Demonetization or How to Make People Beg for Their Own Money

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An elderly man helplessly cries after being forced out of an ATM queue.  The image in Hindustan Times went viral, capturing the chaos and frustration of millions over the Modi government's badly botched up recall of high currency notes. Image credit: Praveen Kumar/Hindustan Times
An elderly man helplessly cries after being forced out of an ATM queue. The image in Hindustan Times went viral, capturing the chaos and frustration of millions over the Modi government’s badly botched up recall of high currency notes. Image credit: Praveen Kumar/Hindustan Times

Whoever advised Prime Minister Narendra Modi they apparently convinced him that demonetization was a masterstroke to silence his detractors — especially those who obsess about his promise to bring back ‘black money’ – and immortalize his legacy. In this breathless chase for glory though, he apparently forgot to consult his own finance minister. The result is total anarchy and pandemonium, adding to people’s mounting fury and misery. Given the size and population of India, it was only expected. In any other country, in Pakistan for instance, there would have been a coup by now! Kafka and Orwell couldn’t have spawned a nightmare of proportions that PM Modi has unleashed on an unsuspecting billion people with his demonetization gamble 

AIJAZ ZAKA SYED | Caravan Daily

[dropcap]T[/dropcap]he road to hell is paved with good intentions.  Prime Minister Narendra Modi’s unprecedented trashing of 86% of India’s high denomination currency hasn’t just brought the world’s fastest growing economy to a grinding halt, it has landed a billion people in a tizzy, sending them on an endless chase for a fistful of notes.

Men and women, the young and old and just about everyone has been forced to drop everything they were doing to line up before banks, begging for their own money. At least a hundred people have died, waiting in queues and trying to exchange their hard-earned money that the government has in one imperious move declared worthless. Many have killed themselves in despair.

Hospitals wouldn’t take in critical patients because they do not have the new currency. Thousands of weddings have been cancelled. Offices are empty for people are out in serpentine bank-ATM queues. Factories are shut. Farmers have no money to buy seeds. Millions of construction workers in big cities have returned to their villages. All construction activity has come to a halt. Vegetables and food grains are rotting as vendors wouldn’t pick them. ATMs wouldn’t dispense more than Rs2000 a day; many of them either do not work or are out of cash.

What would hundreds of millions of farmers and rural folk with no bank accounts and debit/credit cards do? Where do they go to exchange their notes? They have no time to visit TV studios to cheer the “war on black money.” More than 90% of India’s work force is in unorganized sector and nearly 60% of farmers remain in distress. No wonder chaos reigns everywhere. To top it all, everyday new rules are introduced. Kafka and Orwell couldn’t have spawned a nightmare of such proportions.

To all of people’s woes and complaints though, Modi has one simple answer: Grin and bear it in the national interest! The latest fad of the sultan of sophistry is to ‘go cashless!’ Digitisation is the mantra of the massive propaganda blitz.

In a country where 97% of the population does its business in cash, nearly half struggles below poverty line, and thousands of villages do not have electricity, let alone banks and ATMs, asking people to ‘go cashless and digital’ is not just heartless and cruel, it borders on arrogance. Kind of reminds you of Queen Marie Antoinette of France who advised her subjects to have cakes when they protested for bread. Qu’ils mangent de la brioche!

Whoever advised Modi they apparently convinced him that demonetization was a masterstroke to silence his detractors — especially those who obsess about his promise to bring back ‘black money’ – and immortalize his legacy. In this breathless chase for glory though, he apparently forgot to consult his own finance minister. The result is total anarchy and pandemonium, adding to people’s mounting fury and misery. Given the size and population of India, it was only expected. In any other country, in Pakistan for instance, there would have been a coup by now!

India’s Supreme Court, hearing a number of petitions seeking a rollback, was hardly exaggerating when it warned of nationwide ‘riots’ if situation didn’t improve soon. More than a month later and with barely 2 weeks remaining to deposit old notes, it only seems to worsen.

What would hundreds of millions of farmers and rural folk with no bank accounts and debit/credit cards do? Where do they go to exchange their notes? They have no time to visit TV studios to cheer the “war on black money.” More than 90% of India’s work force is in unorganized sector and nearly 60% of farmers remain in distress. No wonder chaos reigns everywhere. To top it all, everyday new rules are introduced. Kafka and Orwell couldn’t have spawned a nightmare of such proportions

Former finance minister Chidambaram suggests that even if new currency is printed 24/7 it would take at least 6 months to end the crunch. Former premier Dr Manmohan Singh, the architect of economic liberalization, has attacked demonetization as “monumental economic mismanagement, organised loot and legalized plunder.” Nobel Laureate Amartya Sen thinks it’s ‘neither intelligent, nor humane’.

Considering less than 5% of ‘black money’ is said to be in cash and 0.002% of currency was reportedly counterfeit, demonetization is like gouging one’s nose to swat a fly. More important, while the poor struggle for a few notes, it’s business as usual for big fish whose bad debts in excess of Rs.8,000 crores, including Vijay Mallya’s Rs.1200 crores, have been waived.

Clearly, Modi has swallowed more than he could chew and everyone, including the BJP, knows it. There’s palpable desperation in their rhetoric and antics. Sometimes the PM cries for people suffering in queues ‘in the national interest.’ At times, he mocks them saying all those who hoarded ‘black money’ all these years are queuing for a couple of rupees.

People queue up outside an ATM in Kolkata on Friday. PTI Photo by Swapam Mahapatra
People queue up outside an ATM in Kolkata on Friday. PTI Photo by Swapam Mahapatra

Clearly, Modi has swallowed more than he could chew and everyone, including the BJP, knows it. There’s palpable desperation in their rhetoric and antics. Sometimes the PM cries for people suffering in queues ‘in the national interest.’ At times, he mocks them saying all those who hoarded ‘black money’ all these years are queuing for a couple of rupees.  

Yet a rollback is unlikely. For it would be admitting this has been one crazy idea, which someone of his ego can never do. But if Modi bravely pushes ahead with it, India could pay a colossal price for this economic blunder. Major global agencies have warned of huge setbacks to the economy. Growth rate is expected to come down by several percentage points, resulting in massive job losses. The whole exercise will cost at least Rs1 lakh crores with little to show for it.

Where do we go from here? A worthy opposition would have pounced on this opportunity to confront the BJP. Governments have fallen over smaller and more mundane issues.  Remember Tunisia? David Cameron quit because the referendum he called over Britain’s future in European Union did not go as expected. This week Italy’s Matteo Renzi announced his resignation after his reforms were rejected. In our part of the world though, politicians seldom go on their own.

Commenting on the notes ban, Shoaib Daniyal of Scroll offers fascinating historical parallels: “The one decision for which Muhammad bin Tughlaq, the 14th century sultan of Delhi, is most remembered is the disastrous shifting of his capital from Delhi to Daulatabad in the Deccan. But this wasn’t the only one of Tughlaq’s decisions that ended in disaster. Like Modi, Tughlaq took a major gamble with the currency in his kingdom. Unfortunately for the ruler, that move (of introducing token currency and copper coins — tanka — in place of gold and silver) was a disaster, leading to a weakening of his sultanate.”

What was wealth at one moment became, through the decision of a single man, worthless pieces of paper. Just as Tughlaq’s sultanate never recovered from his demonetization, Indian economy may take ages to recover from the shock of notes ban. After all, a currency is as strong as the public sentiment backing it and that confidence has been badly shaken, if not bruised. India’s worst enemies couldn’t have come up with a cleverer idea to derail the economy.

Luckily for the BJP, there’s total disunity in opposition ranks. Rahul Gandhi seemingly capitalised on the issue early to tap into people’s anger but the Congress quickly lost the momentum. It’s reluctant to go whole hog against the move, for fear of upsetting the rich, middle class voters. Bihar chief minister Nitish Kumar, once seen as a challenger to Modi, has unexpectedly supported the move. Kejriwal and Mamata Banerjee, eying the national stage, have been right on the ball, highlighting people’s misery. However, their appeal is limited.

So the BJP may get away with this assault on people’s wealth for now. Modi has a stranglehold over power and much of the media is in his pocket. Yet you cannot fool all the people all the time. Public memory may be short but it condones not those who take it for granted and betray people’s trust. Just wait till 2019.

In the notes ban, the BJP may have dug itself a nice, little ditch. As the ancient Greeks believed, whom the gods would destroy, they first make mad.

 

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