Dr. Sanjiv Agarwal, FCA, FCS

Sanjiv Agarwal PhotoDemonetization of high value currency (Rs. 500 and Rs. 1000 notes) w.e.f. midnight of 8-9 November, 2016 is now a fortnight old decision, aftereffect of which is still worrisome and concerning.

While we all agree that this surgical treatment is a welcome step but like in any surgery, post operative care is crucial, so is with this one. The ground reality appears to be full of gaps and unpreparedness on the part of Government – be it political handling, administrative decision making or effective operational management by our banking system. On one hand, every day we are changing the rules but on the other hand there is acute liquidity crunch for livelihood itself. RBI claims that there is no currency shortage but banks are dry. There are no funds. If supply of currency is an issue, it could be very well managed. After all, two weeks have passed by.

Here are some ideas of how the old currency be allowed to be used by citizens (not by people with disproportionate / unaccounted currency) for next one month so that their essential payments are taken care of, rush at banks is avoided and there is less burden on the system. The objective of Government which is laudable will  also not diluted –

  • Come out with a zero interest bond issue whereby citizens are allowed to invest upto Rs. 2.50 lakh in cash till 30 December, 2016.
  • Allow cash deposit for payment of Service Tax for November / December, 2016
  • Allow Advance Income Tax payment (due till 15 December, 2016) in cash which will yield huge collections and ensure higher tax returns for FY 2016-17.
  • Allow cash deposits in PPF accounts till 30 December, 2016
  • Allow school / college / education fees paid by parents for their wards in cash till 30 December, 2016 irrespective of public or private schools / colleges / universities
  • Allow payment of premium in cash for on-going LIC policies on self and NPS scheme till 30 December, 2016
  • Allow cash payment upto a limit of Rs. 2.50 lakh for purchase of solar equipments
  • Allow local taxes (e.g. house tax, property tax etc) to be paid in advance for FY 2017-18 till 30 December, 2016.
  • Cash purchase of text books / equipments / research books / subscriptions upto Rs. 25000 may be allowed for engineering / medical / scientific research students etc till 30 December, 2016
  • Bank loan & repayments or prepayments be allowed in cash till 30 December, 2016.

These measures may ease out liquidity to an extent and bring some immediate relief to the citizens without losing the objective.

If the banking outlets are not enough to dispense cash or exchange demonetized notes, Government may also use roadways buses throughout the country as mobile units for rural areas and villages with 1-2 security personnel for small sums (say, upto Rs. 2000 per person). This may also be done by using school buses on Saturday – Sunday. However for this, supply and distribution of currency will have to ensured which does not seem to be an issue with RBI clamming that there is no shortage of legal tender in the country. Government school teachers and premises can also come to rescue  if the situation so demands.

Government will have to handle and manage the ground reality on an emergency basis failing which situation may go out of control and all good done by demonetization would turn bad, besides having a huge cost in terms of chaos, hardship and unrest on streets. Economy too will suffer, which is otherwise also inevitable.

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  1. k kayanaraman says:

    There could no better advocate for converting black money into white esp when seeing the present dubious ways.WITH SUCH MOVES the schme would be a failure.


    Also PoS machines may be given by banks at one or two shops, small retailers, where ATM/Debit?Credit Cards can be used by purchasers and the slips that they sign can be collected and crefitted to the account of traders.

  3. ravi chandiran s says:

    Govt. thought was a good one But the implementation on the same becomes failure.
    Middle/Low classess peoples are suffering to draw from the bank for their daily needs. For those who has medl. exp/marriage & others – situation is worst. Banks are refusing to give the money we needed due to no money. Daily basis govt./their officials/banks changing their stand. Every body now in queue by leaving their day-to-day job and awaiting in Banks. 100% ATM’s with cash – failed. It shows total rubbish & poor plan from the Govt. & lack of co-ordination in each & every stage of Govt. Organisations. We wonder, how they immediately implement this as a causal one which affects our ECONOMIC MOVEMENT BADLY. It shows the in capability of capturing the real BLACK MONEY HOLDERS particularly from Corproates.

  4. Madhav says:

    All these would work, if only the Govt. have money to pay you. With out given a thought, Govt. announced the Demonetization was announced.
    Now they are trying to come out of the mess they created by announcing different flimsy measures. 2.5 lakhs for marriages, with a long list of documents required to be produced, is one of such funny move.

  5. HItesh says:

    Cash purchase of text books / equipments / research books / subscriptions upto Rs. 25000 may be allowed for engineering / medical / scientific research students etc till 30 December, 2016

    From where i can purchase books?

  6. RAJAGOPAL says:

    Those who are having reasonable old notes with them might have deposited in bank. The exchange of old notes have really created problem. It is misused in large scales. Now the people are waiting in ATM to draw money to spend by cash. This shall be discouraged by intruding a easy payment method. We have to restrict the currency in market so that people will go for digital. It is unfortunate that people do not have black money also not using digital mode because now it is difficult to handle. This can be easily solved by using my proposal of making payments thru sms from our mobile phones. These phones are being all most the entire population

  7. Ram C says:

    would be good suggestion if Govt. comes with the same on 08th-09th Nov. without home work govt. did these strike. Honestly every one is happy with demonetization then where is black money. could not see any search/red on politician or bureaucrat as they are honest citizen and all businessmen are corrupt who are facing IT threat.

  8. Vishwanatha, Bangalore says:

    Dear Dr. Sir
    Kindly do not suggest in this way (Except bank transaction). It will give the way of encasing scraped note.

    Now, its totally in control no rush at banks at all (In Bangalore).
    Honestly, I am telling till yesterday I was not drawn Rs. 100/- currency, I have totally controlled my expenses (and managed with very small amount which was with me as on 08/11/2016) for my nation & Educated my children’s also. It may hard earned money to him but not my nation, since evaded tax and cheated to nation. Please NOT TO SUGGEST other than accountability of the same.

  9. Subir Gupta says:

    You people might have not seen the interview of P.Chidambaram and M.S.Aluwalia in India Today.
    I suggest to take the views of other experts too.

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