20 days of Indian Demonetization experiment | U-turns, Look Backs

It’s not the Modi Government who’s traveled the first 20 days of Demonetization of 86 percent of cash currency. We here have traveled that much distance as well. And just like numerous U-turns the Government had made in these 20 days; we’ve also made some. But for us they are not U-turns, but simply an act of looking back at what we shared here since the 9th of November 2016.

In the very first article, there was an assumption that all this demonetization action is nothing but a way to extend the voluntary income declaration scheme 2016.  That’s we assumed that sooner or later, this demonetization action will don a garb of with penalty. Day before yesterday that proved to be true.

Another thing which was always being assumed was that the demonetization is nothing but an act to increase money in the Banking sector. It was a finer point. As NPAs, which are a major hurdle in loan write-offs, can be minimized only by increasing money in the bank chests. This because NPAs are always accounted for in percentage terms. For instance 20 percent of 100 Rs is Rs 20. But the same Rs 20 of Rs. 1000 is 2 Percentage. That’s why, the Banks will always want more of your cash in chests and less returned back to you.

That said, at the end of the day what this exercise brought for the common man, is a question to be asked. As the option to convert black into white with 50 percent penalty is still open. Ideally, PM must have stood by his promise that after so and so date, black money hoarders will have to put their notes into river Ganges. But he knows, no rich man keeps notes in banks or in his house. He not even puts them in banks. Else, why would banks be facing cash problems (which they keep as security with RBI).

Frankly speaking, as the announcement of allocating “the interest earned out of Rs 25 of every 100 Rs turned from black to white” doesn’t mean much. As this way we’re being told that “the welfare of Poor (common man)” is linked black money. Only when black money will come to banks, the poor will get something.