Chaotic demonetisation: 5 major loopholes in NDA's move

Here's a look at how better planning could have made the transition smoother and more effective.

Published: 17th November 2016 07:45 AM  |   Last Updated: 17th November 2016 07:45 AM   |  A+A-


A woman waiting with her baby as her husband stands in a queue at a bank near Chennai Harbour on Wednesday | ASHWIN PRASATH

By Express News Service

Chaos continues a week after the govt demonetised Rs 500 and Rs 1,000 notes. With the opposition going for the kill and the man on the street getting exasperated with each passing day, we take a look at how better planning could have made the transition smoother and more effective.

Shortage of other denominations not addressed

The government does not seem to have anticipated the time and effort needed to replenish the banned notes. This oversight cost the most as, in terms of value, Rs 500 and Rs 1000 notes together account for Rs 14.2 lakh crore of all our money - that is 86.4%. Having taken the biggest chunk out of market, immediate steps were needed to replenish stock and ensure there’s sufficient liquidity in the market. This, unfortunately, did not happen. The crunch was so high that RBI brought soiled notes back into circulation in many parts of country. There was also no foresight on the need to calibrate the ATMs for the new notes to be dispensed.

Late measures to plug the gushing black money

Measures to make sure black money does not escape demonetisation were all reactionary. Money being converted to gold bought at higher prices, suddenly cashrich Jan Dhan accounts, back-dated FDs in cooperative banks and societies were stopped much after they came to light. It’s impossible at this point to estimate how much of unaccounted money escaped through the cracks. Innovative hoarders also adopted techniques like using staff, domestic help’s accounts to park cash, bulk booking of railway tickets, and foreign exchange. In Hyderabad, small political leaders and contractors reportedly engaged slum dwellers to exchange cash for a fee.

Oversight on potential impact on common man

The deadline for using old notes to pay key utility bills were extended three times in seven days, micro-ATMs were announced on 5th day since demonetisation, indelible ink was introduced, that too partially, after a week. Clearly, the govt did not anticipate the quantum of disruption across segments. From farmers waiting for the rabi crop to the next meal of a daily-wage labourer to the impact on staff working in the banking sector came as a rude surprise. The list does not end there. Still, there are no separate queues for old and disabled or no information when non-functional ATMs would resume operations. Unconfirmed reports claim at least 25 people lost lives in the crisis-linked panic

Other essential banking services remain in limbo

Other bank services like demand drafts, applications for financial instruments and statements have taken a massive hit as staff are fully engaged in currency replacement work. People applying for visas and loans are among the hard hit ones. The impact has been equally intense on bank staff who are under severe stress after the move. Two cases of staff dying while on duty have been reported so far, one in Bhopal in Madhya Pradesh on November 13 and one person in Pune on Wednesday. Hard cash transactions have come to a standstill in cooperative banks, paralysing lives of millions in the rural areas. In Kerala alone, 230 cooperative banks claimed they were short of cash

Informal sector takes the worst beating of all

Almost half of our GDP - 45% - comes from the informal sector. It employs about 80% of our entire workforce. And, it’s the one that has born the massive brunt of the outfall. Being a cash-intensive sector, needed for payments ranging from daily wages to procurement of produce, this is undisputedly the worst hit sector. While some operators claim to have paid advance wages to employees in old currencies, other owners are currently providing only basic facilities for their employees like food and accommodation. “To be sure, eventually most of these funds will be replaced, but during the interim, the human cost will be substantial,” says Pronab Sen of International Growth Centre


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp