Demonetization - Good/Bad and the future

First of all, this is not the first time, demonetization has been done. The major difference this time is that the currency value is very less. 1000 ruppee at time of Morarji Desai = 10 lacs now (perhaps)

Evaluation - Good Part

1. It was well kept secret. Indira failed in this test. She perhaps had a mole.
2. RBI was kept in sych
3. well shielded secret = NDTV was perhaps falsely created and Govt. never meant such extreme step, US election sheilded warth of international media
4. Weekday choosen - Weekend shopping not disturbed, enough time and resource at hand at bank
5. Illegal and fake currency game will be halted for a short while. 

Evaluation - Not so good part

1. Jewelry shops were not closed for say 3-5 days
2. Too much of time has been given - 3 months (Come on, don't think people are that stupid that they will not be able to convert black to white in 3 months)
3. Loop holes in terms of corrupt bank officials esp. private banks. Here small time managers, are doing lot of money minting by opening fake accounts or dubious accounts without PAN or invalid PAN. 

What can be done right now?

1. Announce to deposit notes within 15 days, say by 20th of November. Left out people can still deposit after 15 days, but with greater scrutiny.
2. People should not be allowed to deposit more than 1.5 times of last year income as per ITR. If someone still wants to do, a special process should be followed
3. Close jewelry shops for 5 days
4. Banks should be asked not to open any new accounts in next 15 days, without special requirements approved by say zonal managers etc. 

Overall Evaluation 

It is really a good scheme and pending for long time. Baba Ramdev negotiated for this masterstroke in 2011, with Congress. But the scheme was not designed well. Though there are enough knowledgeable people in the Govt. and it is easy to think in the hindsight than in foresight, Govt.and RBI need to become more agile and adaptable and keep on changing tracks, so that all the loopholes are plugged.

Future

Common people will embrace digital currency. Small entrepreneurs will find it comfortable to deal with digital currency. Bureaucrats and Politicians will forced to find new and legal ways to park money. Big businessman will have business as usual and will have minor tinkering in just their business models.

One major impact could be cleaning of black money in daily life. It will continue like that only in elections. CA's will get higher demand for innovating accounting books.

Yes, one more interesting impact, ISI has to burn their existing inventory of INR and print new lots. They will also look for more innovating ways in future.