Are Demons of Demonetization returning back to India?
1 year ago Staff Writer | Hunt Media Desk 0
On 8th Nov 2016, Prime Minister Narendra Modi had announced the demonetization of Rs 500 and Rs 1000 notes. Since then, the Union Government has vigorously pushing India towards a cashless nation. Many states in India have begun facing the throes of currency and some ATMs are still non functional. Major metro cities in India are struggling for cash where as in villages and towns where fewer numbers of ATMs is expected to be much higher in number.
RBIs recent action do not inspire much faith, Indian’s trust in its bank is already shaken up. Not just crippling of cash but some of the biggest banking fraud we have seen over last few months.
The common man seems to be fearful of the provisions of the Financial Resolution and Deposit Insurance bill and a bail-in clause in this bill even though there is not enough data to show that people have withdrawn their bank deposits due to this scare. But all these factors have been viewed as an assault on the faith Indians have long had over the banking system. On the other hand, through online digital transaction, people’s money is being stolen from their accounts.
The real picture is still somewhat blurb as experts have cited several reasons about the cash crunch across Andhra Pradesh, Madhya Pradesh, Bihar, Jharkhand, Gujarat, Karnataka, Bangalore and many other places. The main reason for this is more than the half circulation in currency of Rs 2000 notes because of this; the farmers have already started feeling the pinch badly. The fears of demonetisation have come back for them. They are in trouble not only because this is the harvest season, but also because they soon need to prepare for next round of sowing.
In an interview with DTE, Ramanjaneyulu GV (executive director of Hyderabad- based center for Sustainable Agriculture) said “The harvest season is on and whatever crop the state government procures, it pays the farmers through cheques. But when farmers are going to withdraw money from banks, they return empty-handed. So they are not able to fulfil immediate needs,” this is the time when farmers purchase seeds, fertilisers and equipment for next round of sowing, which starts in June-July. “If farmers don’t have the money, how will they buy all this,” asks Ramanjaneyulu. He also observes that the cash crunch in villages is not a recent phenomenon. “From the last two months, the bank branches in villages were facing the deficiency of hard cash. It has reached peak now,” he adds. Farmers are in complete dark because there is no word from the Telangana government as to how and when the situation would ease.
Is printing of Rs 2000 reduced? Is current shortage a result of continuously withdrawing of Rs 2000 notes? On 9th February 2018 in Lok Sabha, Mos Finance P RadhaKrishan did not revert back to the specific question “Is the printing of 2000 notes is stopped?” This shows the government did not strategize before demonetization.
The study also quotes government sources to say printing of Rs 2000 note is being reduced or stopped. In 2016-17, when remonetisation was achieved, there was no Rs 200 denomination note. However, in 2017-18, the circulation pace of Rs 200 denomination has increased something which has happened with notes of other small denomination.
The government have an eye on payments through digital mode. In March 2018, digital payments have become far more prevalent, with electronic payment wallets and payment banks ever more popular and supported by mobile phone apps that allow people to transact. After social media attacks, Finance Minister Arun Jaitley wrote on twitter that, there is more adequate currency in circulation and the cash crunch is temporary and it caused due to sudden increase in unusual demands in the several parts of the country. The government is getting accused by the people of India because they think that, the government has carried all the cash to Karnataka to win the elections. Rising operational cost and switching to internet banking and digital transaction have been responsible for shutting down of ATMs.
While pushing towards the Cashless economy, the government had brought few benefits, but the instantaneous shortage of currency would upset the businesses especially in informal sector.
Meanwhile, the SBI research earlier says that currency in circulation in the economy has surpassed its pre-demonetisation level by March 2108 (Rs 17.98 lakh crore to reach Rs 18.29 lakh crore). 75% of the currency in circulation was held by public as on 25th Nov 2016 after the announcement of demonetisation which later rose to 96% by the end of 2016-17. This statistics shows that the cast withdrawal has increased than before and secondly the country needs more cash than before due to heightened economic activities. The only way to surpass the cash crunch in future is for the RBI to develop a more sturdy system of predicting cash demands and ensuring its supply.