INDIA: CURRENCY DEMONETISATION AND THE WAY AHEAD

Abstract

In the backdrop of the recent Demonetisation promulgated by the PM on the night of 8th Nov.,2016, this paper attempts to put together the opposing views among economists, highlight the direction in which cash is headed and also lists the way ahead for India to emerge as a cleaner and transparent marketplace. Some economists opine recent demonetisation as a big bang structural reform the Indian economy needed. Almost all asset classes were reeling under huge price bubbles and assets like a decent house, gold had almost become inaccessible for the aam aadmi. In the short run, definitely the entire nation will pay the costs, however in the long run, this step will prick the asset price bubbles and cause prices to hover close to their real values, give a hit to parallel economy and reduce overall crime. On the other hand, for some economists, this demonetisation is more of a palliative to suppress the ills in the economy. Only some black money holders will get trapped and be impoverished for a lot of others may still find channels to offload their black money. Evidence from other nations show that the stride towards cashlessness is an inevitable step and for countries hitherto dependent on cash, its better late than never. The question is not whether or not to move ahead. Its rather about how to manage all the bedlam that the demonetisation has caused. The demonetisation in India is a clear indication of where the nation is moving. Cashless India is apparent, inevitable and needed! The paper also goes on to suggest measures such as gold registry along with real estate digitisation and periodic demonetisation of BCNs to give a final blow to the black economy.