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Sashi Reddi

Sashi Reddi is Managing Partner of SRI Capital, an early stage venture capital fund. He lost Rs. 25,000 in high value notes because he could not come back to India in time to deposit them.

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1.2 Billion Reasons Demonetization Makes Sense

Demonetization, in the final analysis, is not really about demonetization. It is the willingness to accept the dire straits we are in, and showing that we are prepared to now do whatever it takes to catch up with the rest of the world.

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In the mind of every Indian, there is a complete belief that India will one day become a major economic power. After all, with our glorious history of over 3,000 years, how could we not? You know we invented the number “zero” right—pure genius. In spite of all the data staring us in our face of being one of the most corrupt nations on the planet, one of the poorest, one of the hardest to do business in, etc. we smile to ourselves and say, “It is only a matter of time before we become number one.”

Unfortunately, the universe is not going to conspire to bring greatness to India. In fact, most of us who live outside India and take a more dispassionate view of events unfolding in India, wait with bated breath to see if things will continue to incrementally improve on the ground. It is well recognized that we follow every step forward with two steps back so that we continue to lose ground to other comparable nations like China every year. It is an unspoken truth that just 25 years ago, India and China were on an equal footing in terms of per capital GDP. Equal! I know it is hard to grasp that in less time than it took for us to win the cricket world cup again (1983 to 2011), India is in a place where it will be practically impossible to catch up to China, forget about becoming an advanced economy.

Then, Hon’ble Prime Minister Modi implemented demonetization, banning all high value currency notes. As a keen observer of India and its economic potential; that was the first signal to me that perhaps all is not lost for India. Perhaps, just maybe, India has the potential to realize its greatness.

A lot of people look at demonetization with narrow lens- it did not eradicate corruption, it did not catch all the black money in the system, no rich people went to jail, no poor people became rich, India remains a cash economy. In fact, people went through serious hardships standing in lines to get cash. Some people even died from standing in line.

That narrow analysis of demonetization completely misses the point. To me there is really only one way to look at demonetization: India (or someone in India—Mr. Modi) has shown that they realize that India’s shot at greatness is slipping away and were prepared to engage in drastic measures to try and rectify the situation. There is no time left for tiny, incremental, cautious measures. Hundreds of millions of Indians live in abject poverty and the last 50 years of tiny steps will mean that many of these people will never experience the joys of having a decent standard of living. Clean water, decent healthcare, housing with sanitation, effective schooling, and a guaranteed 3 meals a day.

Demonetization has finally brought into focus that change is coming. The change might not be pleasant for everyone but it is much needed. It set the stage for people to accept the reality of GST, of going after shell companies, for what I hope is immediately round the corner—a law to address benami properties. Just imagine a drastic law that says everyone should come forward and attach their Aadhar number to all the properties they own and whoever has the legal title to a property has the full right to it. Overnight, hundreds of thousands of drivers, watchmen, and servants, could become crorepatis, rightfully owning the ill-gotten gains of their employers.

Demonetization, in the final analysis, is not really about demonetization. It is the willingness to accept the dire straits we are in, and showing that we are prepared to now do whatever it takes to catch up with the rest of the world.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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