At the outset let me acknowledge the varying level of hardship faced by all of us.
Here are my thoughts as a lay man & with some level of financial sense.
Look how people have adopted in the last 40 days. My cafeteria vendors who wouldn’t even accept a Food coupon have resigned to the fact of living with “Paytm” payments. I pay “Rs.8” for my tea via Paytm. All small time snack vendors are now willingly accepting Paytm or similar ewallet payments. Isn’t that quite revolutionary.
A week ago an electrician come to our house to install an equipment. Since the expenses ran over what we paid at the shop via a credit card, he was quick to give us his “Paytm” wallet number. Can you imagine this in our “flush with cash” economy 39 days back?
Vegetable vendors, Kirana stores, small outlets have all moved to virtual money.
Now the question of us going back to our old ways once the liquidity crisis eases.
Here is my take. If the Govt is smart & committed to make hiding income difficult, the cash crunch will never ease. It will never replace the currency notes that has been pulled out from circulation. It will push people to digital platform & early indicators are that people being adaptive, have moved on to the new reality.
Assuming that Govt does replace all the currency notes in numbers, it may still be difficult to hide / hoard. It will take a couple of months for life to get back to normal. Until then all the transactions that have moved to digital world will leave behind an audit trail for future. If someone who has moved to digital payments & is generating “x” revenue / income on records in last 40 days, will have a hard time justifying a drop when money circulation improves & he moves to dealing in cash again.
If we expected big evaders to be caught & prosecuted, I don’t think that would ever happen. People would rather burn their defunct notes than declare. But what’s definitely going to happen is that it will be difficult to evade. It won’t be eliminated completely but it would definitely reduce.
Banks being flush with cash will ensure interest rates drop over time. Which means lower cost of borrowing, incentive to kick start business ventures, more employment opportunities, lower housing loan rates etc etc. It will mean lower incentive to put money in bank FDs & instead invest in MFs / stocks & a more broad based equity market would ultimately benefit the economy (not money in gold, flats, land).
With a clamp down on cash, real estate should hopefully get cleaner & cheaper. If not cheaper, at least no increase for a couple of years which effectively is a reduction.
Since the opportunity to invest in Land / property & gold becoming difficult, businessmen should hopefully have an incentive to account for all their turnover, pay requisite taxes & have profits that can be invested / spent as they please. There are reports of people who are talking on these lines & it’s a good sign.
At no point am I saying this was executed well but keeping in mind what was required to achieve, it couldn’t have been done any better.