With recent publishing of annual report published by RBI and as everyone was waiting for the test results of Demonetisation or the DeMo, we came face to face with the Demon. 98.96% of the scrapped notes came back to banking channel and only 1.04% got scrapped. These results are still subject to the note counting process which is still going on.
Indians have deposited total of 15.28 Lakh Crore rupees in their bank accounts during demonetisation period. Assuming that every citizen in out country is honest tax payer and have every paisa accounted, this is a great achievement for Govt to bring back the money in circulation in banking systems.
As India has become country of economists, post demonetisation, there was heavy criticism of govt post RBI. The criticism was based on assumption that only motive of DeMo was to put currency out of circulation and eradicate it, thus eradicating black money. Well! it is not so, the basic intention of demonetisation was provide govt and taxmen a trail, so that they can reach to the tax evaders and can plug in the ways to generate black money once and for all. Had it been a "change your currency" scheme, eradication of black money would never have possible, instead it would have just deferred the generation. Now that govt is having information of all the honest tax-payers of the country, who have deposited the accounted money in their bank accounts, it is easy for taxmen to put in some good data analytic tools, draw patterns or pie charts and finally chain the demons. Thereby generating huge tax inflow for govt.With another plug in the hole: GST, govt is all set to bring in even common man, a small trader or a business tycoon on same platform and in banking channel.
I recently read a post on facebook saying that India is a cash based economy and thus it should never be changed. DeMo has merely caused inconvenience to the public at large, slowdown and nothing else, much like burning a city to find a criminal. Let's take a look at it:
First assuming that India is cash based economy and letting it be one for sake of convenience is not very acceptable. If a cashless system could replace the existing one, which would benefit the country in long term, it should be accepted with open arms.
Second, the question is how could slowdown in India be because of DeMo? While assuming that all of the demonetised currency was accounted for and has been deposited in bank, there should not be any problem with fund flows at ground level. The persons in trade dealing in cash, could now write a cheque and make payments or more technically sounds one can go for better option. The payment settlement modes have been made really quick and thus I see no liquidity crunch in economy, although there is cash crunch.
All govt is asking the taxpayers to honestly pay their taxes on their net income. The black money menace has been part of our economy for more than 4 decades and it is high time to eradicate it now. Demonetisation followed by GST was more of change in methods to do business. With GST regime now in functions cost of goods sold has gone down in almost all industries. With more and more transparency in transactions and giving govt their share of reasonable tax, we are ultimately moving towards a better economy and stronger nation.
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