With the recent SC judgement with 4:1 majority, demonitization was held legally valid to no one's surprise. It simply is not possible to reverse it. Regardless, the government's media (i.e. the media) is now on a roll listing its benefits, with a major one being the rise in online (UPI) payments, with an average annual growth rate of 55% since 2016. The data speaks for itself, or does it?
It was a cold night in November, only to get colder. People all over the nation tuned to the PM's special broadcast at 8, listing in awe as he decalred the notes of Rs 500 and 1000 will cease to be legal tender. Immediately there was havoc. The author personally rushed to get a year long phone recharge from an unsuspecting mobile vendor. Many simply did not believe it would happen, but it did. The entire nation that day and the following ones had a fine appetizer of authoritarianism in its purest form.
Over the months of uncertanity and havoc, from the scheme meant to target the rich, only the poor (with 80% living in villages and 300 million in absolute poverty- World Bank) were to suffer, with the estimated death toll being over a hundered. Many more suffered and shivered, but as the SC said, the benefits outweighted the issues, right?
Absolutly incorrect.
Two years since demonitization, RBI notified just about Rs 10,000 crores of junked cash that could be assumed as black money amounting to just about 3% of the Rs 3,00,00,000 that Mr. Modi had during his 2017 Independence Day speech (unsruprisingly, maybe because days before demonitization, BJP members acorss India purchased crores worth of land, the best and basic way to launder black money in India). To avoid conspiracies, let's just say some people have with some evidence advocated that the whole scheme was meant for personal profit of few company men who too actually knew about it beforehand. More likely is, however, the idea that the whole thing indeed was just a blunder by an immature government.
The whole UPI situation
The Government quickly realized its massive blunder and absolute failure to curb any black money, and shifted focus to 'other' aspects of demonitization, particularly UPI transactions. Before going any further, a few facts must be understood:
UPI was launched in April 2016, months before Demonitization.
It did NOT grow immediately post demonitization as the preferred means of digital transactions (card payments did).
Most importantly, according to the Reserve Bank data, the currency in circulation (CIC) in value terms soared from ₹17.74 lakh crore on November 4, 2016, to ₹32.42 lakh crore on December 23, 2022, almost two times. In fact in FY 2017-18 itself, the cash in cirulation has corssed the amount in circulation before demonitization, months before the UPI boom.
(Source: TOI, RBI)
So, what does this mean and why did UPI rise?
Essentially, UPI rise has close to nothing to do with demonetization and lack of cash, because when it grew there already was more cash than before demonitization. The only vague argument that can be made here is that it had some sort of psychological effect making people afraid of cash and what the government might do about it, which is obviously ludicrous, and if true, draconian.
UPI prference grew due to many reasons, and governement can definitely be credited for it. PMJDY made banking accessible to the masses, and government policies definitely fostered competition among various players. A massive cultural change, with over 43% people in India now having smartphones, up from 189 million in 2014 to 650 miillion in 2018 (Statistica) however is due a lot more credit that it's given. This led to a massive rise in smartphone usage among the younger population, who generally uses UPI for minute transactions out of convenience.
Thus, while the governement and its other policies are definitely, along with other things, due credit for the UPI boom, demonitization is not one of those policies. In India, cash is still overwhelmingly preferred and the problem of black money is on the rise. The better step for a good government would be to own up to the truth of its failures and look forward to decision making in democratic and not draconican manners.
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