Nobel Laureate Amartya Sen recently in a statement slammed the move to demonetise the currencies as authoritarian. He said that it declares all Indians as possible crooks. This brings many to doubt on the whole move of demonetisation. Whether demonetisation is positive or negative, we will find out in this article.
If we look at it, it has both positives and negatives. These are enumerated as follows.
- Positives of demonetisation
- It will help thrash the concealed income. Now, if you want to make it white legally, then you have to pay around 50% of penalty.
- This ,in turn, could help in boosting revenue.
- This may provide a cushion to an aggravating fiscal deficit.
- With greater revenues in hand, the government ,in turn ,could effectively prepare and implement welfare schemes for the poor.
- It can be considered as a major leap towards a “cashless economy” , especially, when we consider the psychological factor post-demonetisation.
- Cashless economy ,in turn ,has its own pros like transparency in transactions and in-turn lesser accumulation of wealth. Lesser expenditure in printing currencies can also be one of it. (This ,in turn, has an ecological dimension as well: trees).
- Banks are seeing a greener phase. The deposits have spiked considerably. This would , in long-term help in soaring the investment in the economy due to cheaper loans.
- Demonetisation is a major hit on the counterfeit currency(FICN) users, in particular, terrorists who used them to finance terror equipment.
- In long term, it also acts as a warning to those who opt concealing their income.
- Negatives of demonetisation:
- Concealed black income constitute only around 5% of the total black money.
- Sudden demonetising has hit hard on the poorer sections like:
- farmers: no money to but Rabi seeds, equipment etc.
- BPL: who keep their income in cash than in accounts. There are many who still do not have a bank account and an ID(despite PMJDY and Aadhaar) .
- Poor woman: who manages the finances of a household through savings.
- The GDP of the economy would see a decline over the few quarters as the demand of many commodities has dipped. India is a consumption based economy and thus, reduced consumption has a grave impact on the economy.
- Many businesses have seen a decline in their profits.
- MSMEs generally keep their money in cash with them. They could be hit hard. This, in turn ,has a negative impact on employment generation and poverty(MSMEs generate around 128 million jobs in our country).
- New counterfeit notes have already been created.
- Psychological breakdown and deaths.
Amartya Sen has taken a view against demonetisation by attributing it as authoritarian. His view is more or less “socialist” in nature as he has invoked the problems surrounding the common man and the people of the lower strata of the society.
Though the move of demonetising the currencies appear to be one with negative outcomes ,in long -term could prove to be a considerably positive measure for all the stakeholders alike.