The night of 8th November was the nightmare for all Indian people possessing 500 and 1000 Rs notes due to sudden announcement of Demonetisation. There was a chaos of cash hoarding all over the streets of India, women were all busy searching out for the saved money from their hidden places, a crowd of people was racing towards ATM’s and Banks making a snake-like line in order to keep their money safe.
It has been 1 year since the ban of 500 and 1000 Rs notes. It was known to be ‘Notebandi’ and turning the valuable currency into just a piece of paper. This rarest of rare procedure of Demonetisation occurred to combat the deposition of Black Money in the nation. However, the recent news that new Rs. 10 notes will soon be in the market, makes a deviation from the purpose.
It was expected that this reform will bring long-term gain followed by an increase in productivity. But it seems that this move failed in achieving its main objective of the expulsion of counterfeiting, curbing corruption and benefiting the poor. The objective today looks like changing the colors of currency notes, ahead of Holi festivities, for there is no thought given to the after-effects of this activity. From denominations of Rs 2000 to denominations of Rs 50, all notes are very bright.
Common People Are The Actual Sufferer
The trouble of common people started on the very first day of this Demonetisation, where people were seen haphazardly rushing to the bank to exchange their old Rs 500 and Rs 1000 currency notes. An immense disadvantage was faced by local vendors and common people, due to disrupted cash flow. The longstanding unending queue made the common people suffer patiently.
Much to my shock, an old woman of 80 years, died of heart-attack while standing in the bank queue. Not just this, it was about more than 100 people died because of physical as well as mental trauma. The purchasing power of common people was negatively affected due to the scarcity of hardcore cash and so was the income of sellers.
Even after the completion of 1 year, there is no such benefit to common people as it was laid down, though they suffered in the belief of good days. Many people who failed to exchange their money, saw their savings earned by their hard work turning into a wasteful paper.
Demonetisation Leading To Unemployment
The worst side-effect of this activity was the fact that over 1.5 million people lost their jobs and became unemployed. According to CMIE report, the impact of demonetization was such that the average rate of labour participation which was 46.9% in January to October 2016 fell to 44.8% in the weeks after Demonetisation.
This act not only adversely affected the livelihood of labors but also opened the ways in slowing down the economy. Demonetisation made 86.4% of the currency in circulation useless overnight and caused a stoppage to 80-98% of the transaction, which was carried out in cash. It affected the old-aged people who are not much aware of the credit/digital transactions. This hasty move also had negative impacts on the growth of the informal sector and small-scale sector.
Adverse Impact On India’s GDP Growth
Before the implementation of GST, the final result was portrayed to be impactful for India’s economic growth. But after 1 year, demonetization and actual implementation of GST is not yielding the same result as it was represented. Rather there is a fall of 2% in GDP rate, much unwelcomed by Indians.
The GDP Annual Growth rate of India, which was about 7% in 2016, sharply slowed down. After the completion of 1 year, the lowest growth rate since the last quarter of 2014 was recorded at 6.1% GDP in 2017. This clearly shows the lower income of the consumers. The loop starts from here.
Due to no increase in income and highly expensive goods, people reduced demand for more goods. Lack of demand for goods lowered the production rate. This led to unemployment, drastically destructing the rural economy. There is a loss of 1.5 lakh crore with each % of GDP. Thus, the fall in GDP is a nerve-racking situation.
The trauma could have been less if there was no fear of any such demonetization activity in the future. But after new 2000 rupee notes, we saw the new 500 rupee notes. Now, we have 200 rupee notes coming out of the ATMs, ahead of the arrival of new 10 rupee notes. Might be, we have another demonetization scenario waiting for us in the future.
The policy, which was drafted to bring back the good days of people, actually became the worst days of people. And we, the People of India are still unsure if or not we will see good days in the future.