Surgical strike against black money’ was one of the more popular headlines that screamed across the nation on November 9, 2016.
This was the day after Prime Minister Narendra Modi announced the banning of ₹500 and ₹1000 notes.
People could deposit the banned notes into their bank accounts and get newly issued ₹500 and ₹2000 notes. The logic behind the move was that the black/unaccounted money would not return to the banking system and hence would be permanently extinguished.
The ₹500 and ₹1000 notes formed almost 85 per cent of the currency notes in circulation then.
Apart from snuffing out black and unaccounted money, the decision was also meant to cut off funding for terrorist activities and trade in narcotics. But despite the pain that common people had to endure the move itself had surprising popular support. The rhetoric that the rich were suffering more due to the note ban struck a chord among the poor.
There was little doubt that a cash-reliant economy like India was severely impacted by a sudden removal of ₹500 and ₹1000 notes from the system. Newspapers were full of reports about how small businesses and the informal economy, which conducted their business largely in cash, were badly hit by the move. And there were job losses too.
Interestingly as days went by the reasons for demonetisation also expanded – to boost digital payments and to make the economy more ‘formal’.
The one success that its proponents cite is the sharp increase in the number of taxpayers – from 61 million in 2015-16 to 85 million in the next two years.
Demonetisation was indeed a ‘disruptive’ move and perhaps not entirely in ways it was intended. After six years, it is time the government brought a report elucidating what this decision achieved and what it didn’t.
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.