Is India facing a total economic collapse?

Peri Maheshwar

I never anticipated this, but it seems to be happening. The intent and wisdom may be debatable but the execution has been an unmitigated disaster. We demonetised 14 lac crores and haven’t injected even 1 lac crores back in the system. Our capacity to inject is also in doubt. While we scrapped 1,658Cr notes of Rs500 and 668Cr notes of Rs 1000 our Printing capacity is just 100Cr notes per month of Rs 500 and 133Cr notes per month of Rs 2000. This cash sucked out of the system  has taken the economy into a deep freeze. 

– While unorganised has fallen by a half, even the organised has fallen by about 40%(neighbourhood malls). 

– Consumption is at an all time low. This will effect revenue collection for the governments and states.

– Look at your newspaper. FMCG, White goods, Jwellery, Real estate, travel, mobiles, mobiles, restaurants, malls, garments – Every Ad has been pulled off. All you have are obituaries, tenders and government ads. Newspapers lose 50% of display ad revenues.

– The neighbourhood stores are losing out massively to the big baskets and the big bazaars. This deep freeze in trading will hurt small businesses the most. 

– Prices of perishables are down dramatically. Farmers are stuck with produce in hand and no money to invest for the new harvesting season.

– Why can’t we have neighbourhood grocers and private hospitals accept old notes? It is a small price to pay. Can’t we trust our own people? 

– Increasing the 500/1000 exchange from 4000 to 4500 and then reducing it to 2000 in 4 days shows the confusion within the ranks. 

– We are in this for a long haul. The sharks haven’t even entered the banks with their suitcases. 

– If RBI transfers the unaccounted notes as reserves to government, the trust in our currency will be hit.

This is looking grim. The silence from the government says it all. RBI is numb. From an inflation led economy, we may be fighting to stop stagflation and wade off deflation. I just hope this ends soon.

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