The last two months were a testing period for all Indians, primarily the middle and the lower class as they were forced into long queues at the ATMs and Banks by Prime Minister Narendra Modi. Without caution, Modi invalidated over 86 per cent of the country's cash in circulation, on November 8. "The 500 and 1000 rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper," Modi had announced, later seeking a 50-day period until the end of December to fix all troubles caused by demonetisation.
With several conditions and a promise to curb terror funding, counterfeit currency, and unaccounted wealth which revealed to be worth 20 per cent of the nation's GDP, NaMo gambled. He gambled his government, he gambled his votes, but most importantly, he gambled the Indian economy. In his November 8 speech, Modi said, "To break the grip of corruption and black money, we have decided that the 500 rupee and 1,000 rupee currency notes presently in use will no longer be legal tender from midnight tonight, that is 8th November 2016. This means that these notes will not be acceptable for transactions from midnight onwards. The 500 and 1,000 rupee notes hoarded by anti-national and anti-social elements will become just worthless pieces of paper."
He added, "The rights and the interests of honest, hard-working people will be fully protected. Let me assure you that notes of 100, 50, 20, 10, five, two and one rupee and all coins will remain legal tender and will not be affected." The Prime Minister also announced several steps to ease people's troubles. They were:
1. Persons holding old notes of 500 or 1,000 rupees can deposit these notes in their bank or post office accounts from 10th November till close of banking hours on 30th December 2016 without any limit.
2. Thus you will have 50 days to deposit your notes and there is no need for panic.
3. Your money will remain yours. You need have no worry on this point.
4. After depositing your money in your account, you can draw it when you need it.
5. Keeping in mind the supply of new notes, in the first few days, there will be a limit of 10,000 rupees per day and 20,000 rupees per week. This limit will be increased in the coming days.
6. Apart from depositing your notes in your bank account, another facility will also be there.
7. For your immediate needs, you can go to any bank, head post office or sub post office, show your identity proof like Aadhaar card, voter card, ration card, passport, PAN card or other approved proofs, and exchange your old 500 or 1,000 rupee notes for new notes.
8. From 10th November till 24th November the limit for such exchange will be 4,000 rupees. From 25th November till 30th December, the limit will be increased.
9. There may be some who, for some reason, are not able to deposit their old 500 or 1,000 rupee notes by 30th December 2016.
10. They can go to specified offices of the Reserve Bank of India up to 31st March 2017 and deposit the notes after submitting a declaration form.
11. On 9th November and in some places on 10th November also, ATMs will not work. In the first few days, there will be a limit of 2,000 rupees per day per card.
12. This will be raised to 4,000 rupees later.
13. 500 and 1,000 rupee notes will not be legal tender from midnight. However for humanitarian reasons, to reduce hardship to citizens, some special arrangements have been made for the first 72 hours, that is till midnight on 11th November.
14. During this period, government hospitals will continue to accept 500 and 1,000 rupee notes for payment.
15. This is for the benefit of those families whose members may be unwell.
16. Pharmacies in government hospitals will also accept these notes for buying medicines with doctors’ prescription.
17. For 72 hours, till midnight on 11th November, railway ticket booking counters, ticket counters of government buses and airline ticket counters at airports will accept the old notes for purchase of tickets. This is for the benefit of those who may be travelling at this time.
18. For 72 hours, 500 and 1,000 rupee notes will be accepted also at
• Petrol, diesel and CNG gas stations authorized by public sector oil companies
• Consumer co-operative stores authorized by State or Central Government
• Milk booths authorized by State governments
• Crematoria and burial grounds.
These outlets will have to keep proper records of stock and collections.
19. Arrangements will be made at international airports for arriving and departing passengers who have 500 or 1,000 rupee notes of not more than 5,000 rupees, to exchange them for new notes or other legal tender.
20. Foreign tourists will be able to exchange foreign currency or old notes of not more than Rs 5,000 into legal tender.
21. One more thing I would like to mention, I want to stress that in this entire exercise, there is no restriction of any kind on non-cash payments by checks, demand drafts, debit or credit cards and electronic fund transfer.
Consequences
What ensued was utter chaos. While the corrupt and the rich did what they do best, use the poor to stack their money, banks remained flooded with customers, most of them clueless of what the pradan mantri had said. The general idea was that the ban of the two high denomination currencies means everybody's money is at stake. Many scrambled to withdraw cash for daily use, standing in line for hours waiting for their chance. Bank employees were overworked, aam aadmi was confused and exhausted, and the Opposition had the perfect opportunity to point their fingers at the ruling party.
By December 8, a month after the announcement, 100 people were reported dead due to causes directly or indirectly related to demonetisation. Shortage of new notes led to an acute liquidity crunch in the economy. Many held off discretionary expenditure like weddings. To sum up, the government took a step in the right direction, but stumbled along the walk. To make matters worse, the two months following the notification of demonetisation was filled with several tweaks of ruling.
Implications
Eventually, Modi's government lost its objective. From waging a war to curb black money, the administration soon began promoting India towards becoming a cashless economy. Exactly a month after the notification, the Modi government offered a slew of incentives to push Indians towards digital payments, including discounts on the purchase of fuel, railway tickets, and insurance policies. Modi Sarkar even launched the Bharat Interface for Money app for "fast, secure, and reliable" cashless payments.
"It's a part of our campaign to incentivise people, to persuade people. I think incentivising people to go digital and shed cash, to the extent it is possible, is a good development for the economy," Finance Minister Arun Jaitley said.
Tax Raids
Officials of the Income Tax Department have been on their toes, unearthing copious amounts of currency from bank officials, politicians and builders, in a series of raids.
In his recent address to the world, the PM said the war against corruption is far from over, and while we can't ignore the amount of pain and troubles undergone by the people due to mismanagement on behalf of the administration, we think if it promises a better future, so be it.
