Editorial

Demon of demonetization

By Nagaland Post | Publish Date: 8/31/2018 12:32:42 PM IST

 On November 8,2016 at midnight, the prime minister of India Narendra Modi made an earth shaking announcement that the government had decided to demonetize Rs 1,000 and Rs 500 denomination banknotes (by value) which effectively became invalidated. The secrecy over demonetization was such even Modi’s cabinet members knew nothing about it including the finance minister. It should have been the nation’s finance minister but today the nation has a prime minister who makes major policy decisions and announcements from finance, to external affairs to defence, to industry to commerce etc. The demonetization bomb was launched like a cloak-and-dagger operation. It was carried out like a typical ‘surgical strike’ against black money hoarders. The BJP won the first round in the battle of perceptions during the UP assembly elections when voters were convinced that demonetization was to crack down on black money. The opposition could neither say much nor decisively oppose demonetization as they were inhibited by uncertainty and feared that opposing it would invite criticism of being pro-black money. The main objective of demonetization is to get rid of the old currency notes to introduce new denominations. Demonetization was first implemented in 1946 when the Reserve Bank of India demonetized the then circulated Rs 1,000 and Rs 10,000 notes. The government then introduced higher denomination banknotes in Rs 1000, Rs 5000 and Rs 10000 in a fresh avatar eight years later in 1954 before the Morarji Desai government demonetized these notes in 1978. Demonetization is necessary whenever there is a change of national currency. The old unit of currency must be retired and replaced with a new currency unit. After nearly two years, today Modi’s surgical strike called “demonetization” has been thoroughly exposed as a sham which can even be termed as a scam. This was buttressed by the Reserve Bank of India which finally admitted that 99.4% of demonetized currency has returned back to the government. Demonetization was not only a huge flop but it also caused the loss of over 100 lives and where 15 crore daily wage earners who lost their livelihood for several weeks. Thousands of SME units were shut down. Lakhs of jobs were destroyed. A statement by RBI disclosed that based on the verification process when completed, the estimated value of Specified Bank Notes (SBNs) received as on June 30, 2017, is Rs 15.28 trillion.” This means that just Rs 10,720 crore of the junked currency notes did not return to the banking system. Initial estimates had pegged that around Rs 3 lakh crore worth demonetized notes would not return to the system as they might have been stashed away illegally to avoid tax. Even today there is shortage of currencies and the absence of Rs.1000 currency is much felt. The claim that demonetization helped increase net tax base and revenue by 25% is not based on facts. For previous years - taking the entire financial year - tax returns have grown at an equal or even higher pace, rising from 31 per cent in 2012-13, to 38 per cent in 2013-14. The growth fell to 15 per cent in 2014-15, before rising to 27 per cent in 2015-16, and settling at 22 per cent in 2016-17. Despite facts pointing that demonetization had adverse impact the government continues to rant about the positives.

 

Launched on December 3,1990. Nagaland Post is the first and highest circulated newspaper of Nagaland state. Nagaland Post is also the first newspaper in Nagaland to be published in multi-colour.

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