For nearly three weeks after Prime Minister Narendra Modi announced his government’s decision to demonetise the Rs 500 and Rs 1000 notes, the RBI Governor Urjit Patel kept silent on the matter. All the official public announcements on demonetisation were made by Economic Affairs Secretary Shaktikanta Das instead.
The RBI Governor broke the unusually long and troubling silence on this crucial matter by stating that the RBI is trying to ease the pain of citizens who have been hurt. Millions of Indians lose precious work hours as they queue up at banks to exchange their old notes or withdraw new notes from ATMs. Vast sections of the working class have suffered enormously, as their wage payments have been delayed due to shortages of the new currency.
There is a lack of banking facilities in the countryside, leaving farmers in the lurch with the approaching sowing season for Rabi crops. Farmers are unable to pay for seeds, fertilisers, and labour. With the transport sector also hit, the supply of commodities across the country has plummeted. As already emphasised in a previous editorial in this newspaper, industrial cities like Tirupur and Surat have come to a grinding halt. Many ATMs have not been recalibrated to dispense the new Rs 500 and Rs 2000 notes.
Under the previous governor, Raghuram Rajan, the RBI exercised some autonomy when dealing with monetary policy. There are even provisions in the Reserve Bank of India Act that ensure a level of independence for the Central bank from excessive government interference. Admittedly, the RBI must take the government’s suggestions into consideration when determining policy. However, in this case, the RBI Governor seems to have just rolled over.
It is little surprise that banking associations have demanded Patel’s resignation. And so has Congress. Party chairperson Jairam Ramesh, on Saturday, went on to say that “Urjit Patel is either guilty of misleading the nation about RBI’s preparedness on demonetisation or has sacrificed the autonomy of the RBI. Either way, he should resign,”.
Without a doubt, Rajan would have never consented to such a move. Although the Opposition has come out all guns blazing, there is a lack of a coherent and united front against the government’s poorly-implemented decision. The Centre was clearly not prepared to meet the fallout from demonetising 86 per cent of all currency in circulation. Of the Rs 14.5 lakh crore worth banned currency notes, about Rs 8 lakh crore has come back as deposits into banks. Chances are more currency – declared as well as undeclared – may transform into legitimate bank deposits in the coming weeks.
Nearly three weeks after the move was announced, the Central bank’s governor said that they were monitoring the situation on a daily basis. He added that the RBI and government are making sure printing presses work at capacity to make the new notes available to meet the demand, the news reported. He also encouraged citizens to start using cash substitutes such as debit cards.
Patel’s silence on the move, which was announced on November 8, has had commentators questioning his stand, and asking whether the RBI’s autonomy has been compromised. However, in support of the ongoing demonetisation drive, BJP President Amit Shah on Sunday said Prime Minister Narendra Modi’s move has given the opposition leaders Rahul Gandhi and Mamata Banerjee “sleepless nights”. He said at the BJP’s ‘Other Backward Classes’ rally in Bengaluru, “Friends, people who are hurt are those whose black money has gone for a toss.
The demonetisation move has given sleepless nights to Congress leader Rahul Gandhi, Mamata, Arvind Kejriwal, and also they have lost shine on their faces.” The observation made by former Prime Minister and seasoned economist, Dr. Manmohan Singh in the Rajya Sabha about this demonetisation drive sums up this crisis accurately, that this move is a "monumental mismanagement", which has led to "organised loot and legalised plunder".