Demonetization To Whose Benefit
The Government called it a “ Surgical Strike On Terrorist Funding And Black Money “ But –
The Indian Supreme Court while hearing one among a slew of cases filed against the sudden demonetisation decision in various courts, observed that it "appears to be carpet bombing and not surgical strike" which government repeatedly claims it to be.
The announcement was made by the Prime Minister of India Shri. Narendra Modi, in an unscheduled live televised address at 20:00 Indian Standard Time (IST) on 8 November. In the announcement, Modi declared that use of all ₹500 and ₹1,000 banknotes of the Mahatma Gandhi Series would be invalid after midnight of that day, and announced the issuance of new ₹500 and ₹2,000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes. From the midnight of 8th the said notes became invalid.
The government claimed that the demonetization was an effort to stop counterfeiting of the current banknotes allegedly used for funding terrorism, as well as a crackdown on black money in the country. The move was also described as an effort to reduce corruption.
On 28 October 2016 the total banknotes in circulation in India was ₹17.77 trillion, of which nearly 86% (around ₹14.18 trillion (US$210 billion)) were ₹500 and ₹1,000 banknotes.
Leakage Of Information:
Governor of Reserve Bank Of India “ Urjit Patel “ informed that the decision had been made about six months ago, and the printing of new banknotes of denomination ₹500 and ₹2,000 had already started. However, only the top members of the government, security agencies and the central bank were aware of the move. But media had reported in October 2016 about the introduction of ₹2,000 denomination well before the official announcement by RBI.
on 1 April 2016 in a Gujarati newspaper called Akila, a fortnight before the official announcement, a news report in the Hindi daily Dainik Jagran quoting RBI sources and The Hindu Business Line on 21 October 2016 have published about coming of 2000 rupee note and about possible withdrawal of 500 and 1000 rupee notes. There were also reports of 'Ambani Group and Adani Group ' being informed about the demonetization, and having made arrangements.
Immediate Effects :
The scarcity of cash due to demonetization led to chaos. ATMs were running out of cash after a few hours of being functional, and more than half the ATMs in the country were non-functional. Sporadic violence was reported across the country and several people were reported to have died from standing in queues for hours to exchange their old banknotes.
As a combined effect of demonetization and US presidential election, the stock market indices dropped to an around six-month low in the week following the announcement. After the demonetization was announced, about 800,000 truck drivers were affected with scarcity of cash, with around 400,000 trucks stranded at major highways across India were reported. By the second week after demonetization of ₹500 and ₹1,000 banknotes, cigarette sales across India witnessed a fall of 30–40%, while E-commerce companies saw up to a 30% decline in cash on delivery (COD) orders.
Was It Effective:
Huge amounts of cash in the form of new notes were seized all over the country after the demonetization.
In December 2016, over 4 crore in new Rs.2000 notes were seized from four persons in Bangalore, Rs33 lakh in Rs.2000 notes were recovered from Manish Sharma, an expelled BJP leader in West Bengal, and Rs.1.5 crore was seized in Goa. 900 notes of the new Rs.2000 denomination were seized from a BJP leader in Tamil Nadu. Around Rs.10 crore in new notes were seized in Chennai.
As of 10 December, Rs.242 crore in new notes had been seized.
If it was their intention to curb black money then the government is yet to clarify how come such a large amount has been seized in black money,
Only the coming days will tell us how successful the attempt is. How far the government succeeds in curbing the Black Money, Terrorist Funding And The Corruption.