A year after the shock announcement of the scrapping of the Rs 500 and Rs 1000 notes, the debate on the merits and demerits of the move is still on, and remains as vociferous as it was 365 days ago. The long queues outside banks to exchange notes are now just a memory, but the impact of that move is yet to be fully analysed and reported. In the absence of data the debate at best can be only based on secondary sources.
Grabbing of political mileage on the note ban anniversary, notwithstanding which side of the fence one sat on, was expected. And so, it is not surprising that the Bharatiya Janata Party celebrated Nov 8 as anti-black money day, and the opposition, led by the Congress, observed it as a black day. Prime Minister Narendra Modi said the move ‘formalised the Indian economy and ensured better jobs for the poor, while cleansing the financial system’. The Opposition’s Rahul Gandhi said demonetisation had wiped out two percent of the GDP and ‘ruined’ the lives of millions of workers in the country.
Political statements blanketed the main reasons given for the demonetisation – putting an end to corruption by ending the black money economy and stopping the funding of terrorism. We are yet to know whether these two aims have been achieved. There have been statements that stone throwing in Kashmir has reduced, and this is because there is less black money changing hands, but facts and figures to substantiate all the claims are sparse. This, despite the Prime Minister saying that demonetisation was a ‘decisive battle’ that 125 crore Indians fought against black money and won.
The political rhetoric aside, there is no doubt that in the early days of demonetisation, industry and business confidence was severely rattled in the country. There is no doubt that in those early days the daily wage workers who are paid in cash suffered. There is no doubt that the economy took a hit at that point of time. A year later, the search for data to reach an informed decision on the results of demonetisation is still on.
Across Goa, as in the rest of the country, there were many who backed the move on its first anniversary, with one person even suggesting that it be done once every decade, while there were others who said it has affected business. If the common man’s view is divided, so too is the expert view. Take for instance what former Prime Minister Manmohan Singh, himself an economist, had to say about demonetisation. Writing on the move, Singh called it “a misguided act of coercion that shocked and had an impact on every single Indian. It was an ill-conceived economic policy decision”. He went on to say, “What is important is that the current economic slowdown triggered by a liquidity shock.”
There was also a third objective and that was of promoting Digital India, whereby economic transactions would be made electronically rather than by over the counter cash. This again may not have been fully achieved. There has been an increase in the use of cards for purchase, as business claims, but there are cases also of people who did begin using cards having reverted to using cash. There are reports that cash transactions have almost returned to the levels pre-demonetisation days.
It is now to set aside the politics of demonetisation and come up with unassailable data that will prove the success or failure of the note ban. This is vital for if it has been a failure, than such a mistake cannot and should not be repeated. If it has been a success than the gamble would have paid off. But, will we ever know whether it has been a success or failure?
