The overnight and unprecedented regulation of demonetization on November 8 created havoc in the economy. Prime Minister Narendra Modi’s new initiative has garnered laurels from the commoners, though they have criticised the inappropriate implementation of demonization. To evaluate demonization policy and its implications on public, corporate sector and currency, renowned security expert Maroof Raza, from India Risk Report, a web-series produced by risk management firm IIRIS, indulged into conversation with economic and industry experts.
With the introduction of new Rs 500 and Rs 2000 currencies, earlier Rs 500 and Rs 1000 have been banned from the market. This accounted nearly 86 percent of the country’s total money circulating in the market. Besides, only 1.6 percent of the country’s population paid tax in 2013. In discussion with eminent economist Mohan Guruswamy, Raza quizzed if demonetization plan will increase the tax collection.
Guruswamy replied that many taxpayers evade income tax in some way with the help of chartered accountants. He explained huge tax evasion occurs at the state level as it escapes scrutiny but is a part of the economy in the form of labour costs etc. The government is currently targeting the black money stock which circulated in the market in the form of subsequent purchases made by the public like buying a house, car, etc.
The business and real estate sector have been severely affected by the demonetization. The number of transactions has decreased. From garment industry in the north to plantation workers in the south, everybody is suffering.