Ad Here  
Hesitancy in announcing year-end results Small finance payment banks... Reaching out: is it slowing down? Grows Bigger Banking overhauling or reorganisation? Drop in SLR- sparing lendable resources Capital base of regional rural banks raised Payment banks have arrived Why any time money? Thirty more cities seek to become SMART Ernakulam excels... Ferrying digital banking to Lakshadweep The collaboration suite of cyber criminals Small finance banks offer high interest rates Governance in Reverse Gear? Needed a Banking Atlas Another route for achieving financial inclusion Big bank merger, bigger expectations Smart banking in smart cities The paradox: clamour for the Goliath and David Bottomlines shrink, bad loans rise... New bank licences, at last... Managing NPAs... Good, bad and ugly Who is the real beneficiary? Aadhaar, niraadhaar and banking Growing volume of stressed assets… Stage set for Indian ‘avatar’ of foreign banks Too big to fail and too small to sail Well-lived... Insatiable appetite for credit Emerging crisis All that glitters is not gold... One down in private sector Drastic decline in asset quality Rationalised Just 660 days! Target over-ambitious... It’s a war on black money, support it. How ‘secure’ are the secured loans? A new development bank rising in the east… Fund healthcare clinics in villages... Cradle of banks to a smart city... Banking on Risk Nothing much can happen…. Monetary policy continues to adopt dis-inflationary path Indian customers are tech savvy Mega merger is on How okay are new banks? Two banks: their jubilees and performances Small is ‘more’ beautiful Anytime banking to anywhere banking Merger mania haunts banks From lazy banking to easy banking Cautious and considerate Growing gainfully Bank deposits account for 46.3 per cent of household savings A development bank for BRICS What is the priority – mergers or NPA reduction? A bank for women, by women Banking in Telangana Lacklustre credit expansion LVB- A supermarket of financial services Greet Lakshmi the banking robot New capitals of Migrant banks Cut in repo rate – lower than expected Why priority status? Targets continue to be ad hoc Financial inclusion vs unclaimed deposits Perhaps small is more beautiful than big! United India Insurance - Rs 110 crore losses have been claimed till now due to floods in Tamil Nadu Holy or unholy? Reaching the Unreached…
It’s a war on black money, support it.
When a country declares war, its citizens extend full support to the government setting aside their political differences and mindsets. The same is the need to direct this war on black money. Alas, it hasn’t been so.

India has thousands of economists and hundreds of universities teaching economics.  There has not been a single one objective study analysing the impact of demonetisation. What little analysis has been done is based on western economic models that are irrelevant to India’s cash-driven economy. Also, the analysis is influenced by one’s liking for the prime minister. Even a writer of Arun Shourie’s standing seems to have lost his objectivity. 

Worth the try...

So far no country has succeeded in stopping black money generation through demonetisation.  Perhaps India will also end up that way. This does not mean the government has got it wrong. India may not root out corruption, but it will lay out a solid basis towards it if it implements demonetisation. 

In ten days about Rs. 6 lakh crore of high value notes have been deposited. By closing date, 30 

December, about 60 per cent of demonetised notes may get deposited in the banks. That will result in wiping out a significant amount of black money which will result in reducing the price for assets like real estate and gold. 

Also those who have deposited more than Rs. 2.5 lakh will come under the attention of the tax department. Many such depositors will end up paying a penalty on taxes owed. The government has also declared that they will go after property owners who had monetised their ill-gotten wealth and if they succeed, ill-gotten real estate will also be taken over by the government. This requires tremendous improvement in governance, which is not likely even under the leadership of Modi. 

Even those who are complimenting the government for demonetisation are surprised by the replacement of Rs 1000 note by a higher denomination note of Rs 2000. The latest development now is that there will be Rs 1000 note in addition to Rs 2000 note. Only if the government can limit the circulation of high denomination notes (Rs 500, Rs1000 and Rs 2000) to less than 20 per cent of total circulation (considerably less than the current level of 85 per cent) and promote cashless society will make sense.


An overwhelmingly cash economy...

India is overwhelmingly a cash economy with 90 per cent of all transactions taking place that way. Since smaller denomination notes are used for transactions and bigger denomination notes for storing value, the government could have stopped the printing of Rs 1000 and Rs 2000 notes. 


Moving towards a cashless society...

By restricting circulation of high denomination notes, the government will compel people to use a payment system like Paytm, credit/debit cards, bank cheques... Such a cashless society will result in less generation of black money. Besides demonetisation, government should encourage the process of moving towards a cashless society. 

During wars, one cannot escape a lot of inconveniences and people learn to cope with them. In fact, if people did not rush to the banks soon after the declaration of demonetisation, there would have been no long lines. Already these lines have thinned after the first few days in most parts of the country. Also during wars, media does not frighten people and demoralise them through horror stories. There is need for self-censorship, especially on the part of  television medium.

Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236