Demons of Demonetization

Demonetization has been one of the biggest decisions of the current government. It is a bold or audacious step. Not many in the common public knew it was a possibility, let alone the fact that it has happened before. The fact that the government under Prime Minister Manmohan Singh tried to change it is another story.

The rhetoric that started out as rooting out corruption (probably because according to people, ministers are the most corrupt and the people caught are mostly ruling parties members) has turned to cash-less transactions. Paper has its own problems, but as the calamity in Chennai has highlighted plastic money comes with its own set of problems. No electricity and Internet cannot help in smooth transactions. 

High dependency on technology is also vulnerable to hacking and if Hollywood movies have got their calculations right anybody with the right skills and wrong intentions can steal money from millions of honest tax payers. On a serious note hacking is a clear and present danger. 

Usually banks have solid firewalls, but occasionally one hears of the odd person who breaks through. On the other hand, credit card frauds are not rare and one reads about them at regular intervals. It usually happens to someone else somewhere else, but if we are going digital we may as well remember that. 

A high percentage of transactions in India are done through cash and in areas where connectivity is not a usual resident. Add to that the fact that cash gives the business people the advantage to bargain. The various auxiliaries of business like commission agents and facilitators will probably go out of business, which for many will be good riddance, but for some others are necessary negotiators. The agents who will want to fight for survival will be instrumental in increasing prices to accommodate compulsory taxes.

There could be many more repercussions than the ones mentioned above.

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