Friday, December 02, 2016

Narendra Modi's demonetisation: A Monument of Chaos & Confusion....
According to some media reports, though lndia's GDP grew at the fastest pace for a large economy in the September quarter, the nation could experience some amount of uncertainty in the third quarter of fiscal 2016-17 due to the government of India's (led by the BJP -- Bluffers' Party of India..?) decision to demonetize Rs.500 and Rs.1000 currency notes. Also, the Contraction in capital investment deepened further.

India's Gross domestic product (GDP) clocked an annual 7.3% growth between July and September, faster than 7.1% in the previous quarter and higher than China's 6.7%.

It is pertinent to mention here that, Reserve Bank of India posted this notice on November 8:

Government of India, vide their Notification number 2652 dated November 8, 2016 have withdrawn the Legal Tender status of ₹ 500 and ₹ 1,000 denominations of banknotes of the Mahatma Gandhi Series issued by the Reserve Bank of India till November 8, 2016.

This is necessitated to tackle counterfeiting Indian banknotes, to effectively nullify black money hoarded in cash, and curb funding of terrorism with fake notes.

Let us now observe what Patrick W. Watson, wrote in  Forbes, 1 December, 2016:

This whole idea of a “cashless society” used to be a kooky fringe belief. Conspiracy promoters said jackbooted government thugs would kick in your door any minute and confiscate all your vegetables.

Guess what: the kooks had a point. People in high places really do want to take away your cash, or at least most of it.

I , for one, will oppose this (if they bother to ask my opinion). People with criminal intent will find other ways to keep their businesses hidden. Eliminating cash would create hassles for everyone, for no real benefit.

Modi’s “demonetization” turned into a mess. The government’s sudden decision to withdraw large-denomination currency from circulation, has caused enormous hardship to millions of people in the country’s predominantly cash-based economy.

Lines formed at banks, with people waiting for days, only to find the bank ran out of smaller bills. Those without bank accounts had no way to make routine transactions. Already impoverished people had to spend their work time waiting to exchange their money. New bills intended to replace the old ones were scarce.

The results spread through the economy like wildfire. Merchants lost sales because customers couldn’t pay. Some resorted to barter. Media reports suggest restoring normal commerce could take months.

A few people reportedly died, most of them elderly citizens waiting outside banks for days, but also some overworked bank employees.

Analysts are already saying the sudden contraction will hurt economic growth. Economists at Ambit Capital cut their 2017 GDP growth estimate almost in half, from 6.8% to 3.5%. They think the effects will last into 2018, too.

With consequences ranging from disruptive to fatal, why would any government do something like this?
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