The present government decided to ban the Rs.500 and Rs.1000 denominations on 08 Nov 2016. The economic survey also declared just before the general budget of 2018 that all the negative impact of the demonetization has been curbed.
However, with the never ending cry for faster economic growth in India, many an experts feel that the demonetarization has not only failed to do something it was primarily expected to, and has spilled the Tax payers’ money for unexplainable reasons.
Before we try to analyze the successes and failures of demonetization, let us first try to understand the objectives behind the actions:
- The primary objective was to flush out large chunk of black money which was suspected to be piled up as cash and to convert the transactional systems into digital, which was a long term objective.
- The step would also help us to reduce crime rates, internally and at borders as it was suspected that the transactions for these actions were done through cash.
Successes of demonetization: Merits that favored economic growth of India
- The pace of digitalization of money transaction quickened as demonetization opened the gateway for the same and we see both govt. and non govt. players in the online transaction space
- The terror rates across the border and in the other parts has definitely increased, which is evident of cut on supply of hard cash for their transactions
- The kick off for demonetization which further now has continued with denominations of Rs.100, Rs.50 and Rs.10 has made it clear to take steps against the money laundering.
- The track systems enabled will leave a mark for all the money movement and therefore has ensured the increase in the tax paying population year on year.
- The banks which were suffering shorter deposits are now overflowing with cash and therefore are ready to provide loans at a lesser rate of interest, compared to earlier rates. This has made the standard of living of a common man better.
- Even though 99% of the money has come back as deposit into accounts, the government has clear footprints of the depositors and therefore the tax evaders are at stake
- With the transparency in systems, the growth seemed quicker and the stocks started becoming bullish and the market saw a splurge in growth after demonetization
- The cost of living reduced as loans became affordable and therefore automobile sales picked, which further promoted manufacturing
Failures of demonetization: Demerits that hindered economic growth of India
- RBI report decaled that, 99% of the cash was deposited back into the system and therefore the govt. failed to achieve the primary objective of demonetization, to eliminate black money from the system
- India being a farmer led country, the farmers and local vendors who only deal in cash were the most to suffer, which was not the motive of the act.
- The Rs.2000 denomination released and exchanged in lieu of the old Rs.500 and Rs.1000/- notes made it very difficult to exchange it for daily needs like milk and other consumables.
- The cost of demonetization was found to be higher than its positive impact.
- Importantly, black money may not be only in cash and need not be only in India. Researching to understand the black money in cash would have helped.
- It can definitely be regarded as a highly under planned project as it has put the normal citizens at stake.
- Many a Indian citizens who did not have accounts also suffered.
- The world bank estimated that the GDP of India would reduce going ahead due to demonetization and it happened so rightly.
- The real estate, which majorly operates based on daily wages saw a complete halt due to the non-availability of money to circulate.
Considering the above aspects, demonetization can be considered more failure than a success as it failed in achieving the objectives set, as discussed above. About digitalization of transactions, the experts believe that it can be done without disturbing the public too.
Tips for GD contenders:
Since you are unaware, if you would be speaking on successes or failures of demonetization on the D day, it becomes essential for you to be ready for both for and against the topic.
Apart, there would hardly an opportunity or two to showcase your capabilities and you must make the most of it. The following 3 tips will help you do that:
Whenever you speak first, always speak data first and provide your analysis for the same later.
Ex: As per the RBI report released in 2017 about the demonetization, 99% of the money has been recovered which shows that the prime objective of the act has failed.
Speaking in this way, makes you more reliable as you extracted real time data and gives you an opportunity to speak for long and be in the eyes of selectors. Who knows, you may not get another opportunity to speak at all.
When you speak against a point, always politely disagree on what has been told and provide factual details about your view. Never disagree in such a way that it hurts the sentiments of the opposition
Ex: I would like to differ from your line of thought where you said that demonetization was an absolute failure, because all the quicker transactions that you and I do today is a byproduct of demonetization and there are many more such which I would like to discuss if time permits.
When you want to support a point raised by a person, ensure you appreciate his point, agree upon it and never close without adding a point of your own. Nothing shines more than originality.
Ex: I sincerely appreciate you brought in point of the costs of demonetization being higher than its expected effects and I agree upon it. I would like to also draw your attention about the views of economic experts on how the slower and planned demonetization could have helped well.
With the above points in mind, it’s essential that you stay cool throughout and ensure you visit Pagalguy.com every day for your one stop preparation of MBA and government exams preparation.
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