When everything was in place Modi
made a night appearance and announced that most of our cash would be trash in
three hours. Our currency has been changed in the past by Morarji Desai in
1978. However ‘What Modi has done is much kinder’ says R. Prasannan. Demonetization i. e. cash scrapping that is taking
place this time won’t leave us cash strapped. He has made arrangements for new
notes in exchange for the old.
Demonetization was also done by our
former PM Manmohan Singh in the year 2014. However he did it in such a way that
most people don’t even remember it. He demonetized/ scrapped all the 500 rupee
notes that were printed before 2005, and like Modi is doing, gave new notes for
old. He too by the demonetization process managed to flush out a lot of fake
notes that was said to have been minted in Peshawar.
Despite all these efforts a lot of
fake notes still remained. According to an estimate, it is said that out of 10
lakh notes that are in circulation 250 of them are fake. Our neighboring
countries ISI get money on the minting that they do. Our RBI spends 29 rupees
to print a 1000 rupee note whereas the Pakistan ISI spends rupees 39. After
having minted the currency, the Pakistan ISI sells it for 300 to 400 rupees and
according to an estimate Pakistan ISI makes a decent profit of 500 crore a
year.
‘Modi’s demonetization has threefold
goals’ says Prasannan. His first goal
is to push out all the Peshawari cash with the Kalashnikovs. The minting
presses in Peshawar will take some time to copy the new notes that are now in
circulation. His second goal is to dig out all the black money which he had
made as a poll promise. In passing he had said that the money that is there in
the Swiss accounts will be enough to fill each of our Aadhar accounts with 2
lakh rupees. Whether or not the black money really comes out, Modi has created
a wave with the demonetization scheme.
Some feel that most of the black
wealth is secreted in real estate and metals. When that (black) money comes
out, it will be shining white or gold. Modi’s third goal is the real one. This
one is more on the administrative side rather than anything else. He wants
Indians to deal more on cards and other electronic means rather than cash. This
according to me is a very smart move that has been taken by our PM. When the
mode of money exchange is electronic rather than cash then there is less
possibility of minting or duplicating of notes. The only thing that can happen
is hacking of accounts and stealing of money via e- transfer. India is and I
suppose will be the world largest cash cow. However India is not the largest
economy, because there are much larger economies than ours that exist. Those
economies trade less in cash and more through e- ways (This is the third goal
of Modi’s demonetization process). According to some reports one- eighth of our
GDP is floating as cash, whereas most of the other economies keep only 1/ 16th
in cash. This in a way prevents duplicating or minting of notes.
Modi has done many good things like
strengthening the direct- benefit schemes of Manmohan and has been smart to
bank- role the poor people. He has also launched the Jan- Dhan scheme whose
purpose is to bank the unbanked. Now through the demonetization process he is
telling us to do more e- dealing and less of cash dealing.
The main question that R. Prasannan raises is: ‘Why Modi is
offering us 2000 rupee notes when the rich and the smart moneyed Americans
don’t have a bill of more than 100$; when the British who keep more money than
the rest of the world, don’t have anything larger than £50 in their pockets.
Even the Europeans don’t have anything larger than €50.
Why is Modi
offering us 2000 rupee notes?
