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Demonetization and its impact on Indian Economy

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On November 8, Indian Prime Minister Narendra Modi took a historic decision by announcing that the high-denomination notes (Rs 500 and Rs 1,000) then in circulation would cease to be legal tender.

With demonetization effort 86% of India’s currency was nullified that aimed to wash the stock of ‘black market’s cash supply’ and counterfeit notes out of the economy and convert it into the licit, banked and taxable, part of the economy. To reduce the impact of sudden commercial collapse, a 50 day period ensued where the population could (ideally) exchange their canceled cash for newly designed 500 and 2,000 rupee notes or deposit them into bank accounts. Irrespective of the widespread anguish and household disturbances, an optimistic sentiment shown in favour of the decision.

Cash is the preferred mode of transaction in India and only less than half the population uses banking system for monetary transactions. An immediate public anger appeared against the mismanaged and unprepared banking system. The banks didn’t have enough of the newly designed banknotes (Rs 500 and Rs 2000) to distribute in exchange for the canceled notes. The move has also led to a shortage of lower denomination notes such as Rs 100 and Rs 50 that are still legal tender, as people have taken to conserving whatever cash they have in hand. The demonization initiative has caused a sudden breakdown in India’s commerce and the unbanked and informal economy is hard hit. Trade across all aspects of the economy has interrupted, and sectors like agriculture, fishing, and the huge informal market were almost shut down during the initial days of announcement. The informal sector in India employs more than a majority of the workers and most transactions are in cash. Disruption to this system could endanger the employment and livelihood of weaker sections of society. The change disturbed the lives of ordinary people, led to widespread need and major job losses for the poor.

Nevertheless, although India’s demonetization move was apparently mismanaged in the beginning, the effects at micro level look advantageous. For instance, all sorts of illegal activities, like terrorist financing, etc. have been completely hit after the announcement. The demonetization process has also repaired India’s counterfeiting problem for the near to mid-term. The cash-centric black market for the most part ceased to function with the nullification of the bulk of its currency. It has also been reported that the new 500 and 2,000 rupee notes are less vulnerable to counterfeiting, having advanced security features. It is also thought that the drive will wipe out a measure of corruption and tax evasion in India’s real estate market. Growth in cash-intensive sectors such as real estate, construction and FMCG is likely to take a hit in the short term as consumers are deferring purchases. The real-estate market is likely to come to a standstill with property prices likely to fall and the possible tax inquiries following demonetization will affect both consumption and investment in the formal and informal sectors. However, there is a positive side to the story, over the medium term, there would be benefits through higher government spending and greater financial inclusion. Also, the movement of household savings from physical to financial will help boost growth, according to Yes Bank BSE 0.90 % report.

With exchange of the old currency notes coming to an end, many people are forced to open accounts to save their money. It is estimated that banks have opened about 30 lakh (and still counting) new accounts since the demonetization drive began on November 8. India’s largest bank, State Bank of India (SBI), with its 17,097 branches — half of which are in the rural and semi-urban areas – is opening 50,000 accounts a day. The leading consumer internet companies in India (Flipkart, Snapdeal, Shopclues, CCAvenues, Ola and Oyo Rooms) have applauded the move, saying it will pave the way for digital payments, aid the process of financial inclusion and the overall transformation in the economy will translate into long-term benefits for the industry. Payments companies Paytm and Freecharge saw a surge in adoption of their digital wallets. According to market experts, the growth of digital payments and wallets is the first phase of the impact and will give big boost to lending and credit as the digital records of merchants will expand and create more demand in the second phase.

Even though demonetization move created adverse short-term policy impact the real impact of must be assessed in the medium/long term. The reduction in overall investments, both in the formal and informal sectors, would certainly reduce economic growth potential. However, the move need to be followed up with ensuing actions to remain effective. These actions relate primarily to structural changes to make the system more lawful, reducing too much bureaucracy, make the tax system simple and transparent. In addition, a greater effort is required to include the informal sector and ensure effectiveness and the illegal activities such as generation of black money and corruption should not be channeled back into the economy.

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Pakistan Day Celebrations: Civilian Participation

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Pakistan got independence on 14 August 1947 by hectic political struggle from the platform of All India Muslim League (AIML) under the dynamic leadership of Quaid e Azam Muhammad Ali Jinnah. The presidential address at Allahabad on 29 December 1930 of Dr. Muhammad Iqbal, accelerated and gave more clarity to the movement. He presented the idea and concept that Muslims are a separate nation by emphasizing that a nation is distinguished from the other based on religion, customs, and traditions. At the same time, he strongly disagreed with the Western concept of religion as a private affair. Iqbal explained that Islam is a way of life and thus Muslims are a separate nationand accentuated that unless their rights areprotected, it is impossible to establish peace and tranquility in the sub-continent. The determined political struggle of AIML led to March 23, 1940, Lahore Resolution, at its 27th annual session. The Quaid addressed the session on the first day andstressedthat Hindus and Muslims follow two different religions, philosophies, social customs literature and this made them two distinct nations.

The contents of the resolution, according to Story of Pakistan are“No constitutional plan would be workable or acceptable to the Muslims unless geographical contiguous units are demarcated into regions which should be so constituted with such territorial readjustments as may benecessary. That the areas in which the Muslims are numerically in majority as in the North-Western and Eastern zones of India should be grouped to constitute independent states in which the constituent units shall be autonomous and sovereign”. It strongly rejected the concept of United India. The word states wassubstituted to one state by a resolution passed at the 1941 Madras session of the AIML which stated, “everyone should clearly understand that we are striving for one independent and sovereign Muslim State.” Moreover, in all speeches, the Quaid used the word “an independent homeland” or “an independent Muslim state”.Pakistan and India became dominions on 14 and 15 August 1947 respectivelyby the Indian Independence Act, 1947, based on the Mountbatten Plan of 3 Junepassed by the parliament of the UK on 18 July. Keeping in view the atrocities being committed by RSS, a militant wing of BJP in Indian Illegally occupied Kashmir (IIoK), and minorities especially Muslims in all over Indianot being allowed to practice religion freely, havevery sturdily substantiated the decision of AIML to fight for a separate state for Muslims. It elucidates their political acumen and far-sightedness. 

Pakistan remained a dominion for about nine years till thefirst constitution as the Islamic Republic of Pakistan was adopted on 23 March 1956.Thereafter 23 March was celebrated as “Republic Day” (Yome Jamhooria)every year to commemorate the Lahore resolution and adoption of the constitution.   After the imposition of martial law by Ayub Khan in Oct 1958,it is being celebrated as“Pakistan Day”. Probably the plotter of the coup could not celebrate constitutionalism and democracy on March 23 so ‘Republic Day’ was replaced with ‘Pakistan Day.  The main feature is a three-servicesparade in Islamabad followed bythe display of military weapons and equipment. Floats of the provinces also march past. The flypast by Army and Navy combat aircraft displaying their weapons and equipment.The flypast by PAF fighters and aerobatic.

The celebrations are spread over about two and half hours.Pakistan Day has taken the shape of a Defense Day which was not originally intended. Moreover, Army, Navy, and Air Force organize their respective Defense Days on 6,8, and 7 Septemberevery year. The events of the Pakistan Day parade give an impression especially to civilians that military strength is the only most important component of national power. The remaining such as economic capacity, natural resources, industrial capacity, national cohesion, political structure, and leadership, etc. which are also very vital needs to be given projection. Therefore, parade proceedings may be modified to include more participation of civilian-related events. The latest inventory and indigenously developed weapons and equipment may be displayed to reduce timings. The PAF fighters may only carry out professional flypast andaerobatic performance similar to the aerobatic display team, like “Red Arrow “may be excluded. It is pertinent to mention that most of the countries have prohibited aerobatic display in public places to avoid any untoward incident. It is suggested that floats carrying students who have topped in the boards and universitiesand have done distinct research work in the past year may be added. Similarly,floats carrying civilians who have been awarded Pride of Performance and other awards, businessmen who have been bestowed awards, sportsmen who have brought honors for Pakistan may also be included.  Few industrial floats may also be added with indigenously manufactured machinery and other items.Floats carrying agricultural products and livestock may also be considered.Citations are read as the float passes the dais. Moreover, in Islamabad and the provincial capitals industrial exhibitions may be organized which may include indigenously developed machinery and other items.The civilian participation in Pakistan Day celebrations will certainly add colors and act as a source of pride for them as well as for the nation.

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Ancestral Lineage of Hazaras: from Afghanistan to Pakistan

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While the origins of Hazaras are much debated, opinions differ when it comes to the ancestral lineage of Hazara community. According to some historians, Hazaras are the original inhabitants of Hazarajat (now central Afghanistan).Among Hassan Pouladi, Prof. Shah Ali Akbar, Fletcher, and Abdul HaiHabibi, J. P. Ferrier who was a renowned French scholar was the first who argued based on his explanations of the Greek historian Quintus Curtius about the battles of Alexander the Great and his travels to these areas, now Afghanistan that Hazaras were native inhabitants of Afghanistan since the time of Alexander the Great and have not migrated from any other places to this land.

Whereas, according to some, Hazaras have Mongolian ancestry under Genghis Khan. This notion that Hazaras have Mongolian origin takes its origin in the 19th century when European came to Afghanistan, and they distinguish people with Mongolian featured faces among other Caucasian faces. Hazaras were originally represented by the word ‘Ozala’ or ‘Hosala’ which, with the passing of time became ‘Hazara’. The very word ‘Hazara’ then was used to refer to the counting system in the armed forces of Genghis Khan i.e. ‘hazara’ that meant thousand, which comprised one level of the troops.

Yet, few opinionate, Hazaras have Persian and Turko-Mongolian ancestry. According to a report they descended from Genghis Khan’s Army that mixed with Persian and Turkic locals whom as a result of conflict had been settled in now Hazara inhabited areas of Afghanistan.

Nevertheless, some think, Hazaras have ancestral lineage with theKushan Dynasty that goes back two millennia when Bamiyan in Afghanistan was home to the largest statues of ancient Buddhist civilization. Patrons of this idea highlight the similar facial features of Hazaras to those of Buddhist murals and statues in the region. Whilst, some of the Hazaras believe that they are the descendants of one of the sons of Noah.

Although, all the above mentioned theories might differ when it comes to ancestral lineage of Hazara community, but they have one thing in common and that is the land of Hazaras which now constitute parts of Afghanistan, Iran, and Pakistan. People of Hazaras settled in the mountainous regions of central Afghanistan as early as the 19th century, with the majority of their inhabitants living in Hazarajat (the land of Hazara), which is situated in the rough central mountainous core of Afghanistan with an area stretch over 50,000 sq.km.The Hazaras speak a dialect of Persian (Dari dialect) that is called Hazaragi. Hazaragi was one of the two largest languages of Afghanistan. Hazaragi includes many Mongolian and Turkic words, which also maintains the theory that they have Mongolian ancestry.

Afghanistan is a multi-ethnic country with almost 8 major and 10 minor different ethnic groups; among major ethnic groups are Pashtun, Tajiks, and Hazaras etc. Hazaras were once the largest ethnic group in Afghanistan and constituted approximately 67% of the total population, but today their population hardly makes up around 9% of Afghan population. The reason for their massacred lies in their off target political action when they backed the wrong candidate in the accession struggle in the late 19th century, that had changed the life of Hazaras and their role in Afghan politics and ultimately in Afghan government.

Reports from the 20th century depict that arm forces of Afghanistan made pyramids out of Hazaras heads after some of the massacres, as a form of warning to the remaining Hazaras, yet this could not be regarded as the last savage and barbaric government repression of the Hazaras. Towards the end of 20th century during the rule of Taliban in Afghanistan, government specifically targeted the Hazaras for persecution and even genocide. This brutal history of persecution of Hazaras in Afghanistan resulted in killing more than half of their population with some migrating to neighboring countries like Pakistan and Iran.

Whereas, according to historical evidence migration of Hazaras from Afghanistan to Baluchistan province, Pakistan took place about 150 years ago, initially due to economic purposes. But mass migration of Hazara population took place in the late 19th century, mainly due to their persecution and targeted killing at the hands of different afghan rulers and Taliban government that forced them to migrate to Pakistan, and so they settled here.

In Pakistan, the estimated number of people of Hazara community is between 0.6-0.9 million, living and residing in different parts of the country including Karachi, Parachinar, Sanghar, Nawabshah, Hyderabad, also in different parts of GilgitBaltistan and Punjab. In Baluchistan province, the bulk of Hazara population are residing in Quetta and other parts of Baluchistan such as Sanjawi, Much, Zhob, Harnai, Loralai, and Dukki, where their population makes up around 0.4-0.5 million.Unfortunately, along with their migration, the Hazara community brought with them the history of their persecutions based on their ethnicity, religious orientation of sect and also their ethnically unique facial curvatures, and so, their tenure of oppression at the hands Taliban and other terrorist organization like Lashkar-e-Jhangvi, Sipah Sahabah, al-Qaeda and other Sunni radical militants organization that also includes ISIS in its list is on-going in Pakistan.

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Pakistan PM visited Sri Lanka to further strengthen the existing friendship to new heights

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Prime Minister Imran Khan during the Sri Lanka visit. PHOTO COURTESY: FACEBOOK/IMRAN KHAN

At the formal invitation of the Prime Minister of the Democratic Socialist Republic of Sri Lanka, H.E. Mahinda Rajapaksa, the Prime Minister of the Islamic Republic of Pakistan, H.E. Imran Khan, paid a two-day official visit to Sri Lanka on 23-24 February 2021.

Prime Minister Imran Khan was accompanied by an elevated-level delegation comprising Federal Ministers and senior Government officials. The first-ever visit by the Prime Minister of Pakistan to Sri Lanka since the formation of the new governments in both countries clearly reflects the warmth and goodwill between the two countries’ governments and peoples. Prime Minister Imran Khan received a warm traditional welcome from the Prime Minister and the Cabinet of Sri Lanka’s Ministers.

During the visit, Prime Minister Imran Khan held delegation-level discussions with President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa of Sri Lanka. Both sides comprehensively appraised the multifaceted bilateral relationship in various fields of cooperation. The talks were held in a warm and cordial environment, marked by mutual trust and respect. The visit offeredboth sides a timely opportunity to further shape upon their close and regular consultations, particularly in the areas identified during the recently held Foreign Secretary level Bilateral Political Consultations, Joint Economic Commission session, and the Commerce Secretaries-level Talks.

Both sides reached a wide-ranging consensus on ways and means to strengthen cooperation further comprehensively and decided to hold frequent meetings; promote high-level and delegation-level exchanges; and enhance the process of consultations, collaboration, and synchronization between their respective institutions. Prime Minister Imran Khan reiterated Pakistan’s support for the socio-economic development of Sri Lanka in line with the vision of a “peaceful neighborhood.”

The two sides reviewed the all-encompassing engagement between the two countries in promoting cultural linkages, human resource development, capacity building in diverse areas, and educational and technical cooperation. The Pakistan side announced 100 scholarships in health sciences and medicines (MBBS and BDS) as part of the Pakistan-Sri Lanka Higher Education Cooperation Programme (PSLHECP). The Sri Lankan side appreciated the cooperation being extended by Pakistan in human resource development and capacity building.

While comprehending the existence of boundless potential of religious tourism to Buddhist archeological sites and perceiving the close ancient and cultural ties dating back to Gandhara civilization, the two sides emphasized the importance of augmenting cooperation in the field of tourism and highlighted the benefits of sharing expertise in the hospitality industry, including training and capacity building. The Pakistan side declared its initiative of establishing the Asian Civilization and Culture Centre at the University of Peradeniya, Kandy. Both sides recognized the importance of enhancing air connectivity to promote people-to-people contact, tourism, trade, and culture.

In order to explore new avenues for enhancing bilateral trade and investment between the two countries, a high-level Pakistan-Sri Lanka Trade and Investment Conference was held on 24 February 2021. The Conference provided an opportunity for effective and meaningful engagement between the business communities of the two countries. At the Conference, both Pakistan and Sri Lanka sides reiterated the importance of strengthening economic relations in critical areas of mutual interest and diversifying trade and investment. The two sides emphasized the importance of realizing the goal of achieving a US$ 1 billion bilateral trade target and also agreed to work towards broadening and deepening of Pakistan Sri Lank Free Trade Agreement.

During the visit, the following MoUs between Pakistan and Sri Lanka were signed:

i. Memorandum of Understanding (MOU) between the Government of the Democratic Socialist Republic of Sri Lanka and the Government of the Islamic Republic of Pakistan on Cooperation in Tourism

ii. Memorandum of Understanding (MoU) on Cooperation between the Board of Investment of the Democratic Socialist Republic of Sri Lanka and the Board of Investment of the Islamic Republic of Pakistan

iii. Memorandum of Understanding between Industrial Technology Institute (ITI), the Democratic Socialist Republic of Sri Lanka, and International Centre for Chemical and Biological Sciences, University of Karachi Islamic Republic of Pakistan

iv Intent Cooperation between Industrial Technology Institute of Sri Lanka and COMSATS University Islamabad

v. Memorandum of Understanding between University of Colombo, Sri Lanka and Lahore School of Economics, Pakistan

Prime Minister Imran Khan and Prime Minister Mahinda Rajapaksa together accredited the Sri Lanka-Pakistan Parliamentary Friendship Association reconstitution. Both sides highlighted the need to strengthen parliamentary cooperation between two sides.

Both sides expressed satisfaction at the existing bilateral cooperation in the field of defense. They noted that the elevation of staff-level talks to Defence Dialogue has further provided a prospect to expand security sector relations. Prime Minister Imran Khan announced a new $50 million defense credit line facility. The two sides stressed the need for a strengthened partnership to support and coordinate with each other to deal with matters related to security, terrorism, organized crime, drug and narcotic trafficking, and intelligence-sharing.

In his efforts to strengthen sports diplomacy, Prime Minister Imran Khan participated in a shared session with the sports community of Sri Lanka on 24 February 2021. At this event, Sri Lanka’s Minister of Sports and Youth Namal Rajapaksa, in the Parliament Speaker Mahinda Yapa Abeywardane, stated the commissioning of the “Imran Khan High-Performance Sports Centre” in Colombo.

The Pakistan side declared its decision to provide PKR 52 million to promote sports in Sri Lanka, including through training and equipment.

Both sides stressed the importance of inter-religious dialogue and harmony as a key to promoting cultural diversity, peaceful co-existence, and mutual empathy.

The two sides observed the close cooperation between the two countries at regional and international fora on mutual interest issues. They agreed to strengthen a coordinated approach on such matters further.

Both sides restated their commitment to the principles and intents of the SAARC Charter. They stressed the need for SAARC Member countries to build on convergences for the region’s people’s greater good. Both sides emphasized the need to convene the Charter Based bodies and agreed to take forward the SAARC process for further strengthening regional cooperation to achieve prosperity in the region.

Discussing the regional and global environment developments, the two sides restated their shared commitment to regional peace, security, and stability. Prime Minister Imran Khan underscored the need for peaceful resolution of unresolved disputes through constructive dialogue in accordance with international legitimacy.

In the context of regional connectivity, Prime Minister Imran Khan highlighted the opportunities presented by the China-Pakistan Economic Corridor (CPEC), a flagship project of BRI, for regional economic growth and prosperity.

Discussing the extraordinary challenges postured by Covid – 19, the two sides highlighted the need for combined efforts to deal with the pandemic. Sri Lanka thanked Pakistan for the tremendous assistance extended to the return of stranded Sri Lankans in Pakistan since the Covid pandemic outbreak.

While echoing the new government’s commitment to strengthen the bilateral relations further, the Prime Minister of Sri Lanka thanked the government and people of Pakistan for the persistent support extended by Pakistan to defend the independence, sovereignty, and territorial integrity of Sri Lanka.

The Prime Minister of Pakistan extended an invitation to the President and the Prime Minister of Sri Lanka to visit Pakistan at their earliest convenience and thanked Prime Minister Mahinda Rajapaksa for the warm cordiality extended to him and his delegation.

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