Demonetization of Rs.500 and Rs.1000, Why it could fail? - My feedback

Demonetization of Rs.500 and Rs.1000 Why it could fail? - My feedback

I am a PhD scholar in finance. My friends and family ask me what's your opinion on this. I am here sharing my opinion and some facts that I received from them.

Demonetization a new scary word among the common people of India, could really turned out to be a treasure hunt if proper steps are taken further. The success or failure of this couldn't be decided now but I smell a hole already in the vault. That's why I am writing my view point over this.

First of all, I really appreciate and welcome the bold step taken by Honourable Prime minister of India, Narendra Modi. The aim behind this is to bring the black money out and to built a corruption less India. Special Investigation Team (SIT) on Black Money has submitted 5 reports on black money which contains tremendous information and they have given numerous suggestions on each and every scenario. You can get the reports of SIT from Press Information Bureau. I hereby like to share my viewpoint about corruption and Black money generation in India.

Corruption and Black money are a duo. Black money is a giant tree that drinks the wealth of a nation. The basic question on this is who suffers from black money? Its not people staying in top get affected on first place because of this. Its the people in lower level of the pyramid who takes the huge pressure of this. Black money in an economy is a huge loss of revenue to the Government. It increase the gap between rich and poor which in other words, rich becomes richer and the poor become poorer.

Lets come to Demonetization now, before taking this action government introduced Income Declaration Scheme -2016 through which undeclared income should be reported to income tax before the deadline which in turn brought more than Rs.65000 crores in to the account. Which in my point of view I believe its a tip of an Iceberg. Few weeks after the deadline of Income declaration scheme Narendra Modi’s announcement of demonetization took the country in storm.

Something we should understand is the black money doesn't just refer to a physical currency. Black money is in form of Deposits in Share market, Deposits in Foreign banks, Investments in Real estate, Gold, Corporate entities  and etc.. The same is highlighted by SIT on their reports. So, we can say demonetization ends the economy of black money but this could trigger it if proper steps aren't taken.

 

Where does the tree grow?

As I previously mentioned Black money is the tree but where does it grow? . Economy of Black money is not created by some Alien creature. Its citizens of country who creates it and the bitter truth is knowingly or unknowingly, in other words willingly or unwillingly we are part of this. Yes, I said we. Its you and me we are a reason too. for a simple example , Corruption is route for black money. from Rs.10 given to a compounder of Govt hospital to crores of amount given for a govt employee on approval of tenders which involves crores and crores of deal for a business man , just like the 2G spectrum. Whereas 4G is already in air now but still the 2G case is going on the court. I believe the one huge group that could really stop black economy of a country could be govt employees. I am not blaming govt employees on this purely . what makes them to do this is important. The bribe given for a government job, that's where the a common man think about corruption. Lets say you got a Ph.D, you have passed  NET exam too. Do all candidate with such qualification get their job? Do all students get admission in colleges with out donations?  Majority of the people gets their hand in the govt jobs only after bribing the authorities those who give them job. Let if be a professor job in govt colleges, Engineers in govt offices, even for a smallest job in side the govt sector you need a recommendation. for the recommendation you need to bribe them. Who is behind such network? Who knows any one is possible it could be ministers, business man, Principal and any one. I am afraid there is high possibility for even the people who frame rules and Acts involve in such corruption and stood as backbone for black money.

People are suffering in a long queue on ATMs and banks. Even there is a incident that police made a lathi charge at Baghpat bank. All these suffering should bring real benefits and that rise the really is the plan going good or its just a screen and giants are dealing behind the screens now.

Practically speaking – What's going on after Demonetization?

Its great to read banks reporting they received 1000’s of crores across the country. Lets get practical now, What's going on.

There are numerous people carrying commissions such as 25%,15% on conversion of old 500 and 1000 notes to 100’s. This is not happening in 1000’s. Its happening in crores. Gold merchants carrying a business behind the screen. The black economy includes the gold and diamonds that are traded which doesn't comes in to account and still those bullions are out there in the market. The black bullion trader is carrying out this now. He got giants on their backs to convert the crores they receive in 500 and 1000’s. These giants may even have political background. I am not blaming and individual or a political party or a group. I am pointing out the hole in the rat bait.

So , I conclude the success of this really lies on the hands of people with power. As of now I believe its departing from its success. Achieve a 50% success isn't what people are expecting from such sufferings they need 100% .we all know 100% isn't possible so at least we should get succeed in majority on this. and Strict rules should be framed to reduce the gap between rich and poor which is key success for an economy. For this we need a good rule makers. I am still welcoming this action but with a future plans too.

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