Demonetization anniversary: How has India changed in the last year?
This day last year, as citizens were settling down for dinner, PM Narendra Modi dropped a bomb on unsuspecting Indians: Rs. 500/1,000 notes were suddenly dead. The aim was to curb black money, the government said. Demonetization without other regulatory measures won't work, experts responded. But the effects are still being felt in all spheres. How did demonetization change India as we know it?
The first two months were no less than a crisis
Immediately after demonetization, people spent hours in bank queues to exchange old notes; they had time till December 31. Particular sections- elderly, those in remote locations, tourists- had it worse. 100 people died before 2016 ended, apparently due to demonetization-related stress. Low-level trade slowed down drastically: nobody had any cash, the ATMs didn't either. Most states saw protests by different groups and political parties.
'Paytm karo' became the new tagline
The obvious winners were mobile wallets, especially Paytm, which added 20mn new users within a month. Card transactions on PoS machines trebled from 109mn in January'16 to 328mn in January'17. UPI transactions surged from 1L in September'16 to 1cr in July'17. Other modes except UPI gradually witnessed a slow-down: in May'17, the value of electronic transactions was Rs. 94.21tn, close to November's Rs. 94tn.
India got to see two new notes, one never-seen-before denomination!
Simultaneously, the RBI also launched new notes. The pink Rs. 2,000 notes were appealing for their looks as much as for the never-seen-before denomination. A new series of Rs. 500 was also released.
A hard time for shell companies and financial frauds
For I-T and other agencies, demonetization came like a blessing. Post demonetization, it flagged 18L suspicious money deposits in bank accounts. Also under scrutiny are about 22,000 "erratic" tax returns; these people either didn't file returns earlier, or revised their returns after demonetization. In the last year, the government has cancelled 2.24L suspected shell companies and disqualified 3.09L directors.
Demonetization even affected Indians' behavior patterns
If official reports are anything to go by, demonetization also affected Indians' default behavior patterns: there has been a three-fold increase in PAN registrations and an 18% rise in I-T returns. The I-T Department termed it a "marked improvement in the level of voluntary compliance".
In the meantime, BJP managed to win four states
In the last year, one of the major gainers has been the BJP. It managed to form governments in four states (UP, Uttarakhand, Goa and Manipur)- clear indication of its rousing popularity. In the interim, the Centre introduced another revolutionary concept: the GST. Demonetization's economic effects apart, BJP had brought about a new belief: that honest citizens will be rewarded and the frauds culled.
So was demonetization worth it all?
RBI said 99% of old notes had been deposited in banks, leading many to wonder whether demonetization had managed to remove black money like it aimed. However, tax officials recently revealed they had spent the year flagging suspicious deposits and will now pursue them. The price India paid for demonetization was high, but with careful and efficient work, the rewards might be high too.
