Sending the country’s two high face value (denomination) currencies to the museum as it were on November 8, 2016, reportedly resulted in nearly 86 percent of transactional cash with people vanishing in public domain. The plight of those who needed cash in currency of the entire range of low denominations filled the columns of dailies of all hues but didn’t fill their pockets nor the cash chest of ATM machines all over the country. The panic situation, after reaching its peak level, invited the curse of aam janatha, the nation’s Prime Minister and Finance Minister taking the brunt of the curse of 130 crore people. The nearly 10 lakh staff of the banking sector were made to look like mute witness to the cash famine-like goings on. The worst hit, according to reports in the media, were the traders of consumer goods of all descriptions. The dramatically announced measure of demonetisation, ostensibly to rid the nation of unlawfully accumulated as well as undeclared cash in addition to fake currency, reportedly met with only a partial success, as the whales got away daring demonetisation.
The damage control steps, taken in a hurry by the government and the nation’s Reserve Bank, namely printing newly-designed paper currency exposed the unpreparedness on the part of authorities to bring the offending flock to book. However, the land’s people seem to have learnt that there is wisdom in the idiom ‘A bird in the hand is worth two in the bush.’
The country’s money worth of all transactions by the traders in consumer goods, both fast moving and durables, amounts to several trillion rupees. Thus, freezing 86 percent of cash in their hands, like the proverbial bolt from the blue, virtually paralysed both the sellers and the buyers. A study by a team of the Reserve Bank of India revealed a shift to currency holdings in preference to deposits of different kinds, including provident fund by large sections in the population, particularly in urban areas. The rustics had to manage with small denomination cash, whatever the urbanites didn’t grab.
While a few States witnessed households favouring bank deposits in the financial year 2017-18, growth of deposits plunged nationally to the lowest rate of 25 percent, showing that households prefer cash for transactional needs, notwithstanding demonetisation. Further, the deposit behaviour appeared to have resulted in a shift to savings deposits, away from term deposits. Lastly, issues of fake currency and unaccounted wealth continue to be talked about by the chatterati.