Black Money is Indian economies ‘ biggest challenge. PM Modi’s bitter pill as a remedy for Black Money must be consumed by the nation. ‘ Demonetization of currency notes is welcome step, but it is not welcomely executed. Banking system is failing to support this huge remedy, writes Faiz Askari, founder editor, SMEStreet.
NEW DELHI: A major portion of country’s entire cash currency was in the form of Rs 500 and 1000 notes, now with the surprise announcement of PM Modi, on 8th November 2016, the entire country came to know about the fact that a major portion of their cash in hand is no more legal.
This step have made the black money holders and hawala traders a shock as they couldn’t do anything as a remedy for this crisis. But at the same time this announcement has also made the common man worse effected. Small traders, vendors and common man are hugely effected.
But the main problem of the whole episode was yet to arrive, this came in the shape of unproductivity of our banking system.
Now, the scale of the problem is exponentially growing and multiplying because of the inefficiency of our banking system which also at the same time has a strong justification of serving several thousands of people going empty handed from banks and ATMs.
As a reaction, industry bodies are planning to submit a representation to the government to remove the limit on money withdrawal from the banks stating that their day to day businesses mainly runs on cash.
What could be the positive elements of this whole decision are:
There is a possibility of banks reducing the rate of interest in loans.
The loan or credit availability can be made more efficient.
The MSME entrepreneurs usually pay their labourers in between 7th to 10th of the month. Also, they have a day to day expenditure of atleast Rs 10,000 on logistics etc. Such MSMEs are in a problem situation with the demonitization of currency notes. However, this
Also, most of the labourers, the daily wage earners, don’t have a bank account which restricts payments through cheques too.
Moreover, on 8th Nov eve, when Prime Minister Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 currency notes, everyone welcomed the decision assuming that the banking system can support this announcement of Prime Minister. But, due to several reasons, this best possible scenario of execution couldn’t be achieved.
The ultimate objective of this decision was about controlling black money and uplifting country’s economy. So, it is a welcome step but the crisis it is causing to the common man cannot be welcomed. Although it is temporary crisis but the timelines could have been controlled or restricted. But in the longer term, it is likely to bring down the black money circulation in the country, and ultimately positively impact on country’s GDP.
However, we must support the initiatives that are been taken towards nation building, a well planned execution could be far more warmly welcomed.