Is Demonetization Backfiring on the Modi Government?
Since the demonetization of high-value currency notes, a series of events and changes have occurred that challenge the initial skepticism surrounding Prime Minister Narendra Modi's decision. This analysis delves into the various impacts of demonetization, as reflected in a recent interview Mr. Modi shared with India Today.
Neutralizing Illicit Cash
On the positive side, the demonetization has effectively neutralized large amounts of illicit cash held by terrorists, Maoists, and human traffickers. According to official reports, Rs7636 crore unaccounted money was identified in co-operative banks in Karnataka, while Rs4300 crore undisclosed income was uncovered during raids across the country. This indicates that the offensive against black money took a significant step forward. Additionally, over 5000 notices have been issued to identify money hoarders.
Structural Reforms and Big Data
The transition from physical to digital transactions has accelerated this process. For instance, the number of digital transactions has spiked. Netbanking has seen a remarkable increase, with usage going up by 200%. This is not just a temporary measure but a long-term structural change, as the government aims to make every transaction traceable. Digital transactions offer more transparency and accountability, as the Modi government has zero tolerance for corruption.
Economic Impact and Peace Across the Nation
The economy has shown resilience despite the initial turmoil. Despite concerns over rural India's adaptation to the new cashless regime, the sown area under Rabi crops has increased, suggesting a positive impact on agriculture, albeit with some pain. Moreover, the relative peace in Kashmir and other regions validates the government's stance that part of the violence was fuelled by illicit cash. Large-scale raids on black money hoarders have also vindicated the move.
Political and Electoral Impact
Poll data after demonetization has been relatively positive for the Modi government. BJP has seen a winning streak in post-demonetization elections, even as Congress opts to wait for the budget session before making detailed criticisms. The government's handling of this unprecedented move has garnered some public support, as evidenced by the smooth conduct of various parliamentary sessions.
Challenges and Aftereffects
While the initial chaos has subsided, the government now faces the task of addressing the aftereffects and transitional challenges. There is a need to ensure that cashless transactions are cost-effective and accessible to everyone. Banks must waive transaction fees on cashless payments, and the government should introduce a fiscal stimulus targeted at poor rural regions to mitigate the impact of black money holders' reduced expenditures.
In conclusion, despite immediate challenges and skepticism, demonetization has brought about significant changes that align with the government's long-term vision for a cashless, transparent, and corruption-free society.