SEQUEIRA: Indian demonetization is misguided

Costs of demonetization to Indian society, economy have vastly outweighed benefits

The Indian government attempted Nov. 8 to embark on an unprecedented journey to demonetize the Indian currency, opting instead to forcibly upregulate the use of credit and debit cards. Specifically, the Indian government, led by Prime Minister Narendra Modi, announced the discontinuation of the 500 and 1,000 rupee notes, opting instead for new 500 and 2,000 rupee notes. This endeavor consisted of a chronic attempt to decrease the quantity of cash bills in circulation, especially since clandestine and nefarious dealings, as well as terrorist activities, often find their means through cash. Even though the Indian government does have India’s best interest at heart, its lack of attention to detail and its misdirected attempt to combat corrupt and terrorist dealings might ultimately cause the second most populous nation to find themselves belly up.

The demonetization introduced by the Indian government left many citizens infuriated, especially since the whole overhaul was so poorly planned. Specifically, the Indian government set up kiosks to allow those holding demonetized currency to exchange them for updated currency or add credit to their bank accounts. However, due to an unexpected turnout, the queues to exchange currency consisted of thousands and thousands of individuals in the scorching sun and humid weather. As a result, more than 50 individuals died simply from waiting in lines to exchange notes. Moreover, in order to comply with federal mandates, hospitals were ostensibly forced to accept only credit payments and refuse cash. Therefore, several individuals in desperate need of medical treatment were turned away since India’s healthcare system allows for medical institutions to turn away patrons if they cannot afford the bill. Overall, reports estimate that approximately 100 people died from the demonetization debacle.

Hospitals were not the only institutions to refuse cash payments during the onset of demonetization. Transportation systems, merchandise and especially agriculture took a hit when demonetization first found its foothold in the Indian political and economic arena. As all three aforementioned domains are chiefly reliant on the unhindered flow of cash, all three took a brutal beating in the first months of demonetization. In fact, all three domains are now scrambling to find funds and resources to remain on schedule, while ensuring that there exists equally enough demand for their products, especially since most consumers would have used cash to purchase products. As a result of this and other factors such as the U.S. presidential election, the Indian stock market crashed to a six month low.

Many scholars have criticized the demonetization attempt simply because they believe that it will not significantly affect the quantity of clandestine, nefarious and illicit activity that occurs in India. Moreover, the correlation between the use of cash and such illicit activities is primarily unfounded, according to experts. Indeed, while demonetization may instigate a transient decrease in the slush funds of the “shadow economy,” those who engage in illicit activities will not be chronically reliant on cash. However, the population of India that is negatively affected by demonetization is not those that engage in illicit activities, but rather those that do not. In fact, it was those who were involved in small businesses as well as unorganized labor — but were not engaged in criminal or illicit activity — who lost their jobs and domiciles due to demonetization.

If the Indian government was genuinely in pursuit of a drastic reduction to nefarious activity, then demonetization was a convenient, but ultimately insignificant solution. A better and certainly more prudent and efficacious solution would consist of eliminating corruption from the government in India. Sure, it’s easier said than done, but by enacting a policy such as demonetization, the Indian government not only minimally affects illicit activity, but actively hurts its upstanding citizens. India is in desperate need of an omniscient review board that is immune to corruption in order to ensure that greasing palms is no longer a significant and ubiquitous issue. Just as it has made strong efforts to make India clean and green, India must employ grassroots organizations to ensure that corruption, a true contributor to illicit activities, is drastically reduced. Only then will we see the second most populous nation of the world become the democratic superpower it should be.

Sean Sequeira is an Opinion columnist for The Cavalier Daily. He can be reached at opinion@cavalierdaily.com. 

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