Where Are We with Demonitization

It’s been sometime since I wrote the earlier blog on demonetization – and the situation has changed since then. We have got used to the new normal – that ATMs will not be the same again, that some visits to ATMs will be disappointing, some fruitful, that 2000 rupee notes will be in greater use than 1000 rupee denomination ever was and therefore getting it changed will always be a concern, that although a complete cashlessness may still be some years away, more and more number of small shops, the most formidable bastions of cashbased transactions, will offer digital options for payment. In sum, liquid cash will become less and less part of our day to day lives.

Well, all this is good news, but is it the whole picture or just an urban snapshot? From the reports that are emerging, rural India is still smarting under the effects of demo. A few days ago a news portal solely reporting on the effects of demonetization on rural India reported that in Maharashtra prices of some vegetables have dropped substantially due to over supply resulting from the inability of middle men to buy them due to lack of cash availability  (these transactions are almost always cashbased). Some rural regions are not receiving enough cash supply in their banks – and it’s a bigger concern in rural areas than in urban ones.  

And even in urban areas, even by the standard of the new normal, order has not completely returned. Most ATMs are still out of cash. Most of those that are working are mostly dispensing Rs 2000 notes.  Many have concluded that visits to banks to draw cash via cheques is a better option than depending on ATMs; but then if that is so, then does it not defeat the whole purpose of demonetization?

By now it is undeniable that the implementation has been a disaster. How the government and various financial institutions have reacted to situations suggests they were not foreseen and planned for earlier. Surprisingly though, as it appears, demo hasn’t hurt the government politically, although many would suspend their judgement about it until UP delivers its verdict.

Apart from Modi’s thunderous speeches, what has helped the government is that the opposition continues to be hopeless. To start with, there is hardly any opposition unity. Some parties are ambiguous about their stand on demo, some are half-heartedly supporting it by maintaining silence, some are mindlessly hurling accusations none of which is sticking. 

Amidst this chaos, though, one thing is becoming clear: emergence of a new order of payment methods, networks etc. The problem is how fast people can get used to the emerging order. The lightning speed with which demo was brought by the government will keep people on their toes, causing them to rush to the new transaction practices, in terms of learning them and making them an integral part of their day-to-day financial transactions.

Good or bad, this attitude towards government-brought changes is another bequest of demonetization. In the past, whenever it came to matters relating the government, people felt things would largely remain the same and they would be able to bypass the minor changes and survive the effects. Such comforting assurances have become a thing of the past. 

In the meantime, stories will keep emerging, some funny, some tragic. Let us look at this one from Karnataka. To raise funds, to help a depleted exchequer, the government is invoking an old law where pubs will have to achieve a minimum target of liquor sale set by the government, falling short of the target will attract penalties.