You are a warrior. Social media is your battleground. You know that you are marching behind the greatest leader the world has ever seen and together you will take this country to a glorious future. Or you believe that you are the only thing standing against India’s rush towards fascism and total destruction. In other words you are a Bhakt or a Tkahb, zealots at either end of spectrum.
The November 8 demonetization move is the perfect opportunity for you – a chance to prove to the other side how wrong they are.
I am here for you. I will give you facts and more importantly a way of arguing these facts that leave no doubt in any reasonable person’s mind about the correctness of your position. Let us dive right into it.
Issue: How much money has come into the system?
Around 8.5 trillion Rupees or 56% of the cancelled Rupees have been deposited with the bank till November 28, 2016.
Bhakt argument: First of all, the pace of deposits will slow down. So it is likely that a large proportion of the cancelled notes will not get deposited. That will impact the government’s Fiscal Deficit. Additionally, the IT department will be able to identify part of the deposits as undeclared income from previous years and that will attract taxation at nearly 50%. Even if businesses show deposits as current year’s income, the profits out of these will get taxed at the current tax rates. There will be a tax jump that can be used in nation building.
Tkahb argument: If 56% of cancelled notes were deposited in 20 days imagine what will happen in 30 more days! The total deposits will cross 100% of outstanding because fake currency will also get deposited in banks!
Note: This fact has a shelf life. The deposit figures around December 31 will tend to give an answer one-way or the other. Better use this quickly.
Issue: The squeeze in liquidity will lead to a slow down
The cancellation of high denomination notes led to a severe reduction in demand in the economy. This will negatively impact the GDP of the country. The cash crunch has also led to difficulties for farmers at the time of crop sowing.
Bhakt argument: The Bhakt argument in the purest form is to deny that consumption has fallen even in the last two weeks. However, if you are constrained by an analytical brain, argue that this demand destruction has been temporary. You could also point to news report that say that people used the cancelled notes to clear very old dues with banks and electricity companies. In many cases, the old notes have been used by businesses as advance payments to their suppliers and their employees.
Tkahb argument: Reports suggest that FMCG sales were down by at least 50% in the first two weeks. Most economists suggest that there would be at least a short-term slowdown. However, you would be letting your side down if you did not predict doom and gloom in the long term. Argue that the cash squeeze will cause many small enterprises and even families to go bankrupt causing more than a short-term demand destruction. Argue that the bankruptcies will cause unemployment, which will further reduce demand causing more bankruptcies. India is on the precipice of a recession!
Note: It is useful to give links to articles that support your argument. Luckily you do not have to search too much. For example, a Bhakt can use this piece from Indian Express to support his argument and a Tkahb can use this one from the same paper (same page) to support his.
Issue: This measure will cause behavior change in many individuals and businesses
It is now well understood that the problem of Black Money is not of stashes of illicit wealth stowed away but of people not reporting parts of their income or gains and hence avoiding taxes. There is uncertainty on how much of black income people keep in cash. By definition this is not reported anywhere. So will this measure change behavior in future? Will people start declaring more of their income?
Bhakt argument: Government officers who accept bribes and professionals like doctors and lawyers who take their fees in cash and do not declare it are the worst hurt. They usually have very few avenues to launder their cash and hence they are now paying a very high price for converting their black money into white. It is likely that in future these people will declare a higher portion of their income because the cost of not doing so just went up.
Furthermore, Mr. Modi has just shown that he has the political will and capital to take tough steps and the ability to sell those steps to people. This fact alone will change a lot of behavior. People will think, today it was currency notes, tomorrow it could be land and / or gold. You could point out other measures against Black Money already taken or in the works.
Tkahb argument: Focus on the fact that very small portion of Black Wealth is parked in cash and most of it would be in land / apartments and gold. Also, stress on the fact that as soon as cash starts building up in the economy corrupt officers will start taking bribes and businesses would start evading taxes. You could also keep pointing out that this measure does not do anything about the Black Money parked outside the country.
Issue: Quality of implementation
RBI and Ministry of Finance have made and changed rules on a daily basis since November 8.
Bhakt argument: India is a large and complex country and secrecy was needed to implement this measure. The high number of rule changes just means that the government is responsive to emerging situations. It is commendable that the government is carrying out its operations in an entrepreneurial manner.
Tkahb argument: The changes in rules have been necessitated because of a total absence of planning. Did nobody even realize that the new notes were of a different size and that all the ATM machines in the country would need to be re-calibrated?
December has begun and a lot of data will pour in. Speed is of essence. Do not spent time trying to see how the data fits the big picture or even if there is a big picture. Pick up that data and fire.
Copy-paste the relevant parts of my article in your posts. In fact, you can link my entire article. Your social media posts are now being clicked only by other Bhakts or Tkhabs. They will use their own confirmation bias to read only the relevant portions.
PS: Do you have other factoids that can be argued both ways? Post them in the comments section below.
(Yogesh Upadhyaya is a founder of AskHow India. Blogs are personal views)