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Demonetization part 2 – Demonisation!

Modi’s 50 days will come to an end in 2 days. Will I be able to walk into an ATM and get money whenever I want? Will I be able to withdraw more than the rationed INR 2000? All those small traders in the unorganized sector whose work largely depends on cash exchanges will now be able to go back to making their usual daily money?
The answer is simply, no. I don’t need Urjit Patel to come on live television to tell this but it is just common sense. The 2000 rupee notes are practically useless as there isn’t much change doing the rounds. The new 500 rupee note is collector’s edition. We have run out of 100 rupee notes. And frankly, if you chanced upon 100 rupee notes then you are going to hoard it considering the bleak future. Hence their circulation is very limited. Any other kind of withdrawals is such a herculean effort that unless your life depends on it, you arent going to venture out and get it.
Like the vast majority in the country, I was hopeful that this was a gigantic move. Such a disruptive move taken at such short notice is unheard of in India. I was looking forward to the black money getting unearthed and the plough back of the same into the economy. I saw a debate on NDTV yesterday which pretty much out the final nail in the coffin. The panel had Gurucharan Das and Arun Kumar. The panel also contained Sambit Patra and Sanjay Jha but their views practically offered no more than comic relief. Gurucharan Das made a point as to why the notes printing wasn’t being outsourced. It has been done in the past and would have definitely quickened our process of putting more money in the citizen’s pocket. Nobody really had an answer to it. Arun Kumar pointed that black money as cash is 1% of the total black money. And if you look at the money that has come into the banking system based on demonetization it is about INR 11000 per Indian citizen. That doesn’t sound very black to me. It sounds like a huge inconvenience for nothing.
The other danger is the businesses going on hold. The FMCG business especially in the unorganized side of things has taken a huge hit. Mamta Bannerjee has been crying hoarse about this. There is definite truth to this. The public has been supportive of the prime minister so far even though this rule is draconian. They have been hopeful of the greater good that demonetization is set to bring. I was of the same opinion and since 8 November I’ve been looking for that benefit that I am going to get due to this demonetization and I don’t sense much positivity. The consumer sentiment has been hit in a big way which means spending is set to go down. Two wheeler industry reported a 33% drop in sales. But the worry is the drop in spending for essentials. This is going to push the inflation down and the growth down.

I’d be happy to see a real estate rates crash or a big drop in the process of automobiles or interest rates. Maybe it is early days for that or maybe by the time that happens I would be taking a 35% cut in my salary making the whole drop utterly useless. The Indian citizen has been patient so far but she is turning pensive now. How will the trepidation end? I don’t really know.

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