We disagree with the 3 wise men. Are we wrong?

Three distinguished professors of economics, Jadish Bhagwati, Vivek Dahejia and Pravin Krishna, have written an article appreciating the demonetization of currency, unleashed on the nation by the Prime Minister, Narendra Modi. They seek to dispel certain beliefs which they think are false. They say that even if most of the old currency comes back to the banks the government is bound to gain. Since no one knows how much black money there really is, the guess is that out of Rs 15.4 trillion in banned notes around 30%, or Rs 5 trillion, is black. The professors calculate that if people had paid income tax on that money the government would have got Rs 1.5 trillion but now the government may get Rs 2.5 trillion because of the penalties it will extract. Already Rs 14 trillion is back in banks and there are still another 3 days to go. It is amazing that no one has thought of the simple explanation that most of the cash money is held by the poor and the middle class and the reason for the popularity of the Rs 500 note is that retail inflation has made everything so expensive that smaller value notes are of little use. It is not corruption as experts seem to believe. The really corrupt do not keep billions of rupees at home. They either launder that money into white or invest in assets such as real estate, gold or the stock market, by round-tripping it from abroad through hawala. The professors believe that withdrawal of so much cash from the circulation will not have a contractionary effect on the economy because all this money coming into banks means that more money will be available for loans. Loans for what? If demand disappears why will companies take loans for further expansion. Banks are facing Rs 6.7 trillion of default on corporate debt so they have little to lend. On top of that they will have to pay interest on the Rs 14 trillion deposited so far, which will be a lot of money. The professors feel that black money going into Jan Dhan accounts will benefit the poor who will spend it so the economy will expand. Not if most of the money being deposited is theirs and they have lost jobs because construction and the unorganized sector have shut down. Some think that the real intention of Modi was to push India into a cashless economy. If so how? Millions of Indians cannot read and so will have difficulty in understanding mobile or other types of payments systems. They will be at the mercy of thieves. None of our banks are likely to spend millions on upgrading firewalls against cyber attacks. If you lose a banknote you lose a finite amount but if someone hacks into your debit card they can empty out your entire savings. Finally, the professors feel that demonetization will not destroy the trust of the people. The people do not matter because we do not have black money, but the real crooks will shift to other avenues. When you are sitting in dollar land it is hard to understand.