers are the backbone of the rural economy and it has been completely paralyzed.
  4. The informal sector wage earners are also facing the brunt of this decision. These workers comprise of nearly 92% of the total workforce. These are daily wage earners with no additional benefits like DA, HRA or provident fund. One day of leave means no pay for them. Situation has only worsened for them due to the cash crunch and they are losing on their wages.
  5. People who are unwell and admitted to hospitals are facing a dilemma of life and death nowadays. Operations are being delayed and people can’t even buy medicines properly due to unavailability of change. This has led to over 25 deaths since the announcement.  The government has also declared that the old currency notes will only be accepted in government hospitals whereas patients in private hospitals have to pay through cheque and credit/debit card. The government may have assumed that only rich people go to private hospitals. But to the contrary, even poor people are flocking to private hospitals due to the pathetic conditions of government hospitals and their apathy towards poor patients. The expenses of these poor people are not borne by the government. In fact, 89.2% of all private medical expenses are out-of-pocket, i.e. borne by the people themselves. Most of this is arranged through sale or mortgage of properties, which have literally stopped after the decision.
  6. The idea of making the economy cashless is indeed a right step but highly ambitious at the same time. To think that the economy can transit into a cashless phase just by demonetizing the currency is a utopian dream only the urban economic elite can see. Cashless transactions account for only 2% of all transactions in our country. It requires a certain level of technological and communication infrastructure mainly available in urban areas. But the government should remember that India resides in the 6, 40,867 villages and still lacks even in basic facilities like toilets and safe drinking water. So this idea should be implemented gradually to make it more inclusive in nature.
  7. To exchange the old currency notes, one needs to show some identity proof like the Aadhar card. But it is also true that there are millions of people who don’t have any formal identity proof and thus no bank accounts. But they do have cash saved generally in denominations of Rs.500 and Rs.1000. Their savings are now going down the drain and along go their future.
  8. Can the government assure the public that this step can curb the omnipresent problem of corruption? Would officials stop taking bribes for a ration card or sanctioning someone’s pension? If not, then it is futile exercise to say the least. Bribing had already started in the new denominations. So the government, instead of bringing inconvenience to the people should make the tax authorities and the tax evasion laws more efficient, transparent and powerful. This would help them to catch the real perpetrators at the initial stages and thus make this fight worth the effort.
  9. This demonetization scheme is also directed to curb the problem of fake currency notes that are high in circulation within the economy. But the new Rs.2000 note that has been printed in a hectic manner and lack even more in security features than its predecessors that a kid buys candies just by photocopying it! This may have serious ramifications on the economy even if this note is meant for temporary circulation. The cross border fake currency cartels would be more than happy to get such a currency in their hands and flood the market with it.
  10. The government has made it a habit to play the nationalism card with every decision it take. It has made a pure economic issue into a matter of national pride and honor. The public standing in lines has been compared to the soldier guarding the border. This approach has only belittled the concept of nationalism. This has been in vogue especially after the September 18 terrorist attack in Uri. If this is so, would the deaths be counted as sacrifice for the nation by government and provided with adequate compensation to their families. Anyone opposing the decision and asking such questions is being termed as anti- national. This is morally wrong and the government can’t dictate what counts or doesn’t count for someone to prove his love and respect for the nation.

It has been basically the fight of the government that it has involved the general public into, while the real culprits are enjoying the public fighting and dying to get its own money. The government wants to get hand on the miniscule 6% of the total black money available in cash by bringing misery to 1.25 billion people. Instead of wasting our time in queues when our soldiers are sacrificing their lives, what we should do as bankers, doctors, teachers, bureaucrats and students is to do our respective work to the best of our ability and contribute our part to make them feel that their sacrifice of life has been a virtue of a lifetime.

Featured Image: www.amarujala.com

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