Is Demonetization of High Value Currency Notes Worth All Current trouble Caused

To understand this lets take an example – you are walking on a road. A thorn pierces your heel and the thorn contains a sort of slow poison, though you are not aware of this and ignores it thinking of it as a small issue. Now you feel pain therefore takes a pain killer. However, even after taking the pain killer, the pain returns after a couple of days. You take a double dose of the pain-killer, but again the pain returns after a week.

Now, the pain killers are of no use whatsoever. The poison has become stronger with time. Meanwhile you also noticed swelling in your heels so you decide to go to a doctor. The doctor takes a scan and a test and says that the thorn had a slow poison which has now slowly started infecting your blood. However, there is still hope. The doctor says that the poison can be sucked out from your blood, but it requires a operation of your heels. He also warns you that the surgery might have temporary after-effects and will lead to some blood loss. But in the end poison will be out and you can easily get new blood thereafter lead a healthy life !!!

Now why did the doctor want to perform a surgery and suck out some of your blood only to recover a small amount of poison at great discomfort to the patient?

The poison of black money is a parallel economy. You can’t tell if a person is holding black money by looking at his face.

Therefore to identify black money we need to stop (perform a surgery) the white economy to an extent. Yes, its a collateral damage. Yes, people have died and the implementation could have been better. This was expected in a country like India with a 1.3 billion strong population.

You might hate Modi for whatever reasons, but just think rationally for a moment, leaving aside all the political rhetoric.

• Do you really think that the government was (or is ) unaware of the fact that 85% of the economy and most of the informal sector was based and dependent on cash?.
• Do you really think that the government did not foresee the hardships and the long queues outside the bank?.
• Or was the government really unaware of the fact that only a small percentage of money was held in cash, but the bulk of it was held in gold and real-estates?.
• Dont you think that the government would not have thought and weighed the merits and demerits of this move before implementing this?.

Modi might be a novice in economics, but his cabinet ministers and the other ministers need not to be so. They have weighed the pros and cons of this move. The party is well aware that this might have an impact on its electoral prospects as well, but it went ahead with this, which no party has ever done. And there are many economists who foresee a long term gain here- Demonetisation | Economists see ‘short-term pain, long-term gain’

Often we think that black money is held only by top businessmen (Ambani/ Adani) or politicians , but do you know how much black or unaccounted money is held in the informal sector where people evade taxes?. You do realize that even a doctor who sees 50 patients a day can easily forge records and account only for 25 people?. You do realize that a lawyer who sees 100 clients a month can forge her records and show accounts only for 50?. Yes- it happens we all have heard of such stories.

There was a white paper on black money estimates, generation which was published in 2012- [http://finmin.nic.in/reports/Whi…]. It has done some analysis on what exactly a black money is and what are the possible methods people employ to accumulate black money and protect it from the light of the day.

As you can see, storing money in Swiss banks or real estates is not the only way to generate or protect unaccounted money. There are multiple ways to do that.

Black money accounts for nearly 30% of GDP

That’s nearly 28 lakh crores- held in the form of black. And India’s total wealth is $5600 billion which is around 36000 lakh crore- 8% of which is held as black.-India on 10 wealthiest country list, takes 7th spot

Assume that 25% of the black money is held as cash that’s nearly 7 lakh crores. Imagine what we can do with that amount of money- invest it in new infrastructure, healthcare schemes, welfare schemes, electrification, laying new roads!!.

Sure a bulk of black money is held in real estate and gold (as pointed out in that white paper above). And there is going to be an attack on benami holders and the real-estate in parallel- After demonetisation, benami property holders the next target: PM Modi

Look at the positive side of things here. Yes, the move is poorly implemented , may I say. The recalibration of ATMs is taking time because the size of 2000 and the new 500 notes are different. They could have kept the same size , but added different security features which may help in the counterfeit money. Or they could have released both 2000 and 500 in parallel so that people face less hassles.

Yes, sadly few people have lost their lives. However, that doesn’t mean this demonetization wasn’t needed or beneficial for our economy.

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