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Demonetisation and serious job losses

According to Amartya Sen, the Nobel Laureate and economist, “any proper economic reasoning could not have sensibly led to such a ham-handed policy.”

The primary effect of the demonetization was seen in shortage of cash and long queues outside banks. The secondary impact is on the informal sector because cash plays an important role in facilitating trade and business. In the long term, cashless transactions can be woven into a routine but this will require an appropriate amount of time, organization and training. It is important not to base your objectives and act on presuming instant learning and institutionalization because that places a lot of hard earned money and interests with no connection to black money at serious risk.

India is still lagging behind in disseminating widespread usage of electronic accounts and transactions in society. It will be difficult for the poor and illiterate to master correct and proper use of electronic payments and the possibility of losing one’s meager resources would be catastrophic. Why the government did not foresee all this proof of a crisis is perplexing.

Demonetisation is a way for both eliminating black money, as well as moving towards a cashless economy. What started as a fight against black money and corruption has slowly been replaced by promoting digital economy which is understandable because demonetisation can make only a small contribution to black money elimination and that too at a huge social cost.  The country is going to face huge job losses too. As Londons Financial Times has called “a dramatic drop in business in the 34 days since Narendra Modi… announced his plan to scrap 86 per cent of its banknotes.”

People have not reacted to this government move yet adequately because of government publicity and exploitable political slogans but what future holds remains to be seen.

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