Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
5. Critically comment on the successes and failures of demonetisation on achieving its stated objectives. Was it really a self-inflicted shock? (250 words)
Difficulty level: Moderate
Reference: The Hindu
Why the question:
The observations on the performance of multilateral institutions have highlighted the dominance of China during the Covid pandemic and also the failure of such forums to address the changing security issues.
Key Demand of the question:
To analyse lacunae in the existing multilateral institutions and the need for a course correction.
Directive word:
Critically comment – When asked to analyse, you must examine methodically the structure or nature of the topic by separating it into component parts and present them in a summary. When ‘comment’ is prefixed, we must express our knowledge and understanding of the issue and form an overall opinion thereupon.
Structure of the answer:
Introduction:
Highlight key objectives of demonetization.
Body:
Discuss the rationale given that suggests that demonetization has been moderately successful in tackling black money – increasing tax base, formalization of economy etc
Discuss why demonetization was an abject failure in tackling black money. Highlight reasons such as logistical difficulty in penalising all those who converted unaccounted money into legal tender, demonetisation worked as an unintended amnesty scheme etc
Examine if it was a self-inflicted shock– slowdown in GDP, loss of jobs, hit the informal sector etc
Conclusion:
Give a fair and balanced view on demonetization.
