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Demonetisation: Ensuring the success of the bold move
Prime Minister Mr. Narendra Modi's bold move demonetising the 500 and 1000 rupee notes from November 9th, 2016 has sent the Indian Nation into a tizzy. While many people acknowledge that it is a much-needed move to curb the black money menace threatening the nation's development, there are genuine reservations on its successful outcome.

Now, into the third week post-demonetisation, the nation-wide scenes of long queues at banks and in front of ATMs are gradually subsiding but the common man is still badly hit. The discontent among people especially in the rural areas is snow-balling into nation-wide protests. Mr. Narendra Modi's government now finds itself trying to explain why all the inconvenience faced by the common man was not anticipated and preventive measures taken.

Though the Government is trying to convey that the hardship would be temporary and the economy would emerge stronger in a few months from now, valid doubts remain. There is the distinct possibility that the entire demonetisation exercise could turn out to be a well-intentioned exercise gone awry.

The origins of black or unaccounted money needs to be understood and taken into account if it is to be effectively curbed. It arises from the human tendency to circumvent rules of the society and enjoy rights without responsibility. There is a spectrum of human behaviours involved in this. At one end, we have the clearly anti-social elements that do not believe in paying taxes and fulfilling their social obligation.

Then, we have 'going with the trend' people who make it a habit to evade taxes on the grounds that there are many who get away doing the same. At another end, we have people who find it difficult to make both ends meet and feel that the tax payable by them is too much of a burden.

It would have made sense if the government had targeted only the first category - the clearly anti-social. Such people hoard cash with impunity and spend extravagantly. Demonetisation would have affected them first if their main route of escape had been closed by making the 500 and 1000 rupee notes invalid for real estate and gold businesses and those involving very high value purchases (say more than 10 lakhs).

The second category of 'going with the trend' people is already being targeted by high value purchases automatically requiring PAN details and similar such measures that ensure compliance. The third category of people who feel over-burdened can be made more tax-compliant by lowering the tax slabs and making income-tax payments even more people-friendly.

By allowing the continued use of 500 and 1000 notes for all purposes except for gold, real estate and very high value purchases, the government would have achieved the goal of curbing the use of black money to a large extent. Simultaneously, large-scale disruption of economy and life of the people could have been avoided.

Counterfeit 500 and 1000 notes can be eliminated in a time-bound manner by replacing the existing notes over several months if the exchanged notes are properly accounted for. Instead of going in for a predominantly monetary approach, had the government gone in for a more sensitive psychological cum monetary approach, the way things have unfolded in the on-going demonetisation process could have been different.

Even now the government can give more weightage to the psychological aspect and make appropriate changes. The badly needed bold move against corruption and black money should succeed in the best interests of the world's largest democracy and humanity in general. 

Editorial NOTE: This article is categorized under Opinion Section. The views expressed in this article are solely those of the author and do not necessarily represent the views of merinews.com. In case you have a opposing view, please click here to share the same in the comments section.
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