Demonetization: A Closer Look at Its Impact on Black Money and Common People in India

The demonetization of currency notes of ?500 and ?1000 in India on November 8, 2016, was a significant move introduced by the government to combat black money. While the initiative aimed to curb illicit wealth and financial irregularities, its impact has been a matter of debate and scrutiny.

Steps Taken by BJP to Curb Black Money

The Bharatiya Janata Party (BJP) had promised in its manifesto to take stringent measures to root out black money. Following the demonetization order, several policy moves and schemes were instituted. For instance, the Income Declaration Scheme and the Black Money and Imposition of Tax Act enabled the government to recover substantial amounts of illegal money. According to official records, the government was able to recover approximately Rs. 69350 crore under the Income Declaration Scheme. Additionally, the Pradhan Mantri Kalyan Yojana led to the recovery of Rs. 5000 crore.

Other measures such as the Demonetization Blocking Mauritius Route and the agreement with Swiss banks were also part of the efforts to address black money and ensure a cleaner financial system.

Motives Behind Demonetization

Experts and critics have offered different perspectives on the motives behind demonetization. Some argue that the move was aimed at providing sufficient cash in banks to line the pockets of ruling elite, favoring entities like Mastercard/Visa, and Paytm. It has been suggested that demonetization could have been used to target the BSPSP Congress kitty ahead of crucial elections. However, these claims remain contentious.

Impacts of Demonetization

The effects of demonetization have been multifaceted. On one hand, it has been argued that it has not had a quantifiable impact on black money. However, on the other hand, various unintended consequences have become apparent:

Around 150 cash queue deaths, as people waited in long lines to exchange old notes for new ones. Approximately 4 million jobs in the semi-organized and unorganized sectors were lost, affecting millions of workers. Significant complaints were reported for Paytm services, which saw a 3000% increase in complaints. Visa and Mastercard reaped substantial profits from the situation. Digital frauds witnessed a rise, coinciding with the onset of the digital economy. Financial loans and investments, such as those by the Adani-Ambani group, benefited from lower interest rates. Senior citizens had to survive with reduced interest rates on their deposits. Banking systems faced their worst credit performance in 50 years, and corruption in IT and banking sectors ensued. Real estate and transportation prices, such as petrol and diesel, saw a 4-fold increase.

The result of demonetization, as reported by state governments over just 50 days, is an estimated reduction in revenue collection by 110000 - 120000 crores.

Support and Opposition to Demonetization

Support for demonetization was not universal. Influential figures like Kajol and Anupam Kher were seen supporting the move, while others such as Amitabh Bachan were accused of being involved in Panama Papers scams. On the other hand, most economists and political parties worldwide condemned the move, citing a lack of adequate contingency plans. Several BJP MPs also joined the opposition, suggesting a divided sentiment within the party itself.

Conclusion

The demonetization in India remains a contentious issue. Critics argue that it has led to a significant reduction in public finance and healthcare, particularly for the common people. The SC and elected representatives have been accused of leading the country into a dark era, primarily to benefit the rich and corporate cronies. Whether demonetization successfully curbed black money or furthered corruption remains a subject of debate, and it is challenging to definitively assess its long-term impact.