The country is marking the first anniversary of demonetisation today, November 8. On this day last year, Prime Minister Narendra Modi addressed the nation and shocked everyone by announcing the demonetisation of old notes with denominations of Rs 500 and Rs 1000. This was probably the boldest move by NDA govt since coming to power. While the government continues to defend the move despite the inconvenience it caused, Opposition has gone out all guns blazing and has been attacking the government for the ‘devil law’ and has termed it the ‘biggest scam’. So like everything else, demonetisation too had its pros and cons and we would be weighing both in this article:
A look at the Pros of demonetisation:
Big boost to cashless economy: While demonetisation has been unable to completely achieve the motive of curbing black money, it provided a big boost to the cashless economy. Even small vendors, vegetable sellers etc have got Paytm numbers today, which was unthinkable a year ago. Yes, most of the transactions are still carried out in cash today but there is greater awareness about digital transactions and things are definitely turning for better slowly.
Sharp decrease in fake currency: The demonetisation has not been able to curb the fake currency notes completely as many seizures of fake new notes have taken place in the past one year, but the number has come down sharply as compared to previous years. According to media reports, the face value of fake notes post note ban amounted to Rs 16 crore, which is less than one-third of the Rs 51.3 crore seized in 2016 and Rs 44.2 crore in 2015.
More people under tax net: India has witnessed a rise in the number of taxpayers post demonetisation as per the data. There has been a rise in direct tax collections. Post demonetisation, banks are keeping a close watch on suspected accounts which has increased fear among people and they are complying with the tax laws in a substantially better manner.
The cons of note ban:
Unable to curb black money: The basic motive behind the drastic step was eliminating black money, which has not been achieved in its totality. The reason being, there is very little money in cash and more in assets. Also, Panama Papers and Paradise Papers revelations have made it clear that most of the wealthy have their black money locked in foreign accounts. 99% of the old notes have come back to the banking system, while the govt expected the number to be much lower.
Severe impact on trade: With demonetisation. 86% of the money suddenly went out of market which shook many businesses, especially the small traders who worked in a cash-rich model. The market is coming back to normality gradually but the losses it concurred in one year have had its consequences on the economy which has gone slightly backwards.
Unable to control terror funding: While the government continues to maintain that demonetisation has decreased terror funding and incidents of stone pelting, the truth lies somewhere else. We wake up of ceasefire violation and terror incidents in Jammu and Kashmir almost every day. Many banks have been looted in the state post note ban as well.