Demonetisation: Pain in vain?
With the RBI's recent revelation, the government must confess the true reason behind demonetisation and accept the blame for affecting hundreds of lives .
1 Sep 2017 3:51 PM GMT
November 8, 2016, changed the Indian economy forever. The note ban unleashed the carnage of the country's growth that had been upbeat for the last many years. Many of us questioned the need for such a radical move. Tempers flared up, the administration was cursed, tears were shed, counter theories were offered, and lives were lost as many hopes and dreams were crushed.
But to it all, we were told to wait and watch. Our Prime Minister Narendra Modi pledged that in 50 days, the temporary cloud of doom and gloom would pass and our lives would be filled with joy and bounty. This was yet another means to an end; the end being the hallowed 'acche din'. Later that month, a teary-eyed PM pledged to forge ahead with such tough measures even if he was burnt alive. Ten months later, the economy is still reeling under the impact of demonetisation.
As Indians, we definitely get carried away with dramatics and rhetoric. Agreed that some policy decisions may be taken keeping the larger public good in mind; short-term pain for long-term gain. But what, pray tell, gives a democratically-elected government the audacity to suddenly promulgate a note ban without having actual evidence that it would benefit the economy? Remember, that it took 17 years of debate to implement the Goods and Services Act (GST) while the note ban was a haphazard, ill-planned, poorly executed decision that the government had "advised" the Reserve Bank of India (RBI) about.
Therefore, when the RBI made the fantastical revelation this week that only 1.3 per cent of Rs 1000 notes did not come back into the coffers, it begs the question - what did the government truly achieve through demonetisation? The reasons given by the government for the sudden note ban were the fight against black money and Fake Indian Currency Notes (FICN) that fuel terrorism. Lo and behold! 99 per cent of the banned currency has been accounted for. This means that only a percentage of the unreturned notes may be money on which tax has been evaded or simply, that some people have been unable to exchange their money. Or, as former finance minister P Chidambaram asked, was demonetisation a way of legally turning black money into white? Was demonetisation a plan to starve political parties of liquid cash ahead of the crucial Uttar Pradesh elections?
While investigating black money trails, I remember what a senior, retired government official who's spent decades probing financial discrepancies had told me. There is no black money in the country! At least not the way in which people imagine it could exist i.e. stashed in pillows and mattresses. In India, black money is speedily converted into real estate and jewellery; the money laundering machinery is alive and active. The wealthier folk, of course, have parked their black stash in offshore bank accounts in exotic places.
Clamping down on counterfeit currency had also been one of the reasons behind demonetisation. The National Investigative Agency (NIA) has also relentlessly investigated the printing of fake notes and the routes followed to channel FICN into the hands of terrorists. However, the percentage of fake notes was never large enough to justify a blanket ban on Rs 500 and Rs 2,000 notes.
So what did the government achieve in the end? The government definitely gave a big push to digital India. Digitisation received a major impetus with most people and businesses being forced to use payment gateways and online banking. It also heralded a windfall for startups such as Paytm. For everyone else, demonetisation was a harrowing time. Moving to digitisation was imperative for a country like ours that is looking to keep pace with the rest of the world. But I ask again, at what cost?
Over a hundred people died because of demonetisation and the government cannot wish it away. Thousands of lives were affected and several jobs were lost especially in the unorganised sector. While big companies managed to tide over demonetisation, hundreds of small businesses were sacrificed at its altar. I have seen first-hand what the ensuing despair meant for new businesses. Investors slated to pump crucial money into startups turned their back at the last minute. Small businesses suffered the most in the short term with the cost of produce spiralling high while liquidity and buying power of the people affected sales. At least two of my friends shut down their recently opened, bootstrapped food businesses. The loss had deep impact on their financial, mental and emotional state. It's about time that we hear from the powers that be the real reason behind demonetisation.
(The writer is a journalist and media entrepreneur.The views expressed are strictly personal.)
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