Demonetization :More foresightedness should have been and should be applied to reduce hardship of public and avoid justified criticism

[CA DEV KUMAR KOTHARI]

Appreciation for top secret:

We must appreciate successful secrecy with which the team which was assigned task related with demonetization of currency notes have been carried out. Arrangements made for meeting aftermath of demonetization are also appreciable. However, it seems that the team could have worked with more foresightedness to make it more successful with lesser pains to people of India.

Sudden announcement is inevitable:

Announcement of demonetization of currency notes can only be suddenly and surprisingly. However, in the situation, demonetization of ₹ 1000/- and ₹ 500/- could have been from two different dates to carry out process with more convenience and lesser pains to public.

Criticism:

Some criticism is quite natural for such events. Some criticism are very much justified because of sudden and great difficulty put on public even for small payments.  However, politicisation of the issue by some heads of state governments and other political parties is not justified.

More foresightedness could be applied:

In view of author, in the whole process more foresightedness was required. There must have been consideration for nature of essential spending by public including trade, commerce and industry. For example, some aspects and events which required more foresightedness were as follows and in future also more foresightedness is required: 

a. Date of demonetization around 16^{th -17th} November could be more appropriate :

8^th November was Tuesday and just beginning of second week of month. Many organizations disburse salary and wages on or after 7^th of the month. Even if salary was disbursed earlier, wages earners might not have withdrawn salary by 8^th of November, as per requirement for the month of November.

Around mid of month say by 15-17 date of month major expenses  ( by use of high denomination notes) are incurred and thereafter petty expenses are incurred from day to day. Therefore, after 15^th of the month at least households would be holding lower demonization notes sufficient to meet petty expenses. Total cash and particularly high denomination notes would be much less.  Exceptions would be reserved cash for meeting emergencies which are accumulated and kept in well to do families, over a period of time and kept as Reserved for emergencies.

Therefore, if the date was kept on say on Thursday 17^th November 2016, most of organizations would have disbursed salary and wages, employees would have withdrawn as well as spent money for major part of monthly requirements. Essential expenses which are incurred day-to-day  would have been incurred and arranges with lower denomination notes or with credit of local shops and also by arranging exchange of notes.

b. Two dates could be provided:

Two dates say 10^th November for ₹ 1000/- and 17^th November for ₹ 500/- could have been provided so that sufferings of public was less. There would not be so much rush on banks and ATM. Even some delay in making available new notes would not have put so much pressure on all as we have observed.

c. Exceptions up to certain limits could be provided:

One is free to exchange old notes with new and is also free to deposit old notes in his bank account. Therefore, it is not that old notes have been rendered scrap altogether. They have value and are convertible into valid currency notes. The value is available to all with some nominal procedural requirement, in normal circumstances till 30.12.16. Thereafter deposit or exchange may require further procedural formalities. Therefore, it would have been better situation if demonetized notes were allowed for small payments.

(i) Acceptability of ₹ 1000/- and ₹ 500/- notes could be allowed for five to ten days with certain limits formeeting essential and emergent expenses. The limits could be ₹ 5000/- for normal house hold and other expenses and ₹ 15000/- or more for specified circumstances like during travel and in hospitals (including private hospitals and dispensaries).

(ii) Exception for disbursement of salary and wages could be provided:

Exception for disbursement of salary and wages (or part of it) (for daily wage earners,  weekly,  fortnightly and monthly disbursements) could have been provided with reasonable check and balances. This would not have put working class in acute hardship and difficulties.

(iii) Acceptability may be allowed till 15.12.16 in limited way to avoid hardship

Acceptability of old demonetized notes in certain circumstances allowed should have been allowed for a reasonable period. We find that very short period was allowed and then it was extended. For such circumstances the acceptability up to 30^th December can be allowed with reasonable check and balances about recording and reporting for use of old notes.

It is requested that some of relief measures may be provided till supply of new currency notes are not sufficient to meet requirements for individual, households, trade, commerce and industry.

Links for earlier articles by author on the same subject:

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=7076&kw=Demonetization-of-8377-500-and-8377-1000-notes

https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=7077&kw=Old-Demonetised-Notes-ODN-for-payment-of-taxes-time-allowed-is-very-short-must-be-extended-to-30th-December-2016