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Analyzing Success and Pitfalls of Demonetization Policy

Broadly, there are some broad trends that have emerged in the post demonetization phase, which now has completed more than a month or so after its announcement on Nov 8, 2016.

The main objective of the demonetization drive as stated was to flush out the black money possessed by individuals in the form of currency note of Rs 500 and Rs 1000 at their personal safe heavens.

The assumption was that those who have accumulated large amount of such currency notes and are fearful of disclosing them to the government will eventually throw them away after it would cease to be legal tender.

However, even a month after the demonetization coming into effect, nothing such sort has happened so far. Where such money remains located, still remains a mystery. There is no incident of throwing away of the cash reported and this pinpoint to fact that the stated objective has failed in its pristine purpose.

The second objective was to clean up the system from black money. It was said that after the demonetization drive, all the black money will return back to the system and India will get free of currency notes that is privately held by the individuals. However, this objective too seems to have failed to achieve its purpose.

On the contrary, what is seen is large amount of new Rs 2000 notes is being horded by the individuals. The raids conducted by the vigilance department in to safe heavens suggests that old Rs 500 and Rs 1000 notes is replaced by Rs 2000 notes and that is now stashed by the individuals. This point out that the black money instead of being wiped out has in fact doubled since the release of Rs 2000 currency note.

The third objective stated was that demonetization will usher in cashless economy. However, it is being debated whether there is any linkage between demonetization and cashless economy. Cashless economy in any way was already a work in progress, even without demonization. Hence the idea of cashless economy has no linkage with demonetization.

Further, in the wake of cyclone Vardha in Chennai in December 2016, when the satellite network had collapsed, the idea of cashless economy mocked at the people’s face. There was no alternative in place to tackle such situation and people were helpless for want of cash to meet their basic needs.

The cashless transaction is susceptible to cybercrime. There is global indication that cybercrime has multiplied manifold in cashless economies. There is no assurance given by the government that people money will be protected in case of cybercrime.

The conclusion drawn is, there is no link between demonetization and cashless transaction. So such argument is floated as a diversionary tactics to cover up the failure of the demonetization objectives.

Now when the main objectives of the demonetization seems to have been failing, the government has galvanized its enforcement directorate, vigilance department and such anti-corruption machinery to raid premises of the individuals to flush out black money.

If such be the case to tackle black money than what was the need of demonetization in the first place? Government could have achieved its objective through such ‘surgical operation’ even without going for demonetization. It is obvious that the raids that are being carried out to flush out black money are a diversionary tactics to cover the failure of the demonetization objectives.

An assessment of the accumulation of the black money suggests that there are only two categories of people who are the fountainhead of the ill-gotten wealth. One is those classes of people who are engaged in the profession of trade and commerce and other is those engaged in serving the people and by the profession known as politicians.

It is only these two categories of people who need to accumulate money for operational purpose as it’s the demand of their profession. If we slash out these two categories of people from the total percentage of the population, we could not find them being more than 25 percent of the whole lot.

In such case, what is the rationale to lump the 75 per cent of the people to tackle the problem which has symptoms in only with 25 per cent of the people? Some say, to catch a rat, breaking the mountain is the idea behind the demonetization policy. In fact, what is emerging after a month or so since the promulgation of demonetization policy is exactly the rat and mountain story.

There is a comparison being drawn with the demonetization policy of 2016 and the national emergency of 1975. This is primarily in terms of people’s discomfort.

The conclusion drawn is that the common man has not undergone so much pain and hardship in the wake of national emergency of 1975, as he is being subjected to due to the demonetization drive.

The question is being asked, if there is so much suffering among the people than why they have not come out on the street to resent their anger?

This is in stark contrast to the national emergency of 1975, when the anger of the people was spilled all over the street and people were in a rebellious mood ready to face any crackdown on them.

If we compare the 1975 situation with the demonetization situation then the suffering among the people is much more now, but even then there is no demonstration on the street reported from any part of the country?

Probably, the fault lies in the opposition that is still indecisive to take a full hearted stand towards the demonetization and reluctant to mobilize people on the street.

It is seen that baring Mamata Banerjee, the Chief Minister of West Bengal and Arvind Kajrewal, the Chief Minister of Delhi, no political leader has come in open to oppose the demonization policy of the government. The so called opposition parties re not keen about any public mobilization or organizing public demonstration or ‘bandh’ to protest such in human policy.

It seems all the opposition political parties and its leaders are in a quandary to weigh the gain and losses, in case if they come on the street with their cadres to protest the demonetization drive.

Either they are scared that they may not be successful in converting the people’s anger into street mobilization or they do not want to have permanent enmity with the ruling government, as it may have bearings on their future politics.

So, as a best course the opposition parties are maintaining benevolent neutrality even they know well the demonetization is nothing but a policy paralysis.

This is a bitter truth of Indian politics, where political compulsion is forces the political leaders to shy away from calling ‘spade a spade.’

To conclude our discussion, the policy of demonetization looks on paper to be a loud thinking, but when being implemented has failed to achieve its stated objectives.

Demobilization is one of the cruelest jokes being told to the people by those ruling the country. The promises made by them have already failed to achieve its objectives. The irony is people have no escape from such sufferings because the demonetization drive has gone haywire.

The people are subjected to unnecessary hardships that are multiplying each day. It is not sure that their suffering may ease even after seven to eight months when it is said that the situation to become normal. The pitfalls of the demonetization drive are far more in access than its pristine objective.

- By Syed Ali Mujtaba