Wednesday, November 16, 2016

The pious torture of demonetization in India

by Ratnakar Tripathy

These days the whole of India is talking about only one thing – demonetization, a word ill-defined in the press. The concern is far from being an idle obsession or a mania. The reason for this fixation is quite simply that the rich and the poor alike have no money to pay for their daily needs and only the super-rich with hoards of petty cash in Rs 100 denomination are exempt. Even those carrying the new Rs 2000 banknotes are crowding the banks to get smaller denominations since the shopkeepers are refusing to part with their Rs 100 notes to be returned after smaller buys. In brief, daily commercial exchanges, unless online have come to a standstill.  

Does that explain the enormity of the crisis?

To put the extent of human pain in plain language, babies cannot get milk, the sick are unable to get their medicines, the farmers cannot buy their seeds and fuel for irrigation, workers are going unpaid as the employer has no cash or the labourer spends all his time seeking cash from the banks in lieu of his demonetized Rs 500 or Rs 1000, parents are unable to pay school fees, wayside restaurants are unable to feed their customers, to take a few examples. India has never witnessed a mess as humongous as this in my memory.

And yet the millions of citizens standing in queues have thus far stood in the queues tamely with no major incidents of violence and rage. Thus far that is. What tomorrow will bring is another matter, and a scary one! Exactly what kind of civil unrest awaits us we don’t know yet!

Despite the torment imposed by the hare-brained scheme of a government almost willfully dragging the country into economic chaos, a large population feels that the demonetization measure is a good idea as it will purge all the black money. That they do so is entirely because the common voter is clinging by the thread of a slender hope. Just yesterday, she and he voted for a leader who claimed to cure all the ills you can think of. After all it is not easy for the desperately hopeful to declare his doctor a quack in a hurry. But I am sure that at the end of the day before putting off the lights, given the enormity of the ineptness of Narendra Modi government the voter will admit to himself that his hope may be vain and that big trouble lies ahead. Soon the voter may make a candid admission in daylight and in public.  And then maybe he will want to investigate the REAL reasons behind the move.

Let us reconstruct the mental process he may go through as a step by step process as a lay but thinking person - the first thing he may realize after reading a few analytical news items is when it comes to demonetizing, implementation is really the main thing and not the dispensable tail of the animal. So he will move on to the REAL intent behind and confront the following facts with a new and brave ability of the disenchanted. He will register the following:

1. Only 6-8 percent of black money is stashed in cash in India. So what is the big deal behind the demonetization drama? 

2. Our banks have been so badly bled by NPAs that the demonetization was seen as the only solution by the government. Consider this - ‘But all that the government had promised by way of equity capital support under the ‘Indradhanush’ revamp plan was Rs 70,000-crore in the next four years. In addition, banks are expected to further raise Rs 1.1-lakh core from the markets to meet their capital requirement in line with global risk norms Basel III. Considering the piling of non-performing assets (NPAs), growing corporate debt restructuring, and the expected equity infusion to restore the health of the banking sector, the policy makers opted for the difficult route of demonetization. They couldn’t afford to allow the banking sector to go bankrupt, a gigantic mistake that happened with Lehman Brothers. 
Before I take you to the implications, let’s also look at the burgeoning bank NPAs. The 27 PSU banks had written-off a whopping Rs 1.14 lakh crore in the past three years (2012-15). The Public Accounts Committee (PAC) subsequently informed Parliament on July 21, 2015 that banks had in addition accumulated Rs 6-lakh crore of NPAs.’ [Devinder Sharma].

The voter-citizen will wince when he finds out – ‘Oct. 20th 2016 – Reliance says outstanding debt as on September 30th is 1.89 trillion rupees.' 

3. As much as an actor or a director, a politician is entitled to his quota of hysterics, but when Ram Madhav claims that the number of hours spent in the bank queues is a measure of patriotism, the voter’s face may alternately flush with anger and pale with disgust. He may feel the same over Modi’s claim that demonetization has given ‘sound sleep’ to the poor! Sound sleep indeed with 8-9 hours spent standing on the road and massive queues even at the urinals adjacent to the RBI office in Delhi. 

4. When the voter finds out that certain chosen individuals and groups such as BJP functionaries had prior information on demonetization, the voter will have no doubts left about the real intent behind the demonetization drama. 

5. When the voter moves on to serious data and realizes that 45% of India’s GDP comes from the informal sector where petty cash is absolutely vital on a daily basis, he may begin to appreciate the lasting damage to the national economy and the economic anarchy caused by the policy. 

6. When the voter sits down to admire his crisp Rs 2000 wad of notes he may feel further disgust - it is terrible design - ‘The new note has no underlying idea. It is little more than a mishmash of several unconnected elements – Gandhi, Mars Mission, Swachh Bharat Logo, Elephants + Lotus + Peacock Patterns, and various completely random ornaments.' 

7. When he is told that thanks to the size of the Rs 2000 note, the normal ATM machines cannot handle it, he will be barely able to swim above the mire of disgust and frustration with the government he elected in 2014. 

8. Like all the happy go lucky optimists, he will try to forget the nightmare but won’t be allowed to for weeks to come as he will find himself pleading with shopkeepers, cab drivers and sundry folk to accept his pink Rs 2000...

9. He will procure a whip and hit himself hard and find himself waking up to reality, even though we know better ways of being real. Once that happens he will realize his stupidity in punishing himself and throw the whip away fully aware he has already taken a severe punishment from a government he voted for. 

He will then have the guts to admit how wrong he was in 2014. 

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