Denouement awaited – India demonetization
On Day 1 nearly all investors (including myself) hailed Modi’s scrapping of notes – cited concerns were black money and militant sponsored by Pakistan.
Its day 4 and I have had a lot of material to absorb and I strongly feel that Modi has done more harm than good. Although both harm and good is transient without any legacy and lasting effect. Good for RBI, good for villagers with corrupt Sarpanch, good for Jewellers, good for tax payers, bad for 65% population who had to queue up and has never visited the bank.
Verdict is still awaited, read the previous post where I calculate that Modi has only managed to cancel only 10% of annual income of black economy. I don’t think it was a good idea to inconvenience a large number of people, for a cause that does not have lasting effect.
One thing Modi could have done to avoid backlash is use large defence sector and train them up in evaluating currency and set up temporary branches connected to central bank servers for KYC checks so that people could replace notes in a day or two instead of a month.
This bold move can backfire on Modi. I am not sure that at the end of it there will be a net gain other than one time item mentioned above (10% of annual income of black money). What will certainly happen is 31,000 INR gold coin which CANNOT be demonetized by a Govt, Indian or other. You see my point?