Demonetisation Anniversary
It has been a year since since the Narendra Modi-led government scrapped Rs 500 and Rs 1,000 notes, in a bid to flush out black money and weed out fake currency. A lot has been said on this from then on – critics have hit out at the government, supporters have hailed the move, some have claimed digitisation has flourished and data has shown most of the Rs 500 and Rs 1,000 notes have come back to the central bank. So what has happened till now, as we take a look at how the effect of de-mon has grown over. While demonetization conjures up images of long serpentine queues outside banks, the other reality was that of the staff spending many sleepless nights inside bank branches and offices, which several of my colleagues in the industry will vouch for.
Compared to other large economies, India continues to be a laggard in terms of digital infrastructure. Based on data from Bank for International Settlements as of 2015, the density of PoS terminals and ATMs is significantly lower in India. The picture remains largely the same even after demonetisation. Despite a near doubling of PoS terminals after demonetisation, India is still ranked last in terms of number of PoS terminals per million people. One reason for the poverty of digital infrastructure is overall poverty. Per capita incomes of all the other countries shown in the chart are higher than that of India, and the data shows a strong correlation between cashless infrastructure and per capita incomes.
Finane Minister Arun Jaitley said that dealing in cash has a cost and a clear trend is emerging in the country which shows a shift towards digital transactions. ‘Excessive dependence on cash has its cost. It is not just cost but it is a curse on both society and economy,’ he said. There is clear subtle change taking place in the country and there is a shift towards digital payment, he said. Digital transactions and transactions through banking instruments is going to grow.
Positive Impacts
Demonitisation was one of the crucial decisions of the Modi government against the black money and now the country is progressing towards a digital economy
demonetisation had a major positive impact on the real estate sector and turned out to be a blessing in disguise in the medium-to-long term, especially for buyers of mid income and affordable apartments. The aftermaths of demonetisation have perhaps come to a full circle. While the industry continued to grapple with hope two more structural reforms such as the Real Estate (Regulation and Development) Act 2016 and the Goods and Services Act came into effect earlier this year. Time and again the back-to-back policy regulations reinforced a slowdown of sorts in an already sluggish market. The residential sector in particular was the worst affected. New projects dried up, home sales slipped to newer lows and piles of unsold stock remained untouched.’
‘Healthcare industry experienced a major setback because of the demonetisation. There was a considerable delay in the treatment for patients as the private hospitals, clinics and some doctors refused to accept the ceased currency notes during initial stages but the notification from the Central government that explained ‘hospitals that function under state and central government ownership will accept old notes’ eased it. But indeed the note ban compensated its flaws with its merits. It increased the digital transaction that forced the pharmacies to have legal invoicing and billing of exact amount for every medicine bought and sold which in turn prevented the distribution of prescription medicines over the counter.’
Pros and Cons
* Digital payments saw sharp rise
* Withdrawals from ATMs declined
* NEFT/IMPS did not register much change
* Growth in the number of PoS terminals shows sharp increase
* But still, density of PoS terminals and ATMs less in India
* Govt claims black money transactions reduced a lot
* Clear subtle change taking place in country
The Finance Minister said he was ‘more than satisfied’ with the new direction the economy is moving. ‘Domination of cash in any economy, especially having 86 per cent of currency as high denomination notes, and excessive cash transactions lead to tax evasion. In such cases the taxpayers have to bear the burden, of the evaders too,’ Jaitley said. 8 November 2016 will be viewed with pride by next generation as it provided them a fair and honest system to live in.
Needless to say, demonetisation tested the banking system to the limits and the industry responded with military-like precision to accomplish the gargantuan task of remonetisation.