First and foremost, I offer my profound respect to my mother who takes the trouble to stand in a queue almost for six hours to withdraw Rs 5,000 from a nationalised bank located close to my house in North Kolkata. My maa is not alone in her zeal to kick the ‘black’ abettors. Prime Minister Narendra Modi’s mother, like thousands of other Indians, also turned up to the bank in this time of hardship.
The Indian middle class initially approved Modi’s politically-motivated emotional negotiation even if it has claimed some 70 (reported number only) lives so far. Apart from a (divided) Opposition, the only challenge the government seems to have is from the liberal intellectual class which of late, is repeatedly demonised as anti-national.
Now the most talked-out question is ‘will demonetisation really deliver acche din’? We are asking the wrong question at the right time. The question should be on the motive of this move and not on the merit. If the bubble of ‘acche din’ was only an election manifesto hoax, then the time is ripe to deconstruct the concept behind the bubble instead of attempting to burst the bubble.
The demonetisation reaction gives an opportunity to underscore the merit question and scrutinise the motive involved behind this reaction. At present, there are two crises dogging Indian polity. First, though the BJP government sticks to the most acceptable standard even as some may say that the stand often suffered from intellectual incapacity. This hesitation makes the government to distance itself from the stand of progressive intelligentia. Similarly, it deters the government to step into any public debate or encourage space for creating public opinion on a major issue.
Thus, the steps taken by this government is often less discussed and debated both in public and at the party-parliament-government level. Secondly, the degeneration of the Congress and aggression of regional political outfits with their cynical interest creates an excellent prospect for the BJP to cement its position as the single largest national party in a politically fragmented nation. Encashing on this opportunity, BJP’s political heritage muddles the execution process as it is in stark contrast with the democratic plurality.
In India, the majority workforce is from informal economy and that survives on liquid cash. About 86% of the currency flows in the market are high denomination notes. The sudden ban on these notes makes this market awfully vulnerable. Demonetisation leads towards a less-cash economy. Usually high denomination currency is called off from the market by the government to implement demonetisation since they have higher chance of utilisation in big cash transaction and also an easy bait for hoarding for tax evasion.
The reason given behind the demonetisation decision was to strike at black money, corruption and counterfeit currency. The government is right in linking corruption and counterfeiting with black money practice. If the administration can stop the flow of black money, then automatically corruption would minimise and eventually, the importance of high denomination currency will be less. The second possibility has more chance to demotivate counterfeiting since the maximum counterfeited currency is of high denominations.
The logic given for demonetisation is not in conformity with the implementation plan. With this, the government wants people to go for cashless economy to bring every transaction under the ambit of formal economy. The government has introduced the high denomination currencies of Rs 2,000 and Rs 500 rupees notes by replacing the old Rs 500 and Rs 1,000 rupees notes.
So, how can this practice introduce cashless transaction into the economy and also most importantly, stop future hoarding of black money? Stopping the flow of black money is an utmost need to challenge corruption, counterfeiting and generating black wealth. It may be a permissible query whether it is demonetisation or ‘readjustment of monetary practice’.
Demonetisation is a policy-level decision to deal with economy (per se black economy in this context) and not black money. Policy decision needs some well-designed and tested mechanisms for implementation. Black money has a meagre share (roughly 5%) in black economy; the major contributors are immovable assets like unnamed land, house, bullion etc. Black economy is a fallout of fragile political system whereas black money is a production of corrupt and weakened governance. The government is a political arrangement of the state and governance is an administrative arrangement of the politically-appointed government.
Implementing mechanisms
The governance is used for introducing /modifying and implementing mechanisms based on the political decision taken at the realm of the government. Black economy is a policy-related question and is to be addressed by the government. Black money is an outcome of corrupt practice and inefficient surveillance in the rank and file of the governance management.
The reaction of this government to curb black money (and corruption as well as counterfeiting) is demonetisation, succinctly a decision of political choice. This political choice is executed without having any prior/pre-planned changes in the existing governance practices. Hence, the entire banking system is under tremendous distress, non-banking financial corporations are becoming vulnerable and the informal economy sector becomes standstill.
Simply, the crisis of governance (administrative issue) is attempted to be corrected through the actions of the government (political decision). Political intervention cannot bring in any exclusive solution to the governance failure. The economy has a tradition to experience short-term gain at the cost of long-term loss. The present assurance of ‘immediate pain for long-term gain’ converts the tradition into ‘short-term pain to bear long-term pain’! The chimera of ‘acche din’ continues; this time the reaction is demonetisation.
(The writer is a PhD Researcher at the Centre for Social Medicine and Community Health, Jawaharlal Nehru University and presently as Visiting Fellow at ISEC, Bengaluru)