Demonetization – A Master Stroke

By | December 28, 2016

The Demonetization announced by PM Narendra Modi  is really a master stroke of sorts. At one stroke, he has made it clear that India now means business. In doing, there was a huge political risk. He went ahead and declared country is above politics.

The benefits are yet to be seen from this step. There are some glitches in the implementation. Biggest of all is the failure to identify banks to be the key week link in the system.

Political Parties have gone helter skelter because they were completely un prepared for such a derision.

The benefits are

  1. More and more transactions tending towards digital channels.
  2. A steep raise in indirect tax collections can be seen from the next quarter onwards
  3. Now the movement of the notes is being tracked, there is afear factor among the hoarders
  4. While poor are being placated against the move, they are misguiding the very beneficiaries of the move

Here are some of the possible benefits of this move.

All the money which is stashed in a corners and gunny bags is now in banks. Government has a trace of where is it so far. This will help identify the hoarders and get them in to formal economy. . Now with a push towards digital economy, the poor are the real beneficiaries.

Pushing the digital payments of wages will hep the poor to understand how much is actually they are supposed to get. with cash payments they can be hoodwinked easily. But with digital payments, they will get what is their right.

In fact none of the consumer is losing anything in the digital transaction. They already pay MRP, but it is not shown in the sales. Now the trader need to show this in account and forced to pay the tax to government, which he has already collected.

It takes time to get the real benefits. Economy will expand. public spending will increase. More and more jobs will be created. Overall it will give benefits to the entire Population of India.