The DeMo: A boon or a bane?

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With Mr Raghuram Rajan, the ex-governor of the Reserve Bank of India unveiling his memoir and talking to the media about his stint at the RBI and his retirement has, for the first time brought to the limelight a notable economist speaking about the DeMo or the De-monetization exercise undertaken by the Narendra Modi led NDA-II government.

The insights exposed by Mr Rajan

Mr Rajan at the launch of his book, gave his opinion on demonetization but has not disclosed the very closed details that were expected.

are not an assumption to the fact that he shares any hostilities with the current regime. His assessment of the entire economy post-DeMo is a professional analysis of the entire economy and the future prospects.

The conundrum that followed the Nov 8, 2016 declaration by the PM Modi of the demonetization has not ended as of yet.

The CSSO, India’s statistic authentication organisation went public to express its displeasure with the release of new national growth figures. The Government¬†has been claiming unrealistic growth figure of around 7% while the RBI portends a sluggish growth of 4-5%.

The complete picture now shows that it has affected almost every key sector of the economy while the affecting the informal sector.

The growth figures of the economy do not correspond to the actual flow of investment and overall circulation of wealth. The Rajan estimates, that we might like to call it, hint at slow growth figures in the economy. The further commentary indicates that the short-term discomfort as advocated by Mr Arun Jaitley our finance minister is going to cost more than just a short-term discomfort. The long-term effects of DeMo seem to be not capable of neutralising the short-term discomforts of the exercise.

The short-term effect and the application of the entire plan seem to have disrupted a large array of business activity in the country.

The Rupee has not gained momentum and the RBI had to list Masala Bonds in the overseas markets, due to the expected outflow of foreign institutional investment.

The growth figures that have been shown are not indicative of the sharp effects that the inflation triggered by a cash starved economy has triggered. The Banking sector is seeing itself in a record collection of Non-Performing Assets and then comes the surplus liquidity which bears no benefit for the modern economy to a start.

The RBI has lowered the lending rate but the effects are still not good, the common folk and the business classes don’t seem to be using the cheap credit available. The slow economic activity has not provided any incentives to the business class or to the common man to take bold risks by taking credit. The banking system remains slow, while the wages also remain slow, and given the unrestrained hike in wholesale prices of commodities, the economy remains slow.

The informal sector which has not been providing employment to the people has affected the overall buying and the economy stays slow.

The prices of gold have not kept very stable and the business has taken a setback. 

The worst hit sector remains the real-estate which thrives under a cash crunch, where several realtors are on the verge of bankruptcy, the over all impact seems to bite on the wallets of the #OrdinaryIndian.

The rationale behind the futile exercise of DeMo fails when the government and official agencies are unable to provide us with accurate data and solid figures citing how was the exercise helpful.

The exercise has cost every Indian with their penny and now the system is too inclusive in nature while we move towards creating the too big to fail banks in the country.

The government will have to take even bold steps now to manage the fallout of the DeMo which is unveiling day after day, while the #OrdinaryIndian struggles to make the ends meet.

#Views_Expressed_Are_Purely_Personal.

 

 

 

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