Want to understand demonetisation in detail? Banker-turned-author Chetan Bhagat decodes for you
In his latest Facebook post, banker-turned-author Chetan Bhagat explained in detail about the finer points revolving around demonetisation.
New Delhi, Nov 18: Want to understand demonetisation in detail? What are its advantages and disadvantages? It is always better to understand the nitty gritty of demonetisation, as it has a direct impact on all us.
In his latest Facebook post, banker-turned-author Chetan Bhagat explained in detail about the finer points revolving around the scrapping of Rs 500 and Rs 1,000 currency notes, announced by Prime Minister Narendra Modi on November 8.
Bhagat, the author of best-selling book, Five Point Someone, said, "We should support demonetisation, but keep reminding the government to iron out the execution issues."
Read his entire Facebook post here.
"My
Take
on
Demonetisation
========================
Many
have
asked
me
to
give
my
views
on
demonetisation,
suggest
any
positive
ideas
and
explain
the
benefits
and
issues
in
simple
terms.
Since
it
is
not
possible
to
do
it
all
in
a
few
tweets.
Here
is
my
take
on
it,
both
the
MOVE
itself
as
well
as
the
EXECUTION
of
it.
Also Read: China warns India: Demonetisation could prove to be a 'costly political joke'
THE
MOVE:
Benefits:
1) It shows government's seriousness to tackle black money. This signaling effect alone is a huge benefit to the nation where many evade taxes.
2) It will ensure a significant part of the black money gets back to the government. It's not true that nobody gains from the money burnt/thrown away. (See next point)
3) The old money not swapped in banks is effectively the government's Profit. Say 17 lakh crs of total money existed in old notes, and only 13 lakh crores comes back. For remaining 4 lakh crores, the government can print new notes, and keep it themselves. Hence, the government does stand to make a lot of money in this (which can be then used for people)
4)
It's
nice
to
see
a
PM
who
works,
has
innovative
ideas
and
wants
to
make
a
change.
We
have
had
leaders
who
sat
quietly
and
did
little.
It
is
good
to
see
a
man
of
action.
At
the
same
time,
like
any
policy,
there
are
some
issues.
[Also Read: Cash limits eased for farmers, marriages; halved for exchange]
Issues:
1)
Execution
of
such
an
exercise
in
India
is
no
joke.
We
just
aren't
technically
ready
to
do
this
in
a
smooth
manner.
(That
is
why
we
are
facing
some
execution
issues,
which
I
get
into
later.)
2) There are some tricks still people can use to swap black money into new money. It will reduce the amount of black money recovered.
3) There is a huge cash economy in India. It isn't 'black'. It's just cash. To suck up so much liquidity will lead to a slowdown and losses for a lot of people, for no fault of their own. The slowdown in economic activity will cause lower profits, and in turn lower taxes for the government.
4) A potential crash in real estate prices. While some want property prices to fall, a huge drop can cause an economic shock, reduction in bank collateral values etc., again leading to a recession.
5) The exercise by definition involves everyone swapping their money after showing their credentials. In effect, everyone has to prove they are innocent and have clean money. This is somewhat invasive to citizens, and while there is no other way, it remains an issue.
6) The exercise would be expensive, and that cost needs to be taken into account.
7) It's a jolt to our stable monetary system. Doing it again and again will cause people to lose confidence in our currency. It's really a one-off, and even that destabilizes things.
8) The tax department may use it as an excuse to harass people later, with endless questioning about the extra bank entries.
Net
Effect:
Overall,
demonetisation
is
a
good
move.
Given
the
extent
of
black
money
in
the
country,
and
the
tiny
taxpayer
base,
something
had
to
be
done.
It
had
to
be
drastic.
It
has
been
done
now.
We
should
now
do
what
it
takes
to
make
it
succeed.
THE
EXECUTION:
As
important
as
an
idea
is
its
execution.
There
clearly
have
been
execution
issues,
causing
pain
to
a
lot
of
Indians
who
have
wasted
a
lot
of
productive
time
in
queues.
While
doing
things
for
the
nation
is
good,
one
need
not
have
to
suffer
because
of
bad
planning
or
someone
not
thinking
things
through.
The
good
and
bad
of
the
execution
are:
Good:
1.
It's
happening,
and
still
the
country
is
chugging
along.
Banks
across
the
country
are
slow,
but
doing
their
bit.
There
is
no
mass
hunger,
or
calamity
so
far.
Thank
God.
2. Government is taking steps to ease the pain. The change in limits helps. The banks are also devising ways to manage the crowds.
3. People in India are on the whole, taking it well.
Bad:
1. Someone didn't plan the logistics well - it is one thing to make an excel spreadsheet of number of bank branches and the people involved. It is quite another to when you deal with India's reality on the ground. There are bottlenecks galore in this exercise - whether printing of notes, uncalibrated ATMs, or limits to the number of cash vans. One can say whatever about the secrecy required, but it seems that while finance professionals sat and spoke up in the meetings, industrial engineers and operations research experts probably did not to the extent required. We are seeing the fallout now.
2. Citizens do not have to take so much pain. Inconvenience is one thing, suffering quite another. To say bear it in the name of patriotism is not listening to the issue - the execution is not efficient. It is the same as how people say - "Oh, the temple is dirty, bear it in the name of God." Sorry, God had nothing to do with it. The temple management didn't keep the temple clean. Same ways, patriotism has nothing to do with the fact that someone didn't plan the ATMs better or didn't make the new 500-Rs note available early.
FINAL
CONCLUSION
AND
IDEAS
FOR
SMOOTH
EXECUTION:
In
final
analysis,
we
should
support
demonetization,
but
keep
reminding
the
government
to
iron
out
the
execution
issues.
Some
ideas:
1. Online appointment booking for banks.
2. Easy forms, which can be pre-filled. Faster check-outs at banks.
3. Hiring interns at banks for short term, supervised by existing employees.
4. Opening banks 24 X 7 after new hires come in.
5. Supplying enough notes to banks as fast as possible.
6. Fixing the ATMs
7. Declaring one or two holidays (not for banks!) for people to get their finances in order
8. Removing withdrawal limits as fast as possible.
9. Having empathy for people in lines, from the highest levels of government.
10. Giving an incentive to people to come to the bank. A meal coupon would go a long way too.
I hope the above helps you understand demonetization better. I also hope you focus on the making the exercise work, which means supporting the idea and yet demanding better execution. It also means not to get sucked into any propaganda or political drama.
Do share with others if you think this will help people get some clarity on what is going on and what needs to be done.
God
bless.
Thanks,
love
and
Jai
Hind,
Chetan
Bhagat"
This is his Facebook post.
OneIndia News