In two-and-a-half years' time since Modiji came to power in
May 2014, he has become a more humane, humble, accommodating and introspective
person. Modiji cannot be faulted for his intention or motive: by and large
despite the pain and suffering inflicted on the common man post demonetisation
on November 8, people believe that his intention and motives were noble---to
take the country to a more honest, inclusive and transparent financial system. The move may
be termed bold or reckless or even disruptive by critics: in that has it really
targeted and netted the big fish, or have the big fish eluded the net? The big
fish don’t stack their cash at home, but have long since converted them to gold,
property, bitcoins, overseas bank accounts etc so they are hardly likely to be affected.
We had heard about NPAs of Indian banks at Rs 6 lakh crore and with the
infusion of Rs 11 lakh crore in the banking system post demonetisation, the
banks are flush but is this a move to pardon those who defaulted on thousands
of crores in bank loans especially since small entrepreneurs find it difficult
to get a loan of even Rs 50,000 legitimately from banks? Further, with the cash to GDP ratio in India at 12 per cent-13 per cent or at Rs 14 lakh crore, 80 per cent-90 per cent of the cash in circulation has come back to the banking system raising severe doubts whether the move has been successful in checking black money or whether there was black money stashed away in cash in the first place.
The transaction cost of demonetisation is estimated
at Rs 1.25 lakh crore and it has been forecast by many economists and rating agencies that GDP will fall to 5.3 per cent growth in FY17 compared to
earlier estimates of 7.3 per cent growth. As per RBI’s estimate, the velocity of money in
India is 1.3 per cent, and since M3 (broad money) and M0 (high powered money) are
linked by a factor of 6, then it amounts to six times the amount or 7.8 with
respect to cash in circulation, and the calculation is that transactional costs
in India will contract due to less supply of liquidity. Due to this, there is
consensus amongst most economists that there is going to be a contraction in
the economy in the mid-term. Of course, the benefits of demonetisation are
enormous but economics being, what it is, a very complicated subject at the
national and macro level, defies prediction and as of now the general contention is that
the costs outweigh the benefits. There is a sinking feeling among many including staunch BJP supporters that this exercise has gone awfully wrong.
So has Modiji hit a self goal? If the economy
does not recover by 2018, then the chances are that 2019 could be a tough fight for the BJP at
the hustings and also many state election results preceding 2019 could go the wrong way, that is, not in
BJP’s favour. Given the way things are unfolding on the ground, in simple terms this would mean there may not be a second term
for the BJP or Modiji in 2019! A classic case indeed of creating unnecessary problems when all was going hunky dory for the BJP prior to this demonetisation mess. Moral of the story: Good intentions and morality alone do not drive success in Indian politics. The verdict is out--the move is well intentioned but not well thought through
or planned meticulously. For a long time now, people don't have money in their pockets, and believe me it hurts. It is true that love for your country makes you stand for hours in serpentine queues outside the local ATM, but ultimately it is money in your pocket that makes the waiting worth it. If things don't recover and recover fast, this could be the last nail in the BJP coffin. And you might as well get prepared to say: BJP RIP!
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