Demonetisation: Disguising failure with 'boldness'?

Last Updated: Thu, Nov 10, 2016 11:12 hrs
File photo of money lender counting Indian rupee currency notes at his shop in Ahmedabad

Since May 2014, when India voted against corruption and dynastic politics – both being fairly substantiated charges against the UPA regime – we were assured of “achhe din”. This has translated essentially into a series of knee-jerk reactions to tackle problems that our new administrators, inexperienced at this level of governance, did not seem to be able to resolve efficiently without inconveniencing the public.

Whether it is the increase in various taxes or the slow percolation of the Aadhaar card into the system, basically rendering it mandatory while reiterating that it is optional, or the use of excessive force by authorities in putting down dissent, or the fast-tracking of Bills with scant regard for debate, the BJP has made a habit of coming up with “bold measures” to change the conversation when it is under attack, and to disguise its failure at weeding out inefficiency and corruption.

The latest of these moves is the sudden announcement that invalidated 500- and 1000-rupee notes overnight.

The elation with which the Prime Minister’s speech has been greeted is symptomatic, in some cases, of the naïveté that swept this government to power in the first place, and the rabid support its leaders attract from social media trolls who hurl vile insults and threats at anyone who dares offer a different point of view, as if to think along other lines other than those trodden by Narendra Modi were both sacrilegious and seditious.

Conveniently, scenes of sacks of money being burnt and cut were available for the media – scenes that would not be out of place in a Rajinikanth-Shankar collaboration.

As has become typical of these sudden announcements, there has been more panic than logic in their reception, and more rhetoric than solutions in response to key questions.

First, why the time constraint? The government has given citizens until December 30, 2016, which is 50 calendar days, not including bank holidays and government holidays, to deposit all their notes.

Forget the Non-Resident Indians with currency notes lying around and the senior citizens with cash stowed away for an emergency and the students who will have to rush to ATMs to meet various deadlines for payments – to take nothing away from their troubles. Let us think of the plight of the average daily wage earner or small farmer or blue collar worker who never thought to open a bank account.

Banking is yet to pervade large sections of the country and its population, and contrary to everything the banks promise, it is not easy to open an account even for people with proofs of identity and the capacity to supply a sizeable opening balance. Most people who don’t have bank accounts are also undocumented in other ways. Acquiring the documents they will need to open a bank account in order to save their money from turning into worthless bits of paper will necessitate an investment of time they can ill-afford. And while this process drags on, they will not be able to buy basic items unless they were fortunate enough to have been paid in smaller denominations.

That rarely happens, because most “daily wage” earners are paid once a week. Their paymasters, just like the employers of domestic help, pay mostly in 500-rupee notes, because those are the easiest to handle.

Contrary to the promises made in Modi’s address, milk booths refused to accept 500-rupee notes on Wednesday morning. Touts near toll booths offered seven hundred rupees in 100-rupee notes in exchange for a 1000-rupee note. A little industry has already mushroomed, in offering exchanges of notes for a commission, and those without bank accounts have already begun to avail of it.

Clearly, the ATMs were not equipped to deal with the long queues that thronged them on Tuesday evening, and several ran out of cash fairly quickly. Instead of making things easier for the public, the banks were closed the next day, sending everyone into a panic. Are they equipped to deal with the inevitable run on their counters when they open? Have provisions been made to expedite the process of opening accounts for all those who will need to? Is a security mechanism in place to handle the vast cash deposits that will be made?

What justification can there be for sending people into a tizzy without taking precautions to handle emergencies such as purchases in pharmacies and private hospitals?

Next, how will issuing new 2000-rupee notes and 500-rupee notes stop counterfeiting? What measures has the government taken to combat it with these notes that it could not implement with the old notes? The RBI confirmed that social media forwards about the inclusion of tracking chips in the 2000-rupee notes were rumours. How long, then, before the counterfeiting industry picks up again?

How exactly is demonetisation going to stop the circulation of black money? A select group of people have been in the know of the impending move for six months – that is plenty of time for discreet leaks, which would have been invaluable. The names of those in the know have not been made public. Neither have details of their acquaintances and relatives in politics and industry.

Most people practised in the handling of black money, and dealing with it in large amounts, are not likely to have roomfuls of notes stashed at home – unless we believe the storylines churned out by Seventies Bollywood and Nineties Kollywood. They have converted it long ago into investments in real estate, gold, and equity.

The BJP cried itself hoarse about black money stashed away in offshore accounts, but has not been able to bring it back. Asked about this issue, everyone who is authorised to speak has prevaricated, calling it a “separate issue” which must be tackled at another time. How is black money a “separate issue” from, you know, black money?

What about the enormous cost of changing the 22 billion notes that will need to be withdrawn? The cost of printing a 500-rupee note is Rs 2.50, and that of printing a 1000-rupee note is Rs 3.17. An article in The Hindu calculated that this move would cost the RBI more than 12,000-crore rupees, taking into account the fact 14 trillion out of 16.5 trillion notes printed in 2016 were of 500- and 1000-rupee denominations.

Isn’t what appears to be “boldness” from one perspective an admission of defeat from another? An admission that the government failed to crack down on tax defaulters, failed to control the circulation of counterfeit notes, failed to trace the sources of drug money, failed to pin down terrorist organisations which they claim are behind the counterfeiting, failed to bring back black money from offshore accounts, and decided, instead, to inconvenience the common man and exalt it as his “contribution to the nation”, even while burning thousands of crores of taxpayer money to fund this purported piece of genius?

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Nandini is a journalist and humour writer based in Madras. She is the author of Hitched: The Modern Woman and Arranged Marriage. 

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