Did PM Modi sacrificed common citizens to win U. P. Election with the help of demonetise?

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India has amongst the highest level of currencies in circulation at 12.1% of GDP. Cash on hand is an estimated at around 3.2% of household assets, higher than investment in equities, or roughly around $ 220 billion. Of this cash, 87% is in the form of Rs 500 and Rs 1,000 notes or roughly Rs 14 lakh crore ($190 billion). (File photo)

New Delhi: “This has come as a surprise to everybody. The citizens, the nation and even within most of the government!” economic affairs secretary Shaktikanta Das said at a late-night press conference on Tuesday, an hour after Prime Minister Narendra Modi announced that Rs 500 and Rs 1000 notes would cease to be legal tender at the stroke of midnight.

Since the news about old Rs 500 and Rs 1,000 notes to get illegal was announced by PM Modi , it got mixed feedback , many called it a Bold and Correct decision while the rest opposed it.

Why ban Rs 500 and Rs 1000 notes?

In two words: black money. Unaccounted money, often used in any form of corruption or illicit deals, usually takes the form of high-value notes, which in this case are the Rs 500 and Rs 1,000 bills. In his speech, Modi specifically pointed out that these large-value notes were being used to finance corruption and fund terrorism.

But there is another bad consequences which is very bothering and evitable at this stage , what will happen to those common people who use cash as daily transactions , or those daily wagers or any small  vendor who doesn’t keep records for income tax returns ?

As a consumer, if you depend on small notes (which is the great majority of India) to pay for your groceries, household items – it could be difficult over the next one week to do so.

Small businesses, both in urban and rural areas, will find this move downright crippling in the short-term. These businesses are mostly run on cash: they use hard cash to receive payments for services and to make payments for inventory and goods. It’s unclear at the moment how quickly they will be given access to the new Rs 2,000 notes that will be issued.

This move deeply impacts the working sections of society: drivers, maids, cooks, electricians, plumbers. Anybody who provides services in the informal sector and depends on monthly or bi-monthly cash payments.

Why? One obvious example: if you had planned on paying your maid or cook tomorrow and you aren’t able to beat the ATM queues or have enough smaller-value notes lying around the house, they will have to wait to be paid until you can get your hands on some cash. If ATMs are not replenished quickly and often over the next two weeks this could be a very serious problem. The severity of this impact will depend on how easily and smoothly India’s banking system and the government executes the transition.

Stepping back, however, anybody in rural India who doesn’t have access to a bank account (roughly 200-300 million people at last estimate, although the number is likely higher) and depends on high-value cash transactions will be crippled until new notes come through. One argument is that with the Jan Dhan scheme and the UPI/digital payment stack, rural India shouldn’t have too much of a problem. However, it will be a long time before rural India moves to completely cashless transactions.

In the short-term, people in rural India who have a significant amount of Rs 500 and Rs 1,000 notes, but no official form of identification, will have a tough time in exchanging their notes.

What about the victim of fake currency ? 

As we all know there is large amount of fake currency bills of Rs 500 and Rs 1,000 notes are being circulating since long and there is Intel report that it has increased after surgical strikes . These fake currency usually lands in the hands of commoners who does not have any idea to identify the fake currency . It just keep rotating until it gets to bank . When these ‘indirect victims’ will approach the banks which is now only option , they will be devastated to find the truth , if reports of 60% fake currency being under circulation is true then it will be a disaster for citizens .

How will this effect U. P. Election campaign ? 

In India, the Rs 500 and Rs 1,000 notes also constitute a huge percentage of the money spent by governments, political parties and candidates during general elections. A Centre for Media Studies report showed that nearly Rs 30,000 crore was spent during the 2014 general election, while official spending only accounted for Rs 7,000-Rs 8,000 crore. With that said we can estimate the amount of black money which will be used in upcoming UP elections , there are rumors that anywhere around 1,000 – 2,000 crores rupees going to cost all the major parties who will be contesting the election .

This will highly effect the non BJP parties in U. P. to cash in the new currency exchange of such a huge chunk of money within the time period , also the steps which are being taken to monitor the money transactions in banks will create great difficulty . Which will be beneficial for BJP government .


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