Thursday, 22 December 2016

Notebandi – the cash crash


Did the expert advisors to the government ever try to assess the extent of black money in cash before deciding to take 86 per cent of the money out of circulation? In reality, not even six per cent of the country’s black money is stored in cash, say the financial experts......

The message about demonetization is clear. It has disturbed the Indian economy. But it’s too late for the government to roll it back. Many economists and experts have criticized the move and the implementation. Japanese brokerage Nomura issued a grim report about the impact of demonetization in India. It expects growth to fall to 6 per cent or below, as rural demand from fertilizers to consumer items shrinks sharply. Nomura has an index that tracks lot of numbers to forecast growth. This, index it explained, was down to its lowest levels since it was created.

Some call it a monumental tragedy that is harming farmers, traders, small business and daily wage workers. Many small scale units have shut down or the workers have returned back to their villages. Is demonetization and its ugly fallout the beginning of the end of Modi? Modi is losing friends as anger grows over Indian cash crackdown and constant flip flops by the RBI. Nomura could have added that not only was demonetization unnecessary, its execution has been botched. The Reserve Bank of India, the finance ministry overseeing it has issued no less than 60 notices and circulars that contradict each other since 8/11. These create confusion among banker and citizen equally. Now people, who initially supported believing the good intention of the government, are visibly angry. The general perception is, people might forget the ordeal after a few days, but may not forgive the government who created this mess.

Did the expert advisors to the government ever try to assess the extent of black money in cash before deciding to take 86 per cent of the money out of circulation? In reality, not even six per cent of the country’s black money is stored in cash, say the financial experts. Chidambaram, the former finance minister says - What the government has been claiming as a surgical strike appears to be a surgeon operating on a patient without diagnosing him first.

One of the big impacts is instantly visible on the residential sector which has been experiencing excruciatingly slow growth in recent times. Let us hope the New year will bring some respite and good days to the aam aadmi!

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Picture Post:
Vetobha Temple, Arawali, Maharastra
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