Demonetization: 7 point metrics

I need to earn 170/- to take home 115.5% (after 32% income tax). Additionally, I need to pay 15.5% service tax before I can purchase services/goods worth 100/-. So I need to work 70% harder than my friends in the black money economy to match their lifestyle. This is a big enough frustration. Not to mention that the ill-gotten black money is often made through extortion, corruption and other illegal activities and not by under-reporting of legitimate business alone.

So while I struggle to make my ends meet, there is a guy who not only extorts money from me, but flaunts it in my face. The rage was always there, but this government has provided a channel for the individuals to get even.

I have a simple metric to gauge to gauge the any public policy:

  1. Is it tangible? The benefits/results of the movement can be gauged by individuals themselves.
  2. Does it inspire? It primarily involves changes in attitude & behavior and can easily become a self-sustainable engine.
  3. Who benefits the most? Rich, Corrupt bureaucrats or bottom of the pyramid?
  4. Can it provide some short term low hanging results immediately to sustain the zeal?
  5. Does it improve the socioeconomic mobility? (help the poor to overcome adversity that limits their ability to achieve “pursuit of happiness”)
  6. Intangible benefits:
  7. RoI: Tangible benefits to Investment requirement ratio (after accounting for cost of level of disruption it creates)

Government has repeatedly claimed that their target is 3Lakh crore. (44 billion dollars). It is a drop in the ocean of the trillion dollars’ worth of total black money that held by Indians in property, gold, foreign currency and stashed abroad. However, if we assume that the cost of this move is 1lakh crore (printing of bank notes is a mere 13 thousand crore) then not only the country gains 2Lakh crore, but also would have for the first time, since independence, created a large impact to the hoarders of black money.

I had once argued that the problem with India is not the corruption by the complacency and attitudes of the masses. Rather than ostracizing the corrupt, we adored them for their wealth and gifts. Even elected them back to power. The intangible benefits are also hard to ignore. For the first time rather than flaunting the wealth, people are regretting the choices they have made. (the question is if the culprit will return back to their old methods after 1st Jan or not). The adoption of bank accounts, digital payments (card/cardless) has improved. There is a better trace ability of one’s spending.

I had earlier argued that 2.5Lakhs (USD ~3,700/-) was too high a concession for a blanket amnesty on undisclosed income. It is more than twice the per capita income of India and more than 20 times the per capital availability of high currency notes. However by Monday 28th of November only 8Lakh crore (60% of cancelled currency notes were returned back to the authorities). The queues in front of tellers are disappearing and it seems most household without any ill-gotten gains to declare have returned back to normalcy. So hopefully the target of finding 3lakh crore can be achieved.

It is amazing that after almost a decade of inaction, Indian government has come up with two policies in a single term that excel on my 7-point metric to evaluate any public policy. The previous one being swachh bharat abhiyaan. If they achieve their 3Lakh crore target, then the policy will not only fund itself, but provide the government a war chest for battle against benami property & personal gold reserves.

Advertisements

Leave a Reply.... we want your views

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s