While this summary of Narendra Modi’s demonetization might not be
fool proof without holes, logically and expectations per say, it does makes
sense.
Modi current plan attacks following things
1.
Terrorism
(be across border or internals like Naxals, Mafia, etc.,)
2.
Counterfeit
(fake) Notes
3.
Black
Money
4.
Economy
5.
Opposition
- other “dishonest” political parties
Let’s look at each one of them one after another
Terrorism:
Most of our terrorism is because of the
- Support
terrorist get inside India but backed by Pakistan, support from handlers in
India who are paid (obviously in cash of Indian currency notes) by Pakistan and
other such sympathizers
- Naxals
sitting on large pile of hoarded cash, that they looted or took from villages
or given to them by sympathizers
In just few hours, their entire cash pile is now crap. They cannot
deposit these notes, terrorist handlers cannot go to banks to exchange or
deposit. Even if they exchange or deposit via others, it will be a miniscule
amount. More than hating India, handlers in J&K and elsewhere and naxal
supporters in villages get paid to do these jobs.
You might have seen that there has been no agitation in J&K
for few days now. Just to prove govt wrong, these terrorist could mount new
offense in immediate future but logically their backbone is broken with this demonetization.
Terrorist and their backers will take some time to recover and
device new modus operandi. They will definitely bounce back. Hopefully, by then
Modi (or new govt in future) will have a better way to tackle that.
Counterfeit (fake) Notes:
It has been said again and again by various Indian governments in
the past and present that Pakistan has been continuously printing Indian
currency to de-stabilize India economy and fund terrorist activities within
India. Mainstream media also says there are dedicated printing press in
Pakistan that prints fake Indian currency notes and brings in country via pores
Nepal and Bangladesh border. With demonetization, this has taken a huge hit.
All fake notes are nothing more than pile of shit now. Pakistan (and internals
who print fake notes in India) cannot overnight print freshly to create a pile of
new fake currency notes. They anyhow will take some time to tweak their
machines to print the supposedly counterfeit safe new 2000 and 500 currency
notes.
Counterfeits will definitely bounce-back but they need time and by
then (hopefully) Modi will ban new high denominations notes also (detailed in
below section).
Pakistan, with their economy, cannot fund terrorism in India with
their own money (unless China supports them now more than ever). This is be a
huge gain for India. Again, Pakistan will take some time to recover and device
new modus operandi. Hopefully, Modi (or new govt) will have a way to tackle
that later
Black Money:
Modi should create shortage of currency by no longer printing new
500 and 2000 notes once current cash turmoil settles down in a week or two. Then
gradually Modi should declare these new 500 and 2000 Rs notes also illegal.
This time, as there is not much black money in market, he will give them LONG
time (say 6 months) to exchange big notes with 100 Rs notes but I hope this to
start soon (may be by mid-2017 itself) or so.
Soon, India will not have large denomination notes and such
shortage of high denomination currency will force people to go cashless way
which is not impossible. Almost everyone has or can afford a smart phone now.
Those who are really really poor, who do not understand smart phone or credit
card, anyhow cannot afford costly items and for them 100 Rs notes are
sufficient. Even for them, let’s for discussion sake, assume Modi finds a
solution.
Such shortage of large denomination notes will also be a huge
setback for fake currency as cost of printing 100 rupees fake notes and logistics
of circulating in India via various countries will not be economical causing a
dent on terrorist, hawala and counterfeits.
Also, lack of big notes will reduce black money. I mean you will
not carry 30 bundles of 100 rupees notes to buy 100 grams of gold or 300
bundles of 100 rupees note to buy a plot or home or pay college fees etc., !!
Obviously, people will find some alternatives later. Hopefully,
Modi (or new govt) will have a way and will to tackle that later J
Economy:
I believe if done well, this is the master stroke. Modi will get
loads of money in two ways
One, taxes from the un-accounted money being deposited. We are talking
of 200% penalty on the tax that was avoided. For un-accountable deposit of (say)
Rs 6,000 crores, back hand calculation says tax + penalty is Rs 5400 crores !!
Two, all “unreturned” or “missing” money. RBI says about 14 lakhs
crores worth of 500 and 1000 notes have been scrapped and about 3 lakhs crore
are not likely to be returned (i.e. these 3 lakhs crores of black money will
not be exchanged for new notes or deposited in banks and becomes rubbish).
After all deadlines, RBI will transfer this 3 lakhs crores as it is and
entirely to govt.
Now imagine what govt can do with such surplus money for general
public? Reduce/eliminate income taxes, increase subsidies for poor folks for
two years, give one time thank you bonus to all bankers for their support, take
care of poor in many other ways, spend on infrastructure and other areas there
by giving a flip to economy, setup R&D units to compete with European and
Americans on advanced technology, strengthen border etc., etc.,
This money is huge surplus for govt which all of us have
confidence in Modi that he will spend on our benefits & improve economy. If
he does not, he will not win next election and his own party and allies won’t
allow that J
Our banks all of a sudden have HUGE ….. HUGE ……. I mean real HUGE
cash deposit. Within initial couple of days, banks had received 1.5 Lakhs crore
of cash deposit, we have 40+ more days to go. This is just a start. Not
everyone will withdraw everything immediately that they had deposited. Banks
will reduce interest rates (for both saving and loan).
If loan interest is reduced and real estate price crashes (due to
lack of black money), many will be willing to take home loans to buy new homes
thereby improving economy. So on and so forth for many other
industries/sectors, giving a boost to economy.
With low interest rates on your savings and deposits, public will
invest more in other venues like shares (say via MF), real estate’s etc., and
that will give a good boost to industry. I’m sure govt and SEBI will continue
to strengthen norms to ensure public do not get cheated easily. FII will have
more confidence in India and invest more.
In longer run (if all is done well) economy will get a good push
because prices will come down.
Why many opposition
parties worried?
First, like any other initiative in India, job of opposition party
is to oppose. This is not a new trend and has been happening for many decades
now, irrespective of which party rule and which party sits in opposition, be in
state or central govt. Opposition party immediate job is to oppose, they will
think of merits later. Period.
Second, we always believed that many of these politicians and
political parties are sitting on huge black money. Even if many of their loots are
in swiss banks or elsewhere or in other assets (gold, real estate etc.,), they
still are sitting on huge pile of cash that they need under short notice for
polls, bribing voters during election, bribing their supporters to arrange
strikes/bandhs, etc., etc., All these cash pile which they “worked” so hard
over many decades to generate is worthless now!
Third, in next two budgets if Modi bring out policies favoring
masses like reduces taxes, pass on all these benefits to general public in one
way or other, give a flip to economy etc., etc., (because of the lakhs of
crores of Rs govt expected to get from demonetization) other parties will not
have any future. They are finished. PERIOD.
Fourth, no political party (perhaps except BJP and their allies if
Modi cheated) has cash to bribe voters in future elections. All money in swiss
bank cannot be converted to Indian currency overnight J
In a way, Modi is taking away all ill-gotten (black money) from
these politicians, Modi is expected to spend this money on the welfare of
comman man and these politicians who are yelling and screaming now will not get
any credit for this (they cannot go around saying this is their black money).
Opposition is aware of these and in fact they are aware of many
other scenarios which you and I are not aware of. That’s why opposition is
afraid of demonetization and hence causing hue and cry. No one is able to find
fault with this plan, they are simply saying that common man is affected. Their
survival is at stake now. Opposition is not fighting for comman man, opposition
is fighting for their own survival !
Does this mean all
previous governments were very bad?
Definitely and absolutely no ! Previous governments did lot of
good work, that’s why we are far better than many others countries.
All said and done, our strong democracy, strong opposition and
strong public support ensured our govt did lot of good for people and we did
not become worse and did not become beggars like our neighbor country who is
always seen begging from America and China for everything.
It is just that along with good work, previous governments ended
up doing lot of bad things as well - does 2G scam ring any bell ! There were
just too many scams to track at one point of time. It is just that some of the
bad things (like corruption and black money) grew over a period of time and
started becoming too big to handle. Corruptions and black money menace took
such monstrous proportions that drastic steps are required to manage it.
Why me and why not get
Lalit Modi, Vijay Mallya & others who have crores and crores of black
money?
Lalit Modi and Vijay Mallya’s of the world flourished, cheated Indians
during the previous congress led government regime. These cases are getting much
highlighted now because opposition is doing an excellent job of reminding
current govt that they are unable to fix the mess created by previous congress
led govt !
But nevertheless, point is not that. It is a completely valid
argument as why not catching those who have absconded and let’s hope govt is
doing right things to haul them back to India but then how long are we going to
keep leaving in the world of telling first do this and this and this and then
come to me ! Let’s get out of legacy and think of moving forward for this demonetization
move. It does not mean we will not push govt and authorities to haul these
fraudsters back to India, we will continue doing that.
All this is ok, what is
in it for me?
If you are still asking this question I’m puzzled but not
surprised. Let’s look at just few scenarios.
If someone goes for a medical college admission next year, college
cannot ask 25 to 40 Lakhs cash!! Nobody will have that much of cash!! College
cannot simply increase the fee beyond a point (as govt / court will not allow)
which means cost of medical education will come down drastically. Same analogy
applies for all school and colleges, bringing down the era of donations and
capitation fees. This saving from the so called capitation fee is applicable to
everyone.
You can extend such discussion to other areas like real estate,
hospitals, jewelry, dowry etc., etc.,
We already covered that govt has huge cash now which they will
spend to improve economy. Take example of China, they generated huge economy in
manufacturing and then spent that money on upgrading their infrastructure and
R&D.
If we move towards cashless economy, tax collection (GST) will be
better there by giving govt more money to spend
Also, with public not having huge currency at home and govt
expected to take measure to control exposure to gold (let’s reserve a post for
that for a later day), thieves will not have anything easy to steal in homes.
Break in homes is expected to come down, a huge boost for law and order and
police and governance and general public J
What about common man getting
affected?
Yes, common man is affected. They were affected when political
parties instigated numerous strikes, bandhs, shut down for some or other
reason. Many of these were for many consecutive days.
Yes, common man was affected when goons supporting political
parties went on rampage/arson destroying private and public properties
Yes, common man was affected when political party after political
party did nothing to curb corruptions (but only encouraged as they had to fill
their coffers) and we continued to hear scams after scams for many years
Yes, common man was affected when there were riots on name of
caste, religion, state bifurcation etc., etc.,
Yes, common man was affected in many such ways but common man did
nothing that time. It is just that common man is forced to do something now and
it is not easy for anyone to come out of their comfort zone.
Here, comman man is one who has NEVER hoarded any money, never
cheated monetarily (it doesn’t matter whether govt is/was good or bad) always
gave or asked receipt/bill for everything and does not have any black money.
Those who have black money and running helter-skelter now is NOT a comman man.
Real comman man is indeed affected now BIG time because of the
long queues in banks and ATMs and yes it is unfair on them. Comman man is
indeed affected because of disruption in their plans, be it marriage, regular
business, tourists, long hours by bankers and police, large section of public
who are daily wagers and so on and so forth.
But then look at the big picture. If all done with good intent,
future is bright. We did not receive independence from british within a day or
two because of one or two individuals. It was a mass movement spread across
many years. Similarly, demonetization act to check corruption, black money,
etc., etc., also needs to be a mass movement.
I would want everyone (including opposition) to focus on making demonetization
success now and be vigilant to ensure govt does not “eat” away these surplus
cash or does any malpractices. Opposition and individuals are welcome to level
charges against govt, we need strong opposition and alert public to keep check
and balances on govt but at this stage it should not be at cost of NOT doing demonetization.
Last but not the least, fortunately/unfortunately our common man always
had a short memory and will forget about these long lines and losses they
incurred/incurring soon, more so if they start seeing and realizing the
benefits of these hard days
If common man did not had short memory, political parties (be Congress
or BJPs or SPs or AAPs or any other Tom Dick and Harry calling themselves as
political leader) can never ever ever win any election. They would have been
penalized by common man ages ago !!
Now what I think went
wrong on demonetization:
This was supposed to be a top secret and supposedly only 10 folks
knew of entire plan. If Modi had invited some panel of expert to talk of pros
and cons, you and I know that this would not have been secret and the entire
operation would have been waste
The current issue of long Qs and cash crunch is probably because
of so called educated folks trying to stand in bank queue again and again
and/or asking others to stand in queue again and again to exchange notes !
To give a better perspective, during elections entire voting (for
any given region) gets done in a single day (say) between 8 AM to 6 PM. Many
places gets a turnaround of 60% to 70% or even 80% within a day. If Indian
public had not visited bank more than once to exchange notes, this entire
activity of exchanging would have been completed in a couple of days and not
more than a week (max) !! Please remember, 4,000 Rs exchange is supposed to be
a ONE TIME offer for emergencies and not per day limit (as clarified by Jaitley
later). Rest all money is supposed to be deposited in bank and to be withdrawn
from bank as needed.
Even if there is a shortage of new currency in bank, if no one
goes again and again to exchange or withdraw un-necessarily, this entire
exchange + deposit activity should not take more than couple of weeks and can
be done in an orderly way
Changing new note dimension also backfired, probably because they
didn’t knew that ATM has “plates” that has to be physically replaced to put new
2000 Rs notes as it is of different dimension !!
All said and done, govt did not do a good job, never took into
consideration the cunningness of black marketers / corrupt folks, had no contingency
plan and is forced to put up a brave united front to tide over. Most of it is
past now, hold on for few more weeks and normalcy will return soon
Conclusion:
For a country of India size, involving varied demography and large
cash based economy, corruption and black money that flourished over decades cannot
be fixed overnight. Any solution would have been fought by corrupt politicians,
corrupt bureaucrat, corrupt business man etc.,
Demonetization is a good move on longer run, assuming Modi
executes it well and honestly. Even if Modi does not win next election, he has
created the framework for next govt and public to take this movement forward.
Do remember that corruption and terrorism can never be eliminated.
Attempts can be made and should be made to minimize them though. Who would have
thought such demonetization was even possible?
I’m not necessarily a big Modi fan but I’m big fan of this demonetization
plan if it is done well till completion and with complete honesty and integrity.
Now if Modi also becomes another disappointment like Kejriwal, we
all can join in yelling at Modi later but then what after that? As usual close
our eyes and as usual wish and pray that someone else fixes our problem!
For now let’s be optimistic and support the guy who did something
that no one else dared!
For this demonetization initiative, #IAmWithModi.
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