Approaching deadline: What happens after Modi's 50-day promise to eradicate black money from India

Deaths and scarcity of new notes among other inconveniences faced by people were reported following the demonetisation move. After 50 days of note ban, what will become of India is what we all have been thinking about.

The hands of the clock ticking showed it was 8 in the evening. The stage was set and people were glued to their television sets, reminding a scene from the past when Chitrahaar on Doordarshan vacated roads.

Instead of old Bollywood songs, Prime Minister Modi appeared and made an announcement. In five minutes, the world's largest democracy was running blind. Once a legal tender, Rs 500 and Rs 1,000 notes, which made up 86 per cent of India's cash economy, were rendered impotent. Cutting the long story short, the Prime Minister of India asked for 50 days to transform our nation into a corruption-free economy.

Along with a bureaucrat -- Hasmukh Adhia -- who served as Modi's principal secretary when Narendra Modi was Gujarat's chief minister, and with a special team of trusted researchers, Modi came out with a plan to demonetise Rs 500 and Rs 1,000 notes to bring out black money from the 'shadow economy' of the country.

Before the demonetisation drive kicked off, Modi was substantially forthright by asking people under the Income Declaration Scheme, to show up on the department's door and declare the wealth they hadn't yet. On September 30, 2016, the scheme ended.

The move drew global attention. The demonetisation drive was cherished by many and condemned by even more. Banks started to slog, cash counters and ATM queues clogged up with people, all reaching for an epilogue, which was to come after 50 days since November 8, 2016, when Narendra Modi's demonetisation drive was put in the first gear.

Amid countless media reports --  reports of people losing their lives standing in long queues, bank employees dying due to work overload, income tax raids seizing close to Rs 230 crore in new currency, the boon and the bane -- was a question. 'What happens after 50 days?'

Government under note ban ordered a withdrawal of more than 2,200 crore notes of Rs 500 and Rs 1,000 denominations, as per estimates.

Out of Rs 16 lakh crore, which was part of our cash-based economy, a staggering 86 per cent of the cash in India, which is Rs 14.18 lakh crore worth of notes, was discontinued. This cash includes both the legitimate money of taxpayers, and cash with black money hoarders.

The residual currency amounted to Rs 2.2 lakh crore, which was the remaining 14 per cent of the cash-based economy out of 86 per cent.

After the withdrawal of old notes from the country, RBI started to print new notes of Rs 500 and Rs 2,000. An amount equal to Rs 1.5 lakh crore worth of new notes was printed which supplemented the Rs 2.2 lakh crore of the residual currency (other than Rs 500 and Rs 1,000 notes) already in circulation.

A November 25, 2016 research report by Credit Suisse suggests that new notes worth only Rs 1.5 lakh crore have come into circulation so far.

According to another media report, for RBI, it could take several months to fill the hole left behind, by the withdrawal of notes worth Rs 14.18 lakh crore.

"To meet the new currency demand, industry estimates indicate that the RBI has already been able to print Rs 3 lakh crore worth of new currency. However, these notes being high value and with remaining currency which is less that 15 per cent of the total currency,



they are unable to provide enough liquidity to transact,"

According to an IndiaToday business expert, to fill the gap in the economy, 3.5 billion notes of Rs 2,000 were to be printed, for which it takes close to three months. Out of that, 1.5 billion Rs 2,000 notes have been printed.

For Rs 500 notes, 16 billion pieces were to be printed for the hole in the economy to be filled, and out of that, 7 billion notes worth Rs 500 have been printed.

Taking into consideration the withdrawal limits till December 30, once the limitations receive relaxation, the demand for new currency will go up.

"The requirement of notes could be higher if normal demand for currency picks up as and when the government relaxes withdrawal limits and more ATMs become operational,"  the Credit Suisse report said.

WHAT HAPPENS AFTER 50 DAYS - HAPPY NEW YEAR

Experts are of the view that the pace at which Reserve Bank of India is working, the situation can continue to be the same, up until March or April of 2017.

"It is possible that the circulation normalises before January 2017 but for that the presses would need to operate at more than 150 per cent capacity utilisation, which might be physically improbable…," the Credit Suisse report said.

According to an Indian Express report, ICICI Securities estimates, that the cash crunch might go on for longer than promised, even if the government works at its 100 per cent capacity to fill the void, and the same report also suggests that 'normalcy might not be restored until March of 2017'.

DEMONETISATION HURTING WHERE IT HURTS THE MOST

In the past, countless reports have stated the misery of farmers in India. With prices in a free-fall due to demonetisation, small farmers have seen their produce suffer, as many failed to get a legitimate price for the same.

The cash crunch compelled many farmers and farm traders to experience the scarcity of cash, which led to a chaos in the business and trade.

In December 2016, Chhattisgarh farmers crushed their produce under trucks after getting 50 paise a kilo for their yield. In another IndiaToday report, onion farmers dumped their produce when they received a mere 50 paise a kilo for their onions. 

WHAT'S IN THE FUTURE FOR REPUBLIC OF INDIA

Prime Minister's demonetisation drive started with crackdown against black money hoarders, which soon turned into action against terrorism, which later was termed an initiative towards making India a cashless economy.

This particular move gave e-commerce a spike in their business.

On the other hand, many have been speculating that India is not yet ready for a cashless future where poor internet penetration and networking infrastructure will hold India back, as a majority of the people still don't posses debit cards or credits cards in the country.

India's cyber security is a big issue as in the past we have witnessed Twitter handles of Congress and Rahul Gandhi getting hacked. And that's just social media under threat and not how big the impact of rogue hacking will be, if it comes to online transactions, especially in a nation where rural population has no clue of online payments whatsoever.

The stats and figures in the story give a close idea of what has been up with the economy of India post Modi's demonetisation drive. There have been several incidents which prove that India's currency-ban decision has made people suffer.