What did Demonetization achieve? J��

While data is showing up every day indicates a failure of the demonization vis a vis the stated goals (corruption, terror, cashless economy), there is a feeling of a washout. But I feel there are benefits, which can be leveraged in future — provided there is a willingness. My 10 takes:

(Note: This excludes the political benefits as seen in the UP election).

1. An instance of decisive leadership — which created a sense of confidence. We saw that in the case of Doklam, where many felt that India will not backtrack even in the face of a war, and helped keep the confidence high.
2. A roadmap on how to take a unilateral decision and then convince all of the benefits. This is a critical skill for the leaders, where no more than 40% information is ever available to react, and in most cases, the decision is to be taken in secrecy. Example — the Contra & Iran rescue attempts by the US, which both failed. But the action is key.
3. A large majority was ready to sacrifice their time and comfort for a bigger cause. They felt that something good is going to come out. Lots felt folks will go berserk, it did not happen. This can be leveraged in future for tougher decisions in the future too.
4. The banking community raised themselves to the occasion, including all the supporting ecosystem of ATM providers, the money transporters, the security agencies. Around 11 members of the banking fraternity lost their lives, while scores toiled for months with no holidays but lots of additional responsibilities. But there had been no complaints.
The bright spot was the public sector banks — which otherwise are considered inefficient. Possibly the same can be used as the benchmark of support from any or all the sections of the society and the government in the case similar occasions do arise in the future.
Incidentally, it also helped some of the rotten apples in the system and brought to fore how some of them are deeply entrenched. Probably the likes of Axis Bank got a decontamination as a result, but even the likes of RBI was mired into this. But overall it was a significant cleanup.
5. People in their own way made innovative methods to bring back money to the system. I assume banking system, government, and IT department will study this in detail and plug these in future — in case there is an intent.
6. The government received a list of people who have deposited disproportionate amounts. It has been mentioned 1.8 million. Assuming all of them will be asked to reasonably explain their source of income. If not explained, the same may be regularized with a hefty penalty, or may even be confiscated. (Please note below the budget speech extract **).
The same goes for the dodgy accountants, middlemen, shell companies and other entities — however, the data is only as much of value as we use it.
7. The people who have amassed illegal wealth was concerned at least for few days. This was especially true in the areas where the divide is stark, and the rich many times indulges in a vulgar display of wealth. And for sure, they became worried for future — at least the ones who are not big fish.
8. Many people got into the habit of digital payments — being forced by the circumstances. People learned simple tasks like withdrawal from ATMs, which they had been avoiding because of uncertainty/ laziness or just procrastination. Many got familiar with the digital economy and stuck to the ease of use. This was also aided by the parallel reforms happening in the financial sector — Wallets, UPI, and BHIM etc.
This also gave us a realistic picture of the connectivity status. While we have great penetration and coverage, the network overall is still weak. Though 4G and LTE are all pervasive now, there was a struggle in making transactions happen. We will need focus on this, including enabling offline closures of transactions.
9. The whole debate proved that common person has lots of emotion, but very little understanding. So the social media reduced to parroting and mudslinging. Particularly galling was the way experts like Kaushik Basu, Amartya Sen, Kirit Parikh or Manmohan Singh was trashed. However, at the end, it proved that expertise matters, even if it is something we disagree.
10. The whole process helped restore the faith in the system. Though in doubt at times, ultimately the data came out from NSSO, RBI, and Niti Aayog — and gave a realistic picture of what happened. This is good and builds confidence.

**Budget speech extract on deposits made:
“After the demonetization, the preliminary analysis of data received in respect of deposits made by people in old currency presents a revealing picture. During the period 8th November to 30th December 2016, deposits between Rs 2 lakh and Rs 80 lakh were made in about 1.09 crore accounts with an average deposit size of Rs 5.03 lakh. Deposits of more than 80 lakh were made in 1.48 lakh accounts with average deposit size of Rs 3.31 crores. This data mining will help us immensely in expanding the tax net as well as increasing the revenues, which was one of the objectives of demonetization.”

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