Demonetisation blues

  • Why Modi’s political stunt is bad news for Indians and Nepalis
- Atul K Thakur

Jan 6, 2017-

George Orwell had something important to say about Adolf Hitler’s narcissism and his ability to create a mass-scale illusion: “If he were killing a mouse he would know how to make it seem like a dragon.” This Orwellian saying holds true today for public policy in India. Its latest offering—demonetisation—is a case in point.

The Indian government for now is in absolute control of Narendra Modi—a man who lacks imagination but never shirks from shaking up the system and following his whims and fancies. It appears that his demonetisation move was made in haste, as it was amended by 58 rules by the Reserve Bank of India (RBI) since the dramatic declaration on November 8.

Many shortcomings

Leading bankers are of the view that the total currency formerly in circulation (about 15 lakh crore Indian rupees) is already back in the system. Reportedly, about IRs3.5 lakh crore out of it is of questionable origin. Probably, those who had an enormous amount of unreported money found ways to cope with the currency crackdown. It proved that corruption is something that has more to do with ‘intent’ than merely to possessing obscene wealth.

The much-publicised recovery of counterfeit currency must be questioned, because officially it has hardly crossed the mark of IRs400 crore. News of big recoveries has yet to have an effect on the ground, so optimism is unfounded at this stage. One must wonder about the losses in terms of manpower spent queuing in front of ATMs; add to that 125 reported deaths at bank and ATM queues and a sizable cut in this fiscal year’s GDP growth rate, which surely will harm the already injured spine of the Indian economy. 

Besides these shortcomings, the demonetisation drive also lacks clear implementation. Designing and printing new notes are a matter of concern, and the newly introduced note of IRs2000 appears to be making life easier for black money holders. Erroneously called Modi’s ‘masterstroke’, demonetisation is in fact turning out to be a political stunt that turned into a blunder. Demonetisation, a failed experiment all over the world, was hardly an option to challenge the menace of the shadow economy.

At home, the informal economy is worst affected with almost no cash in the hands of the working class and small traders. In addition, India’s reputation among visitors and foreign investors has taken a hit. Modi, like any other national populist, plays the ‘politics of hope’ with the aim to muddy the present and the past. Starting with his promise during 2014 elections that each bank account in India would receive IRs15 lakhs from recovered black money stashed in Swiss banks, his evolution as the leader of a short-sighted government hasn’t supported India’s high claim in the global order.

Impact on Nepal

The aim of demonetisation was to get money from the system into the bank in the short-term, so the liquidity crunch was eased for a few weeks and partial recapitalisation of some state-led banks was possible. It is unlikely this will help the banks, but it surely has helped the business groups whose loans to the tune of 7.5 lakh crore have been waived without making headlines in the mainstream media. The mishandling of public money in this fashion deserves to be known as the biggest scam in India. Sadly, without a plan to counter it or present a better alternative, the opposition is in a really bad shape.

It would be too naïve to expect a corruption-free world in a place where the system itself promotes corruption. Nothing less than a major overhaul can have an effect. But who will take the lead? Modi could possibly come up with a liberal tax policy with the forthcoming Union Budget to give a sense of relief to the middle class. This will damage the economy and contradict the idea of an ‘inclusive India’, but the people may be kinder to him. This is the beginning of a new form of commercial politics in South Asia, with great chances of emulation.

In Nepal, people will mostly seek recourse from money exchangers and launderers to change notes. People will be cheated and anti-Indian sentiments will rise.

December 30 was the deadline for the demonetisation exercise to end. Nepal’s ambassador to India Deep Kumar Upadhyay has said: “We hope that special provisions will be made for Nepali citizens after December 30 to exchange the banned currency for new notes. Otherwise, Nepalis will lose their savings.” Panic is widespread, but no robust agreement has yet been reached between the RBI and the Nepal Rastra Bank (NRB) to counter it.

Because of failed policies of the governments of India and Nepal, the border regions on both sides are active black markets. Modi’s failed demonetisation move will let rogue elements flourish on both sides, and the masses will continue to suffer.

Thakur is a New Delhi-based journalist and writer 

Published: 06-01-2017 08:14

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