I am not a economics specialist but from what I understood, there are 2 key points in the proposal and that's the crux :
- Recalling currency notes with denominations over Rs. 50.
That's it. It was not about releasing newer version of the notes. So little unclear why the 2000 note is released.
- Do not question those who bring the money back into the banking system whether it is 10000 or 10000 crores.
Even this is not being followed. People depositing over 2.5 lakhs are getting notices.
While the second is fine, the first is a big question for everyone. With newer notes and that too of higher denomination than current notes, will this lead to people accumulating again? Even if we think of the case that lesser amount is being printed in the newer version, its still an amount which people can store and keep under rotation. The total amount might be less but it still can defeat the numerous benefits that can be achieved by eliminating the possibility of "higher value cash transactions".
The Rs. 2000 note is now making few people to start thinking now, will there be a follow up "recall" so that those who still don't change have one more blow? Yes, some people might still not be willing for this big change and continue to find newer ways to earn and keep it undeclared and maintain cash.
Even before this big change, there is already a continuous decline in the number of people who do the so called "zero business" or business where the declared amount is so low compared to actual earning. But it was not a steep decline. Hope it will be steep now.
Finally, what I feel is that while new rules are written for good, people continue to find loop holes. If not high impact decisions like this which impact all households including those below 2.5 lakhs of fully declared and actual income, there is definitely a need for regular revision of the rules as people crack existing ones. I don't how much it costs for reprinting, logistical overhead and all other costs for
this kind of an exercise but these may be needed few more times.
Several dreams of middle class and below would come true if prices come down as targeted. Hope this government, the support they are getting with the ground work of organisations like Arthakranti and the support from the banking/financial companies continue for next several years !
References:
Video: https://www.youtube.com/watch?v=Jvu8SvG36Uo&t=20s
http://indiaarising.com/15-mind-blowing-immediate-benefits-demonetization-media-will-never-tell/
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