Demonetization and India: A difficult path

With India turning into a superpower, the world is yet to come up to the
terms to presence of India in todays world. The country better known as
Sone Ki Chidiya , or the golden bird is yet to spread its wings and reclaim its
full glory it once proudly boasted of. India shackled and in the clutches of
corruption yearns to fly high but the politicians today, come into power for all
but the sole reason that is to fill their coffers up to brim leaving India and its
people to fend to themselves in the war against corruption and poverty.
According to Indian Government in 2012 22% of its population is below its
official poverty limit. The World Bank, in 2011 based on 2005's PPPs
International Comparison Program, estimated 23.6% of Indian population, or
about 276 million people, and lived below $1.25 per day on purchasing
power parity. These numbers reflect upon the hollow promises made by the
politicians who are still unable to understand the ideals the country was
based on and the dreams of a nation, free of economic disparity and
prejudice. The dreams of our forefathers who laid the foundation for a better
India is still far from true. India which has been highly dependent on cash
transactions and cash has moved deep into the economy. Studies show 50 per cent
of Indian economy is in cash. Cash economy does not mean it is illicit economy, its
unorganized economy. It had distorted the economy in the last 10-12 years,
because of what is called the wealth effect. The wealth effect is a psychological
phenomenon that causes people to spend more as the value of their assets rises.
To counter the ever growing problem of illicit or counterfeit money in circulation,
Prime Minister Narendra Modi took a brave step of Rs. 1000 and Rs. 500 note being
taken out of circulation by cancelling them as legal tender. Out of the total
circulation of currency about 16.6 lakh crores, 87 per cent is in Rs 500 and Rs
1,000.How much of this finances genuine economy versus the illicit economy is still
debatable. It is believed that this shall have huge impact on Indian economy as
people with undisclosed income and illicit money shall be forced to declare their
income and pay money in taxes to which they are entitled to. This shall also have a
great impact on the terrorist groups taking active part in illegal activities within the
nation and hollowing the roots of the very nation they were born in. The terrorists
are funded through normal currency. According to one estimate, about Rs 50,000 to
Rs 60,000 crores of the extremist funding is in the form cash. It will be very difficult
for them to deposit their funding is designed for cash economy.
The demonetization can trigger a recession if not handled carefully, while not
entirely addressing the black economy. This will affect only those individuals who
hold cash. Others who have already converted their money into assets, and

invested in gold and other luxury items will be only marginally affected. This
demonetization is not likely to impact the structure, level and incidence of
corruption in India.
For Modi, this is work in progress. India is on a verge of a new beginning. This is a
golden era for the country. The country shall in the coming days, come out of the
mess as the problems shall be leveled and the guilty charged as the plans are
implemented and world shall see India in its full glory.