Truth is, Modi's demonetisation has failed, people won't forgive this

The country has been gripped in a terrible economic crisis ever since the astounding decision of Modi & Co on November 8 to demonetise 86 per cent of the currency in circulation, apparently to net in black money.

There was no need for this note ban as GDP growth was 7.6 per cent this financial year. Despite the claims, Modi in 50 days since the drive failed to unearth the huge amount of black money that he had promised.

At the same time, he got the Rs 2,000 currency note printed. That begs the question: won't that help black money even more?

Demonetisation, Modi said later, would also prevent terrorism, but the threat remains, as the Nagrota attack showed. So that's another promise not kept.

The PM had vowed that within 50 days, till December 31, all difficulties and shortages would be over. Again false.

Modi's New Year speech was also a damp squib. No concrete steps to help those suffering the pain of demonetisation were announced. The upper limit for withdrawal from banks was not raised.

Instead, the price of petrol was increased by more than Rs 1.29 per litre and the price of diesel was hiked by 97 paise per litre. After state levies, the rise would be even higher. The latter hike will be inflationary.

The hikes are meant to increase government revenue, because international fuel prices are significantly lower.

In the 45 days after notebandi, Jan Dhan account deposits have more than doubled to Rs 87,100 crore. Most of this is the black economy. Another failure of a Modi claim.

Cash is in short supply. The new Rs 2,000 and Rs 500 currency notes printed are nowhere near enough. MoS for finance AR Meghwal has stated that "lower denomination" notes with new design will be printed.

More confusion. Will the old lower denomination currency notes also be phased out? Even now sections of the public, especially the poor and middle class, are not able to buy enough for usual consumption.

This underconsumption accentuated by a sharp decrease in employment, is causing a severe drop in demand for goods, leading to a sharp fall in aggregate demand.

Rural areas are underbanked despite the RBI Act, 1934, promoting agricultural cooperative banks, which have been ignored by the Modi government. So the rural areas are even more short of cash.

Cashless economy? A con game. No economy in the world is cashless, including Sweden and Norway. The Scandinavian countries also have a robust social welfare system, far greater than India's. Anyway, despite the trail of plastic, the final account has to be in cash.

Safety through digital economy? It is clear that Modi's advisers are incapable of understanding economics and digital technology. Wikileaks have hacked the ultra secure US government emails. There can be no complete safety on the internet, specially in India where there are many potential hackers.

In any case, 70 per cent of ATMs run on Windows XP software, that was phased out in 2014. There is no anti-virus for this software.

So why this notebandi? To make a quick political surgical strike, in order to gain major policy advantage in the elections from February 2017 till the general elections of 2019.

The PM's gambit has failed miserably. People will suffer until the currency situation improves. But Modi will not be forgiven.

Also read: Why Modi's New Year demonetisation speech was a failure