50 days after the demonetization move - which side are you on?

Well, today is the last day of 50-day window of demonetization measure taken by Modi government. This measure, started on 8th November, to ban all existing 500- and 1000-rupees notes, has faced a mixed bag of reaction from the global audience. Whereas noted global economists have been towards the negative side, industrialists have favored this move. In my opinion, I would have liked this to be opposite to it. Economists think theoretically and see a long term impact this move will have. Industrialists might just assume things (positive or negative depends on them), and since majority might have been affected by this, I thought they would be slightly negative.

As far as politicians are concerned, the divide is not a surprise. Oppositions are negative while ruling party is obviously positive. One institution of which I am not able to decipher the stance properly has been RBI. Somehow I have a feeling Urjit Patel wasn't completely in favor, but he won't speak this publicly (I just hope he speaks something at least, even 10% of Raghuram Rajan would be good).

What about the general public, the common man? Again, this seems to be a mixed bag. On this, we can't trust media, as we all know they are paid. BJP tilted media houses show a very positive picture and vice-versa. But having myself spoken to many people, I can easily club them into different buckets as per their occupation.

The service class has almost unanimously been in favor of it. They understand that only about 1% of India's population is actually paying taxes and they form a majority of it. Just because they have to suffer from a concept called TDS (Tax Deducted at Source), they can't help it but pay taxes. However, they realize that they are rendered fools paying for the entire nation.

The highest class of business groups (Reliances, Tatas, etc) seem to be in favor. I find one of the two reasons for it - either they have already made arrangements to exchange their cash or they don't have an option to say the move is bad, it will easily mean they were hoarding it. This is based on the presumption that they would NOT have all the money in white.

The next layer of business class are the ones who I believe trade mostly in cash, and the biggest hoarder of black money. I have mostly heard abuses for Modi from majority of them. Truly, they have been hurt and some have been hurt very bad. Of this class, Modi is sure to lose his vote bank. None of his populist move will help win favoritism from this class now. Most of them had been habitual of not paying taxes. A lot would not be tech-savvy or would not have wanted to adopt digital payment system, but now forcibly will have to. Even if Government lowers the tax rates, it wouldn't help this class.

Next would be the lower strata of society, like drivers (mostly Ola / Uber), domestic helps, etc. They earn for themselves and majority of their work is entrepreneurial types. Though their business is affected, this class is, in general, happy with the move as they believe it will help punish those people who have been hurdles in development of this country. How are they going to benefit from this in long term may not be very clear to them, but because of Modi's speeches and positive word from people around, they are positive.

Finally, there is the rural class. The farmers, peasants, daily wagers, small business class are the ones severely hit. Sitting in an urban city in front of a computer, we might not even imagine their condition, but I believe they are the worst hit and unfortunately, their voices won't be heard properly, given either they won't speak or they won't get a platform to speak. I am sure Modi would do a lot for this class going forward to win them back.

What about my stance? Well, I don't think anyone would have been happier than me when I heard this on 8th Nov. I have been extremely positive of this move right from Day 1. However, as days passed and we noticed policies changing everyday, hardships not decreasing, etc made me sad there was an improper implementation, which looked like the repercussions were not clearly thought out. The so called "bhakts" will try to defend everything the Government does (which is also wrong; I am a neutralist and support whatever I think is right, not trusting anyone blindly). I felt most defeated and cheated when I heard that donations to political parties can be made anonymously. This is double-standard.

However, being a student of finance, I think in a long term scenario, whatever is happening is extremely good. I had even written about it more than 2 years ago here. By long term, I do not mean 1-2 years down the line, but around 15-20 years. It takes time to change the mindset of people. With push for a cash-less or less-cash environment, India will adopt technological changes faster. There will be immediate negative repercussions of slow internet and inadequate infrastructure to support this, so the public and the private institutions will rush to solve those problems. The issues which would have taken some years to solve gradually, will have to be forcibly accelerated. This scenario calls for reactive measure rather than proactive. Although this is not in best interests, but a reactive measure is an assured thing, compared to proactive measure which Indians would always postpone.

If I see all the Modi's initiative together he has taken in last 2.5 years, we are sure to have a much better India going forward. I just hope he gets another term to actually help those initiatives getting implemented. Anyhow it terrifies me to imagine that the alternatives are Rahul Gandhi and Arvind Kejriwal.