It was the same iconic day of 8th of November when Donald Trump was elected as the President of United States of America that the earth-shattering announcement of demonetisation was announced back in India. The lives of 1.25 billion people were instantly affected as the disruptive new policy called for redundancy of Rs 500 and Rs 1,000 notes. A tactic that was supposed to give a huge blow to the cash-centric black market, to wipe out the country of counterfeit notes and to digitalise the whole economy. And yes, to get more of the population under the taxable economic grid. But today, after a year of this policy was all of this achieved? The country still struggles to determine whether it was a beneficial move or not.
One Year Post the Demonetization Announcement
Soon after the public announcement of demonetisation, the vibe amongst people was tense and chaotic. It was estimated that around Rs 15.4 lakh crore worth currency has been expunged as legal tender and remonestisation of such a huge amount would take time. It was expected that around Rs 4-5 lakh crore wouldn’t make it back into the banking system as this money would end up creating an audit trail. But, this hope was soon crushed, when 99 percent of the invalidated currency made its way back into the accounts. Meaning what what was supposed to be an attack on black money simply turned out to be a big money laundering scheme.
Another biggest hope with demonetization was that the income tax base would increase and benefit more. But has this income tax increase resulted into higher direct tax collections? For the period, April to September 2017, "Net Direct Tax collections represent 39.4% of the total Budget Estimates of Direct Taxes". For the same period last year, "38.65% of the Budget Estimates of direct taxes for FY 2016-17 has been achieved." While there has been only a marginal improvement in tax collection, does it justify the destructive effect of demonization on the country’s economy?
Moreover, one of the milestone effect of demonetisation has been to detect and eliminate counterfeit notes. According to RBI data, the growth in counterfeit notes has not been remarkably large. With cash-to-GDP ratio back to double-digits, surely the dream of non-cash payments has only been attainable in a short-term scenario.
Today, after more than 12 months since the demonetisation has been announced, standing at long bank and ATM queues is a faded memory and more revolutionary policy measures like GST has been implemented by Modi Government.
Organised Jewellery Sector Shines Brighter
But if there’s one sector that has fruitfully benefited from demonetisation, then it is the jewellery sector. It has accelerated an already gradual shift of customers from the unorganised to organised sector. Whether it is the fear of hardening crackdown on informal sector transactions or whether it is making a gradual shift towards digital payments, the organised retail sector of gems and jewellery is growing roughly by 30-40% in recent years, according to an internal study by a large chain of pan-India based jewellers. The jewellery industry is all set to thrive following demonetisation, as people will tend to have a higher level of trust in pure jewellery when compared to currency notes.
All India Gems and Jewellery Trade Federation chairman Sreedhar G V also was seen saying that even though the unorganised sector jewellers could face some problems in the initial few days, in the long run demonetisation would surely help them get organised.
When it comes to buying and choosing 100% authentic diamond and gold jewellery, as it is plummeting income levels, rapid urbanisation, an increase number of working women and shining economic prospects are a few factors that will continue to attract people to buy more jewellery in India.
With more and more use of plastic money, debit/credit cards for buying jewellery, it is good for Indian jewellery industry to create more transparency and to bring the whole industry under the organised segment.
