GD Topic: Demonetization – Success or Failure?

Even though Demonetization or Notebandi (as it is termed in Hindi) is now a few years old, this topic conjures up strong reactions on both sides of the debate. Let's explore it as a GD topic.

By Aritro Dasgupta

This article was first published on August 26, 2019.

Current affairs topics are quite common for being posed for GDs during MBA admissions. Whatever the topic, one needs to steer clear from controversial matters. In this series of articles, we explore certain topics which are quite likely to be in line to be asked in the GD rounds at the top MBA colleges in India this year. These are all based around the most important topics centres around business, economy and society. We will set a path on how best to attempt these. Let's explore Demonetization as a GD topic for MBA.

Even though Demonetization or Notebandi (as it is termed in Hindi) is now a few years old, having been implemented in the early winter of 2016, this topic conjures up strong reactions on both sides of the debate. There is also much debate on what were the intentions in the first place for implementing this idea, overnight. Like almost any other topic, this too can be answered in either For or Against motion. Let us explore each option:

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GD Topic: Demonetization

For the Motion

There are several points to justify the implementation of Notebandi, as explained under the following bullet points:

1. This move helped wipe out lakhs of crores of black money out of the system. Several cases emerged of people abandoning their hard cash.
2. Due to the overnight nature of the announcement, those with black money were mostly unable to get their money converted. While a number of critics voiced concerns on the sudden nature, anything else, unscrupulous elements would have been able to find loopholes in the system, and ‘whitened’ their black money.
3. There were fewer terrorist incidents over the next few months as the cash supply for illegal means got cut off at source. This was true for all over the country, especially in the trouble spots such as in Jammu & Kashmir and in the Naxalite belt.
4. Digitization got a massive boost with this move. As people were forced out of their comfort zones, they started using mobile apps and digital wallets, while card payments became more common.
5. There was a substantial boost to the tax payers’ base during the period.
6. There was consistent message that the government was sending out in its fight against black money. The Benami Property Act had been passed just before, so all part of a planned move.
7. Due to the massive collection of money by the banks, there was reduction in the tax slabs at the subsequent budget. The first level of tax payers, i.e. till Rs 5 lakh annually, now had to pay 5% as tax and not 10% as previously, was provisioned.
8. Several noted economists like Bibek Debroy and international bodies such as the IMF, have praised this initiative as a landmark decision.

Against the Motion

A number of points also go against this topic, as mentioned below:

1. The black money being abandoned were stories that merely emerged on the first few days, but then died out as people found loopholes. A lot of these stories got over hyped on WhatsApp and other social media, rather than any real news outlets.
2. In spite of the sudden nature, people did find a lot of loopholes to get their money ‘whitened’. One such way that emerged then was through the Jan Dhan Yojana route, where many deposited money in to the accounts of their domestic help or employees, only to get back most of that, with a slight commission to those bearing the accounts.
3. There was much loss to business and economy especially the unorganized sector, where a substantial proportion of Indians work in. Not all the previously held ‘black money’ was illegal, in the sense that no illegal occupations were being run. It was simply being concealed, but now thousands of small business had to either shut shop, or lay off employees by the dozens or more.
4. It is true that digitization got a boost, but it was private foreign VC funded entities that made the biggest gains. The best example is of course Paytm. Only belatedly did the government launch its own such initiatives to counter the rise of the private VC-driven ones.
5. The long-term boost to the tax payers’ pool was not substantial. In fact, the rise was not different from those in previous years.
6. A lot of experts felt that while the intention was probably good, the execution may not have been so. A good example being, the newly printed notes were not aligned to the ATMs in the country, leading to further delay as people suffered daily.
7. There was even much discord as a result between the Ministry of Finance and the Reserve Bank of India (RBI).
8. Several international publications such as The Economist and noted economists such as Raghuram Rajan spoke out against the decision, claiming it did not make economic sense.

The main lesson we draw from the above points is that both viewpoints are perfectly fine, as long as the backing evidence is provided. Supporting examples need also to be drawn up. To prove one’s point, citing of data released by credible sources such as the World Bank, World Economic Forum (WEF), The Economist, Forbes, Fortune, etc. is the best way of making one’s point. Indexes and ranks released by such bodies, present a highly credible and scientific justification for the points sought.

About the Author:

Aritro Dasgupta is a Teacher, Trainer and Content Writer. He has taught at several leading colleges and coaching institutes in both India and the UAE. Several of his students have finished in the top 10 of various national level exams such as CLAT, AILET and DUJAT. He is also a prolific content writer, having written for several leading publications in India, while currently, also working for one in the USA.

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