The demonetization of ₹1000 and ₹500 notes is one of the most remarkable economic measure taken by Prime Minister Narendra Modi’s Government, dealing a brutal blow to counterfeit currency and the black economy said Mr. Vijay Kalantri, President All India Association of Industries (AIAI).
Mr. Kalantri said that it is also perceived as a major and bold move towards converting India into a cashless economy. A good outcome of this move is that it would eliminate the counterfeit and black money funding towards terrorism Although the announcement was well received by the people, it is only later that the impact of this decision was felt, as people panicked and ATMs and banks reported long queues. Also, banks are not ready with enough supply of smaller denomination notes and the common man is facing severe problem in day- to –day transaction of high denomination Rs 2000 note.
The new ₹2000 notes released are smaller in size than the old notes. Besides ATMs have not been calibrated to dispense 2000 notes. As a result ATMs are storing less cash and thus the stock is running out faster as they can only dispense ₹100 notes.
AIAI feels that the Reserve Bank of India should consider introducing currency notes in ₹200 denomination, which will ease the waiting and there will be no fear of counterfeit in this denomination.
AIAI feels the Government could have planned its implementation more effectively by creating awareness which would have built a confidence level in the people and could have avoided the panic situation being faced today. Moreover people are now frantic for cash spending long hours in unending queues at the banks and ATMs.
The Government should also have considered the informal economy —this sector is the worst affected, with the poor and the marginalized suffering the most. Also small and medium businesses are finding it difficult to run their daily businesses as MSMEs are dependent on cash for their day-to-day operations. While the government has increased withdrawal and deposit caps, it should still be a few weeks before the situation stabilizes, but there is no need to panic.
Taking into account the fact that the informal sector accounts for about 45% of the GDP and nearly 80% of employment, imposing a sudden ban on cash liquidity can be very damaging both in terms of growth and equity added Mr. Kalantri.
Mr. Kalantri further added, India still has to go a long way to put in place infrastructure for a cashless economy. Moreover, it becomes imperative to first overcome the low level of digital literacy. Hence it is important that these challenges also be addressed alongside. It is also important to note that some of this cash is held by hundreds of millions of the poor as savings and for meeting emergencies, and they have little else to fall back upon.
We are aware that the move taken is for the betterment of the Indian economy and in due course most of these funds will be replaced; but this situation is bound to result in huge uncalled for chaos and cost. The magnitude of this move though bold, clearly depends upon the speed and manner in which the currency will be replaced.