This day, back in 2016, Prime Minister Narendra Modi astonished the country with the introduction of Demonetisation on November 8. This much-debated move by the PM had gained a lot of attention of well-versed economists in the country as well as from across the globe. To rejoice the first centenary of Demonetisation in the country, the Bharatiya Janata Party (BJP) will be observing today’s date as ‘anti-black money day’, while the opposition is all set to mark the occasion as ‘black day.’
According to Manish Sabharwal, the chairman of Teamlease Services and director on the Board of RBI, the move to scrape Rs 500 and 1000 notes had made India a good home to formal job creation. Here are five reason according to Sabharwal which prove that demonetisation solves the job problem in the country-
- Demonetisation condensed the amount of cash available with the citizens, which in turn increased the bank deposits somewhere between Rs 2.8-4.3 lakh crore. Sabharwal, as quoted by Indian Express, further states that is we assume Rs 3 lakh and apply an accepted 6 multiplier, then demonetisation, has created new lending capacity of Rs 18 lakh crore, which is 36 times India’s Central government allocation to primary education.
- With the introduction of Demonitisation, came the 7.6 crore new monthly digital transactions. Sabharwal in the report states that Demonetisation exploded the number of digital payments on UPI/Bhim from 1 lakh in October 2016 to 7.7 crore in October 2017.
- Demonetisation acted as a catalyst for 3 lakh crore new financial savings. As quoted by Indian express, the eight months after note ban was introduced, the country saw a mutual fund inflow of Rs 1.69 lakh crore (up 1700%) and the three months after demonetisation saw Life Insurance Premiums rising by 46 per cent. With greater financialization of savings, a virtuous cycle for formal job creation was formed.
- After the introduction of Demonetisation, interest rates were lowered by 2 per cent. Expensive loans and the increasing cost of money in the country has been crippling for India’s entrepreneurs. As cited in the report, lowering interest rates is a policy priority and banks had been only passing on 50 per cent of lower policy rates to customers; in the year after demonetisation this has risen to 100 per cent.
Formal job creation in the country needs the lower interest rates that come from macroeconomic stability, fiscal discipline, muted inflation expectations and an Independent Monetary Policy Committee.
- The move to introduce Demonetisation in the country was targeted towards the creation of a cash-less society as cash is the primary tool of corruption.