Thursday, November 17, 2016

Notes Ban: Terrible Implementation shows No Planning

Notes Ban: Terrible Implementation shows no Planning

The Government of India order to declare the current Rs. 500 and Rs. 1000 notes as not legal tender has initially said as a well planned move against black money. Shri Arun Jaitley, Union Finance Minister as well as Shri Rajnath Singh, Union Home Minister has reiterated the Government stand that the Government had thought through the move and implemented it. However that appears to be complete hogwash.

It seems that the number of Rs. 500 notes withdrawn are 1570 crores. And 630 crores of Rs. 1000 notes were withdrawn by the Government order. The total capacity of Government of India's currency press is 300 crore notes a month. So it would have taken some 7 odd months to print replacement of Rs. 500 and Rs. 1000 notes. So the Government decided to print Rs. 2000 notes in lieu of Rs. 1000 notes. Nevertheless, it appears that it will take some 3-4 months atleast for the Government to fully print replacement currency. So the queues will last for a long time.

The Government initially said that people will be able to draw RS. 2000/- from their ATMs per day and from 19th onwards they will be able to draw Rs. 4000. However, the Govt. again raised the limit to Rs. 2500 and dropped the promise of raising the limit to Rs. 4000/- per day. Clearly they realise that it is impossible.

The initial order said that people will be able to exchange Rs. 4000 worth of old Rs. 500 and Rs. 1000 notes by filling a form. Now that limit has been reduced to Rs. 2000. People will old currencies can however deposit all the money in their bank accounts. However despite the Jan Dhan Yojana accounts not many in India have bank accounts. So that makes it very difficult for people.

The Government has also allowed people to withdraw Rs. 2.5Lakhs if a family has a marriage. This appears to be a fallout of Mr. Modi sarcastically saying in Japan that even marriages have been stopped and the people were heard laughing. The Government has now decided to fight that negative image by ensuring that anyone in the family having a marriage can draw Rs. 2.5L. So this again shows that the Government had not thought about this before ordering its implementation.

The Government realised that many people are going to exchange notes. Some of the people are visiting again and again. So to stop it the banks were asked to put indelible ink on the finger of people while exchanging old notes.  However, there was shortage of such ink, so the banks were advised to use the ink that dhobi's use to mark clothes. Now the Election commission has written to the finance ministry that that since this ink is only for use in elections, the finance ministry ask the banks to stop using it. This again shows how this Government is grappling with a bad idea which was implemented without planning. The Government is moving from one knee-jerk solution to another.

Mr. Modi had come to power by promising efficiency and development. Certainly this muddle headed idea and its poor implementation has left his carefully crafted image in tatters. If this impasse continues for some more days, which it is likely to be, the anger against the Government will rise and no amount of giving it a positive spin will suffice.

His past actions tell us that he will try some other big bang announcement to make people talk about it and forget the pain of notes ban. We haven't heard the last word yet on this issue.

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