Apprehension of recession

Nadeem Sharief Niaz
The recent decision of GOI to demonetize higher denomination which is 86% of total currency can lead to economic crisis due to the veiled corruption involved in demonetization . The shortage of liquidity is showing significant constraint on household, agriculture , micro and major business establishments , medical facilities, tourism, trade and education. The methods adopted to implement demonetization has forced many under privileged to commit suicide.
Demonetization scheme seems to be a replica of 1978 demonetization carried by Morarji Desai the then PM , at a time when higher denomination currency was only 2-3% of total currency and resulted a complete failure at that time . The so called changed has pushed economy to turmoil now that 86% of higher denomination currency has been declared non legal tender.
There are other countries also who had adopted the same methods of demonetization in past which later resulted only disaster to their nations like (1) Soviet Union -under Mikhail Gorbachev in January 1991 . The reform failed to halt inflation and instead served mainly to accelerate a slide in public confidence in the Soviet government. (2) North Korea – In 2010, the regime of then-dictator Kim Jong-Il mounted                                are form that knocked off two zeros from the face value of the old currency in an effort to tighten control of the economy and close black markets. Combined with a poor harvest, the measure left the country with severe food shortages, according to reports at the time. (3) Nigeria – In 1984, the military government led by Muhammadu Buhari instituted an anti-corruption crackdown that involved issuing new banknotes with a different color, forcing the replacement of old ones within a limited period. The move was one of a series that failed to fix a debt-burdened and inflation-ridden economy. (4) Myanmar – In 1987, the country’s military invalidated as much as 80 percent of the value of money in circulation, according to reports at the time — as in other such initiatives, it was directed at curbing the black market.
One result was the first student demonstrations in years. Deepening economic unease helped trigger mass protests across the nation the following year that led to a Government crackdown that killed thousands of people.
NDA Government has attempted to flush liquidity which if not brought back into system in time can prove disaster to economy of nation .
Although PM has assured nation that issues faced by common man will be resolved by 31st December 2016 and liquidity will flow in market without any inconvenience to public . But how is it possible to print currency worth rupees 14 lac corers in just one and a half month when printing press of RBI doesn’t have that much capacity to print this new huge amount in so short period of time .? Does that mean to bring back total cash in market it will take several months or few yearsto complete whole exercise ? If the whole exercise takes many months to complete , is there an apprehension of recession now ?
Our nation where only 50% of population is having accounts in banks and rest 50% are having no accounts in bank can not think of getting whole system digitalized in short span of time.
The task for banks is not only to provide back cash to those 50% people but also a mammoth challenge to provide currency to other 50% also who don’t hold account in banks .
All over the country there are around 2 lac ATM machines out of which only one lac twenty thousand ATM machines are functional . None of ATM machine had been recalibrated for dispensing 500 and 2000 rupee notes before announcing dramatic scheme of demonetization. The havoc caused because of methods adopted for demonetization has reduced purchasing power of people. The dry cash flow has made a negative impact on small business establishments and middle class people which is backbone of GDP in our country. Unlike of USA and Europe not everyone in India is having debit or credit cards and millions of small businesses run by cash, and methods adopted for demonetization can result closure of all those businesses leaving millions of people jobless.
Before announcing the scheme Government was not prepared about demonetization which can be gauged from the fact that dozens of times rules for demonetization has been changed which proves the exercise is not a comprehensive one and there is uncertainty whetheror not lasting results can be achieved.
Agriculture sector which is one the most important sector in a nation and in our country where it gives a significant contribution to GDP has been completely ignored. Farmers are not being provided with any solutions to purchase seeds and other requirements for agriculture .
And if the issue is not resolved within days it can lead to lower agriculture production and higher inflation.
Unlike farmers , billionaires are happy with the decision which is apparent from the statements given by them in last few days . Their happiness is genuine since the Government is completely committed to increase their wealth from tax payers money . It is pertinent to mention that the time when underprivileged and middle class people were standing in queues to deposit their life time earning , SBI decided to write off debts of 62 billionaires including kingfisher airlines owned by absconder Vijay Mallya . Although Finance ministry has said that itis not a loan waiver , but it is a fact that once loan written off from books means recovery is unlikely. Does that mean demonetization is an excuse , the real reason is to let absconder billionaires rob underprivileged and middle class people with the help of Government of India . Similarly Adani industries was exempted 200 crores of rupees as exemption on green tax fine . In addition to it SBI has sanctioned loan of one billion dollar to Adani group for starting oversea mining project in Australia . Does it mean that those people who are depositing their money in banks after standing whole day outside the bank are ignorant of the fact that their money may be used as loan waiver for Vijay Mallya or Adani. Apart from this, Reliance port has been awarded with undue tax benefits . A report by Comptroller and Auditor General of India (CAG) has stated that there had been an irregularity in allowing deductions by the Assessing Officer which has resulted in tax effect of Rs 2,716.79 crores. Such examples have put a question mark on RBI and SBI which is running as per the whims and fancies of NDA Government . The issue is very serious since the lifetime earning of middle class people has been declared as black money and people are being forced to deposit in banks to provide loans and loan waivers to capitalists .
If such situation continues and no action is taken against PM and RBI for this heinous crime then the day is not far when in India not only democracy will be diluted but also will give rise to capitalism .
The other serious issue which has arisen post demonetization is that today rupee is at the weakest level against dollar since independence .
It is the first time value of rupee has reached to 68.80 against dollar which may cross Rs 70 per dollar in coming days.
The worrying thing about methods adopted for demonetization is that God forbid if recession happens in India , do we have a mechanism to deal with it since the magnitude to economic crisis will be much bigger than any ever happened in in the world . It was Dr Manmohan Singh who faced economic crisis in 1992 when he was finance minister and in 2005 when whole world had faced the worst recession , it was India which didn’t get affected by recession because again this time Dr Manmohan Singh was at helm of affairs as PM and whole world had acknowledged the role of Dr Manmohan Singh in handling economic crisis.
Now the most significant question that has arose is that God forbid if our Country has to face recession because of mismanaged and corruption involved demonetization, do we have any leader like Dr Manmohan Singh to bring out country from recession ? The answer  will be “No”
(The author is  Secretary Publicity J&K Congress Committee The statement is a very personal observation and not an official statement of my party )
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