What did India achieve from demonetization move?
Arun Jaitley, citing the recent RBI declaration that "99% of the old currency notes were back with the central bank", said that demonetization had a positive effect. He said that demonetization had broken the otherwise high cash economy and reduced the capacity to fund terror activities with cash. Let's see if demonetization did prove to be effective, as claimed by Jaitley.
Like Jaitley pointed out, demonetization was not about confiscating money but ending India's reliance on cash. The digital push has become the prime focus now. As a result, consumers are fighting with banks for levying service charge on credit and debit cards. The BHIM app promoting a cashless economy crossed 1 crore downloads. But, was that the only aim?
Jaitley also pointed out that demonetization had stripped off terror with the much-needed cash flow and that is true. Jaitley in the Parliament had previously announced that demonetization had checked the number of stone pelters as well, so much so that they had resorted to "looting banks". He said that a similar impact was seen on the Maoists of the country.
While Jaitley may have welcomed RBI's recent announcement but P. Chidambaram had only criticism for it. The former finance minister said "RBI 'gained' Rs 16,000 crore, but 'lost' Rs 21,000 crore in printing new notes!" He criticized RBI for suggesting demonetization and wondered if it was "a scheme designed to convert black money into white?"
Demonetization was introduced to stop black money and a UN report recently revealed that it didn't manage to do that. The report said that unless followed by other measures, undeclared wealth and assets won't be unearthed. Demonetization was based on the principle that black money gets hoarded through cash which as the RBI results have pointed, may not be true.
Flying high on the success of demonetization, Jaitley now wants to end black money in elections. One suggestion in the past was to set the limit from Rs. 20,000 to Rs. 2000 but if this will be a hit, only time will tell.
