Is Surgical Strike On Black Money A Good Idea?

You have a new job, apart from your usual 9 AM to 5 PM, hectic work schedule. You have to rush home to stand in the queue at the ATM. Believe me….this is a real long line. Worse….Money gets over, before you can reach the ATM. Banking officials are under severe pressure, to service so many citizens at bank counters. Retired bankers are being called to assist, in these difficult times. The bankers of our Nation, deserve to be saluted.

The scrapping of 500 and 1000 rupee notes, forces our economy to go cashless. This is the time for digital….mobile wallets….UPI…NEFT….RTGS and Plastic…Debit cards…Credit cards….But can India become a cashless economy like the USA? You can pay by card at retail stores. Many Kirana stores which reach poor people in rural areas, accept app based payments. But how do you pay the local fisherman? Clearly, there are some difficulties ahead.

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There will be some pain in the short term

For a mission of such large proportions to succeed, secrecy is of utmost importance. It is not possible to recalibrate so many ATM’s and print new currency notes, with nobody knowing. If black money hoarders had any idea what was coming…all black money would have disappeared. The credibility of the Government would be at stake. If this mission was to be carried out in secret, there would definitely be some problems, for the general public. About 86% of the currency in value, is in 500 and 1000 rupee notes. Replacing these notes with new 500 and 2000 rupee notes, is not easy.

Yes….

• There will be long queues at banks and ATM’s. The common man will suffer, as he tries to balance, work and standing in the queue for money.
• Stores will be empty as citizens postpone purchases, sticking to just essential purchases. The luxury business and real estate will be severely hit.
• The economy could be severely hit and deflation looms large on the horizon.

In all this, the Prime Minister has asked for 50 days, to clean up the corruption-ridden system.

Let’s discuss if giving the Prime Minister, Narendra Modi, 50 days to clean up black money, is a good idea.

• India’s black economy is said to be around 20% of the GDP (Gross Domestic Product). Many citizens disagree…they say it’s much more.
• Hardly 3% of our citizens pay income tax. The number of citizens paying income tax, should be much more. Many citizens are evading paying income taxes. They laugh as honest tax payers, pay income taxes.
• Yes…The Government was not too successful, catching black money, stashed abroad. Yes…Black money is hidden in real estate, gold and some other assets. But the size of black money in India is so large; it is not possible to hide all of it. A lot of black money transactions are outside the tax net. By scrapping 500 and 1000 rupee notes, the Government is going after this black money.
• It is very difficult to catch black money, as it leaves no traces. Cashless transactions can be traced. India has most of its transactions in cash. Few citizens use cashless services. This means corruption and black money is rampant in our economy. The poor citizens suffer, because black money makes most things unaffordable.
• Yes…Not many citizens use cashless services. But….this does not mean they cannot be pushed in the right direction. Scrapping 500 and 1000 rupee notes, would force citizens to adopt cashless services.
• Many households in India, are known to stash a lot of black money in their homes. This money does not exchange hands and is out of circulation. This money is of no use to the economy. If black money becomes white, the Government can spend this money on development projects and schemes for the poor, which will help the poor in the country.

Yes, it is foolish to assume that all black money will be destroyed with this move. Black money would stay idle for sometime….absorb the shock….rebuild….But the aim of this move is to make black money transactions…difficult….dangerous…tiresome. In this move to weed out black money, the grocer who offers digital payments and the homemaker who is willing to bear hardship for a few months, with the hope that things can only get better, are the real hero’s. Be Wise, Get Rich.