On November 8, the Indian Prime Minister Narendra Singh Modi shook the roots of Indian financial System by announcing the demonetization of Rs 500 & Rs 1000 notes. The move wasn’t without precedence. Both in India and in the world, governments have taken such before, for different economic reasons. Sometimes to tackle inflation. At others to phase out old currency. But this time, the scale of demonetization was going to be at such a level that nobody would have thought of even in their wildest of imagination.
At the time when the announcement was made, according to statistics, these high currency notes formed 85 % of the total value of the currency in circulation. EIGHTY-FIVE Percent! This is a staggering proportion of the total value. And in a country which still relies largely on cash transactions, such move would go on to create a storm that would shake the foundations of the economic infrastructure of the largest democracy in the world.
So then, why did the Indian Prime Minister and his team took this suicidal step? Is there a benefit of demonetization? What is the real reason for demonetization?
The team at his disposal must have an inkling that this step was equivalent to stirring the hornet’s nest. A political hara-kiri that could potentially destroy the image of our Prime Minister. The demonetization would not hurt the middle class and above so much. They have adopted to the ‘paytms’ & ‘credit-cards’ that would cushion the oncoming blow. But the common man, who depended on cash to sustain his life was not protected. He was the one who would join the long queues, again and again, and suffer the most.
And would suffer the support which BJP and our prime Minister had enjoyed. But still, they went ahead with this move. Why?
Apart from the technical benefits of demonetization, I believe the real reason for demonetization is ‘selflessness’.
After a very long time, the government took a step that was not about the petty politics that we have been seeing for years in this country.
It would have been so easy for BJP to do nothing. To let the economy move forward in an auto mode. To do only the cosmetic changes, here and there. To support one section of voters today, and the another one tomorrow, focusing on doling out one ineffective populist scheme after another, to appease the voters, to create the illusion of development. When in reality our nation would continue to be a standstill, the way it has been, for all these years.
Instead, the prime minister and his team decided to tackle one of the biggest challenges that is plaguing our country.
The challenge of black money. The one that is made up of dishonest people in our country who are not only fooling the government for years but also putting an extra pressure on the people who do pay taxes.
Since the Government fails to get sufficient tax revenue due to large-scale tax evasion, it is forced to resort to high taxation and deficit financing which again carry their ill-economic effects. Apart from that black money results in distortion of production pattern towards luxury goods, and redistribution of scarce resources to the black money holder.
The curse of black money is plaguing our country for years. Government after another came and left, without concrete steps to tackle. But this government is doing something, doing something concrete. I’m not talking about the execution. It is not perfect. I agree. But see the intentions. They are at the right place. And that is the kind of government that we want -that takes the steps not out of the lust for power at the center, but for the love for the people of this nation.
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Also published on Medium.