Raju Korti
There cannot be a bigger paradox in human life than money -- or "rokda" as our "motabhais" from Prime Minister Narendra Modi's Gujarat may like to put it. As the country grapples to evaluate and comes to terms with the financial implications of the Modi Government to demonetise the currency, reactions, looked at mostly from political prisms, are making rounds thick and fast. The key issue here is the impact this is going to make on the economy.
Contrary to what is being drummed up in the social media about the move targeting black money holders, it appears majorly to be a move to arrest the circulation of a pestilence called fake currency. The fact that the government wants to come out with a technologically advanced chip-based currency is a strong pointer towards that direction. If collaterally, that also brings those who have stashed black money, in its ambit, it is a fringe benefit.
Black money is so much a part of our white economy, a malignant tumour right in the centre of the brain. You try to remove it and you kill the patient. For a market that has had a track record in insider leaks, it is rather difficult to believe that large amounts of black money hasn't been already offloaded. All it needs is a simple hawala transaction to launder the tainted money. If you looked at the well calibrated moves of the government, this was coming. The move to come out with amnesty schemes in the last few months was not just a regulation liberal move to curb black money. It was harbinger of a more audacious move to demonetise the currency. To that extent, it is only a partial master-stroke by Modi.
Skewed as they are, economists have different takes on demonetisation. There is a certain amount of cynicism that demonetisation doesn't work as effectively as it seeks to portray. In 1977 the Janata Party government had demonetised Rs 1000, Rs 5000 and Rs 10,000 notes with limited success. Mind you, the finance ministry was then headed by H M Patel, who served as the Governor of Reserve Bank before. To be fair to the then Morarji Desai government, the demonetisation didn't happen as abruptly, reason why the situation this time is more chaotic. The very premise that demonetisation will help eradicate the menace is over-rated.
Just how much black money will be unearthed and what will be its fiscal concussions will be seen in the months to come but it is a promising beginning to start from the home turf although as of now there is a status quo on the black money stashed away in offshore tax havens. The general view is this might inconvenience the people now, but it will be good in the long term for a cashless economy.
The ideas of economists and political philosophers -- both when they are right and when they are wrong - are more powerful -- than is commonly understood but there will be a crisis for some time. Economy will slowdown for a while. The two big sectors, bullion market and real estate will be hamstrung because the entire effect is likely to witness what is called as "market correction." On the flip side, the downward pressure on prices will boost housing demand which has been sluggish in recent times. Secondary market will witness some upheaval unlike the primary market which largely uses the banking channel. The resale market is bound to feel the pinch.
At the moment, issues like the impact of demonetisation on political funding are not weighing heavily on my mind. Just before the government came out with the shocker, I parted with five 100 rupee notes to automen and vegetable vendors, happy that a couple of thousand rupee notes and some five hundred rupee notes would still take care of my frugal needs for the next fortnight. Now I am rich and yet poor in a country where successive governments have desperately tried to cover up the country's deficit budget by printing as many currency notes.
Currency -- plastic or paper -- has no soul, no feelings and the only currency I am stuck with right now are my two rupees on an issue that I don't understand head or tail. In my limited cash and wisdom, what I do know for sure is that the present austerity is forced on me.
There cannot be a bigger paradox in human life than money -- or "rokda" as our "motabhais" from Prime Minister Narendra Modi's Gujarat may like to put it. As the country grapples to evaluate and comes to terms with the financial implications of the Modi Government to demonetise the currency, reactions, looked at mostly from political prisms, are making rounds thick and fast. The key issue here is the impact this is going to make on the economy.
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| File photo from the net. |
Black money is so much a part of our white economy, a malignant tumour right in the centre of the brain. You try to remove it and you kill the patient. For a market that has had a track record in insider leaks, it is rather difficult to believe that large amounts of black money hasn't been already offloaded. All it needs is a simple hawala transaction to launder the tainted money. If you looked at the well calibrated moves of the government, this was coming. The move to come out with amnesty schemes in the last few months was not just a regulation liberal move to curb black money. It was harbinger of a more audacious move to demonetise the currency. To that extent, it is only a partial master-stroke by Modi.
Skewed as they are, economists have different takes on demonetisation. There is a certain amount of cynicism that demonetisation doesn't work as effectively as it seeks to portray. In 1977 the Janata Party government had demonetised Rs 1000, Rs 5000 and Rs 10,000 notes with limited success. Mind you, the finance ministry was then headed by H M Patel, who served as the Governor of Reserve Bank before. To be fair to the then Morarji Desai government, the demonetisation didn't happen as abruptly, reason why the situation this time is more chaotic. The very premise that demonetisation will help eradicate the menace is over-rated.
Just how much black money will be unearthed and what will be its fiscal concussions will be seen in the months to come but it is a promising beginning to start from the home turf although as of now there is a status quo on the black money stashed away in offshore tax havens. The general view is this might inconvenience the people now, but it will be good in the long term for a cashless economy.
The ideas of economists and political philosophers -- both when they are right and when they are wrong - are more powerful -- than is commonly understood but there will be a crisis for some time. Economy will slowdown for a while. The two big sectors, bullion market and real estate will be hamstrung because the entire effect is likely to witness what is called as "market correction." On the flip side, the downward pressure on prices will boost housing demand which has been sluggish in recent times. Secondary market will witness some upheaval unlike the primary market which largely uses the banking channel. The resale market is bound to feel the pinch.
At the moment, issues like the impact of demonetisation on political funding are not weighing heavily on my mind. Just before the government came out with the shocker, I parted with five 100 rupee notes to automen and vegetable vendors, happy that a couple of thousand rupee notes and some five hundred rupee notes would still take care of my frugal needs for the next fortnight. Now I am rich and yet poor in a country where successive governments have desperately tried to cover up the country's deficit budget by printing as many currency notes.
Currency -- plastic or paper -- has no soul, no feelings and the only currency I am stuck with right now are my two rupees on an issue that I don't understand head or tail. In my limited cash and wisdom, what I do know for sure is that the present austerity is forced on me.
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