Demonetization in India

Introduction:

In the year 2014 the Narendra Modi was elected as a new Prime Minister to INDIA. He and his members have won major numbers of seats in election by seeing the leadership skills and his dedication towards wellafare of the citizens to his state as a chief minister (Head of the state, elected based on state local elections). As being a chief minister of Gujarat (A state in India) for 10 years. He changed the whole system with his broad thinking and reduced the poverty level drastically and managed to attaract many big industries by providing beneficial schemes to companies.

And he was behind the achievement of one of the highest solar energy producing state in india. Being marked by the people as spiritual and Hindu religion person as he was alleged behind the hindu and Muslim riots in 2002 but still with his other ideoliges and leadership skills he sustained as a Chief minister and later on became the Prime Minister of India by making citizens belive in his manifesto and agenda.

After Becoming PM he had started many policies to make india strong economically and politically. People of india saw many changes in the nation with his ideologies and leader ship skills which helped him to implement many schemes like Make in India, GST etc. where people started to believe in his schemes and many of the them supported it. This led Narendra modi to take a major step from his agenda to stop corruption. which made to see a sudden fall of GDP in india like never and many who supported him started to criticise him.

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His intension was good but the situations made Narendra modi his team and government face crisis in the Nation.

Implementation and crisis in Demonetization

In the year 2016 November 8th Prime minister of India has announced that two of the higher denomination currency notes that is rupees 500 and 1000 will no longer be legal tender to use. The reason for this implementation was to break the grief of corruption and black money. Though the government had given a dead line 50 days from 9th November to 30th of December for depositing old currency notes and replacing them with new denomination. Many of the citizens did not welcome this move by Prime minister Narendra Modi because people had many concerns how to make sure that they get the new denomination because the two currency notes which were banned was very usefull in daily life as there were very less denominations in india by that time. But no one got to know by that time that there was big plan from many months and many leaders from prime minister cabinet and RBI( Reserve Bank of india) were working on this execution.

The leader of Nation Narendra Modi was always focused on eliminating terrorism, corruption and Black money. His agenda of bringing back the black money from foreign contries did not work well so he and his team made a plan of demonitization. The new denomination and how to execute everything was planned before six months to the execution day. Two main persons in this plan were Narendra modi and RBI governor Urjit Patel .

It is just not that easy to announce and handle the situation. Predicting ,Thinking and planning for each and every risk that could arise and the whole team made sure that not even single news leaked about this in any media. This was the first major success for Narendra modi and Urjit patel because the way they motivatated the team is great. A single news about this issue before execution could have created panic in citizens and oppositions would have protested a lot or many of the corruptors would have deposited the black money to the banks the whole situation would have been uncontrollable and huge loss on new printed notes.

After the successful planning and announcement narendra modi was looking for the response from the citizens were many of the middle class and poor people had trouble were they were forced to stand in bank counters for hours and hours by letting the daily work to over come this crisis Narendra modi has planned that each and every bank in the villages and post office were allotted new currency notes for the middle class and poor people were most of this catagoegy people stay in villages and this category people maintain their savings within themselves for daily life usages.

The second crisis that Narendra modi predicted before execution was bank account of citizens. Were as before 2015 nearly 20% of the rural citizens did not have proper bank accounts. So in the year 2014 august 28 prime minister Narendra modi have initiated a scheme ( Pradhan Mantri Jan Dhan Yojan) that each and every citizen should have an valid bank account to get all the benefits from the government where almost 15 million accounts were opened on the inauguration day and more than 40 million accounts were opend within one month. So all the people who opened this accounts helped them in demonitization situation. In this way PM Modi has predicted the crisis 2 years prior having such plan of demonetization and managed the crisis while implementing.

The third crisis which they expected while planning was distribution of new currency where the whole nation will be required of new notes so RBI and Pm cabinet have made a survey to find the spending of people all over the nation from that survey government has decided to receive the deposits of unlimited and withdrawl of only 4000 rupees (51 Euros)

Per person per day. where 4000 ruppees was more than enough per person for daily spending’s. By this way they tried to distribute currency through banks to all the citizens to meet their daily spending’s.

The fourth crisis that Modi government faced was high amount of currency requirement more than 4000 rupees per day. This problem raised on 3rd and 4th day after the announcement.

But reserve bank of India has planned only 4000 rupees per day and distributed new currency to all the cities based on population and number of bank accounts. So PM modi and team has decided immediately to implement cashless india scheme where the govenement of india had invited all the E-Bussiness and asked them to provide hastle free transactions and Government has encouraged the citizens to use online transactions for purchasing,selling or online transfers by providing discount of 0.75% on fuel 0.5 % off on Tickets booking, 10% off for Health insurance payment and many more discounts to people on various platforms for who ever uses digital payments.

With this move india has seen an new digital era which people never saw such growth in digitalization which it leaded to growth of new E business and many of the citizens now use online payment for everythin in daily life. By this way PM modi and team has not only managed the crisis of currency shortage but also lead to Casless society, a huge growth for E business and also making most of the payments compulsory through online so the circulation of black money also reduced.

The fifth crisis that PM modi and RBI faced was huge number of people hitting the banks and post offices to deposit their savings or withdraw the new currency. This problem raised due to the working hours in india where most of the people work from morning 9Am to evening 5Pm and the Banking times was 10Am to 5Pm.

In the bank working time people were also busy with their works and many of the started to visit at the end of the banking hours. As many people are in the banks at closing time banks were not able close as per banking rules at 4PM all the banking software used to logout from working till next day but citizens did not understand the situation and lead to many major fights and quarrels all over the nation. Which also opposition parties have taken this as advantage and started to blame the PM modi for giving inconveince to people.

Then PM modi has called for all the banking sectors for an emergency meet and asked them for alternatives and with many proposals and pressures from them Modi and RBI governor (as all the banks in india works under RBI ) have come with a bold move by making all the banks in india should work from 8Am to 8Pm and no weekends which leaded that all the banks nearly from November 20th to December30th worked 40 days with no weekoffs and 12 hours a day. This was a big move by PM modi and team which lead to relief in the Nation.

Negative

Prime minister Narendra Modi Main agenda of demonetization was to stop corruption and eliminate balck money in india. But at some point everyone felt that the design of the whole process was done in a hurry and improper implimentations and they did not do proper cost benefit analysis for demonitization and they did not have a backup plans for many issues .

Because these three risks which RBI and Narendra modi did not think off lead to failure in stopping black money returning to banks . They corrupters who had huge black money distributed those money to many poor people by offering so cash for depositing black money into their accounts and with daw them as new currency and return back to the corrupters. This way most of the black money which was not accounted or tax payed returned to the banks and converted into leagel and white currency.

The another illegal activity which helped black money to convert as white money was fraudulent acts by the bank managers and staff. The new currency which was allotted to each and every bank was taken care by the Bank managers and they had all the rights to manage the cash distribution daily. Government has given rules to banks that who ever doesnot have have bank accounts can directicl go to bank a just exchange old currency with new currency with just providing citizen proof. But by the time of demonetization most of the indian citizens had bank accounts, so the bank managers and staff had taken advantage of that policy and started to colleberate illeagally with correptors by demanding the share (example : 20% commission in total amount for exchanging back money).

Correptors had only three choices one was to dump it without exchanging and the next one was to pay 50% fine to the government and pay tax for total amount and convert into white currency and the last was to collebrate with bank staff which was very easy to convert and advantage of converting black in to white money.

Where many of them used the third option which was second major failure to stop black money to convert into legal. Here modi and team has failed to find the risks from banking sector which was the main source for frauds.

PM and the team have failed badly in communicating and motivating banking sector. All the design and plan was done by a team where higher officials were only involved to not let the news leak out but they did not design the strict rules to banking sector which was a place that can be corrupted. At this point government did not even change the rules by knowing that the corruption is happening and the stron reason behind not changing the rule was if the government accepts that corruption happed through bank staff and change rules, every citizen and opposition parties would have protested a lot that the government failed in stopping corruption.

Another biggest mistake by PM and team was considering limit on purchasing gold. Already in india approximately 30% of ileagel money is converted in to gold knowing that they did not give any instrutions to gold selling companies or for citizens on limiting the gold purchase. All the gold companies have taken this as advantage and sold the heavily by attracting the customers by letting them to exchange the black money in to gold which becomes legal. After knowing this immediately government has given instructions to limit the purchase but all jewellery companies had managed the date of purchase and tried to sell huge quantites for their profits but ultimately the agenda of PM, stopping corruption did not work out and failed miserabily. The total responsibility for this situation was the whole team who did not try to find out the loop holes and put regulations on it and failed to control the crisis.

Knowing that huge number of people will be using ATM(Cash withdrawal machine). The team did not focus on the problems that are related to software update and service of the machine. While huge number of citizens started to use the with drawl machines continuously as those machine can be used 24/7. After 4 to 5 days 50% of the manchines were not working and due to software and hardware issues.

As local banks were responsible for repairing them but due to no communication or awareness on such issues the local banks did not maintain service parts and team to work on huge complaints. It took almost 15 to 20 days to make them work again were in 50 days nearly 20 days citizens suffered due to this issue. In this issue RBI and Pm team had no plans in design to face such issue which leaded to disaster plan in usage of withdrawal machine. But no where the government, narendra modi and RBI took the responisibility for failure in plan instead they blamed the citizens for using the machines harshly. In this case government team started to coverup many things and was not ready to face them which made a mark on Modis leadership and government.

As india is one of the destination country for tourism. At the time of demonitization many of the trourists from differ place of the world were already in india and many were in plan to come in that time but government of tourism was not involed in the planning and designing team so they had no idea on this issue. As forigners do not have indian bank accounts they were not able to exchange the old currency.

National media focused on international tourists standing in lines outside the banks to exchange the currency. Foreigners did not have separate schemes they were also given the same amount of 4000 rupees per day. As this situation was telecasted in international media many of them cancelled their visas to india in that period which was a huge loss to tourism department.

In this issue PM and team did not think of involving all the departments to work on the plan. While trying to maintain the secrecy in plan they have not considered many departments which ultimately lead to failure in plan. As a leader PM modi should have selected top officers from each department and should have identified the loop holes and risks from all the corners. Believing one persons idea and over confident on thoughts and lack of back up plans hit the governemet is failing to reach the agenda.

Conclusion:

On the end of December 30 2016 night Narendra modi has addressed the nation for thanking the citizens for cooperating and also mentioned that the problems which they faced were temporary and at the end he told that demonetization was successful. He was mentioning only the good thing happened and how he was responsible for that but he never mentioned the negatives which showed a lot of impact and how they were responsible for that. As a leader his first step of failure was not accepting the failure and mistake . which made that he was not ready to take failure in execution. After demonetization when the reports started to get published there were only few positive sides on it like Cashless economy, Increase in number of tax payers and increace bank accounts. But on the negative side due to demonetization 1.28 lakh crores directly and 5 to 6 lakh crores indirectly wasted on implementing, nearly 15 lakh jobs were lost, 2.2 % of GDP reduced and nearly 150 people were dead.

The main agenda of eliminating black money was a biggest fail were RBI quoted in a report that 99% of cash was returned to banks which the government has helped corrupters to make their black money into legal. Demonetization failed due to improper planning, proper communition to the ground level, less motivation to team,lack of preparation, lack of risk and crcisi management and finally the leader who did not consider any backup plan, wanted to stick to his plan and also denied to take suggetions from Ex RBI governor(Raghuram Rajan) who predicted that demonetization will be a failure, were he was resigned from his post and new governor(Urjit Patel) was appointed who agreed to Narendra modi plan.

When all this started to come out as truths behind demonetization but government or Narendra modi did not accept or took the responisibity to failure and instead started to cricize and blame them as anti-nationalists. As a leader of nation his intension to fight on corruption was right. But dealing as a chief minister for 50 million people and being a Prime minister for 1.3 billion people is totally different which Narendra modi did not consider. whatever it is may be his idea or implementation or planning or execution failed he and his team should have accepeted the failure. But ultimately Prime Minister Narendra modi as a leader and Government and RBI as a team failed to manage the risk and crisis firstly by executing and implementing a unstructured plan and secondly by not accepting the failure then and now.