‘The Phoenix rising from the ashes’ popped into my head one day while I was casually skimming through the demonetization news. As a child I had read in Greek mythology – the phoenix is a mythological large bird with a long life span. Cyclically it settles in to its nest of twigs which then burns intensely, reducing the bird and the nest to ashes. And from those ashes, a fledgling phoenix rises – renewed and reborn. That’s what I hope this demonetization wave will do for my beloved country. Like a phoenix India will rise from the ashes of despair and soar.
Our honorable Prime Minister Mr. Narendra Modi on 8th Nov’16 made a historic announcement of phasing out our two major currency denominations of Rs. 500 and Rs. 1000. It is one of the boldest decisions, I have seen any Prime Minister make, at least in my lifetime and I have been around for some time now. This is a major re-boot for our financial system and a mighty kick to the black money both hoarded and in circulation.
As part of the Demonetization process, our Prime Minister had announced the decision to withdraw the old higher denomination notes of Rs 500 and Rs 1000 in circulation and issue new currency notes of Rs 2000 and Rs 500. This as per him and noted economist and financial experts, aims to address the unaccounted money problem, corruption, the issue of fake currency and funding for terrorism. Reduction in cash transactions will help multiply digital and plastic transactions such as cheques, credit card and mobile wallets. This measure would improve the liquidity in the overall system and could lead to lower interest rates in the long term. Demonetization of high value currency notes in India will provide a big boost for Digital India.
Demonetization, in combination with Aadhar number linking with Jan-Dhan Yojna, could be a decisive move towards digital money economy, which can have significant benefits for the country in the long term. In my opinion, it will far outweigh the inconveniences caused due to logistical issues in the process of replacing 86% of the currency in circulation.
These measures are expected to result in higher tax revenues, higher GDP growth and lower interest rates. Having said that, a major portion of our Indian financial system is traditionally used to dealing in physical cash, the transition is not going to be easy. As evident there has been an initial natural resistance towards the big change.
I am a premium account holder with a leading private bank; I also stood in the sun, with the common man in a long queue for a long time – to exchange INR 4000. It wasn’t that dreadful, as its being made out to be. We are used to standing in queues. We stand in queues for movies, cricket matches, for a new Apple iphone and even when we go to cast out vote. There are always ways to mitigate problems and alleviate exasperation. Let’s endeavor to ease out inconveniences and not be a part and in some cases further problems and miseries.
We have to learn from history and take cognizance of the fact that demonetization has been used by countries like USA and Australia too, for the same reason. And it worked for them. In the 1960’s USA phased out all currency denominations above $100. It worked for them, it will for us too.
Amid the crunch, some businesses are offering interesting methods to get the illegal notes exchanged. Gyms, Salons, boutiques, etc are offering to take in and offering discounts / long-term memberships for people seeking to get rid of wads of illegal cash. Cash dumping has also been witnessed. People are using ‘cash mules’ to get their money exchanges at banks.
As I pen up, I would like to say – In India normally change is slow however under duress change is swift. Soon the brouhaha will die down and we will see a new India – a cleaner India rise from the dust.
The phoenix will rise from the ashes!