We have seen enough explanations by the Narendra Modi government of the provocation for the demonetisation bombshell. The first and the foremost justification was that it would reduce the huge pile-up of black money into a pulp of waste paper. It had also cited counterfeit currency menace as an equally important urgency. Tagged with it was also the reason of terrorist funding with counterfeit currency to unleash mayhem in India. At last came the cashless economy argument. But with almost all the cancelled old currency notes now set to return to banks, the black money argument appears to be fast petering out. And with terrorist attacks continuing, the efficacy of demonetisation in containing the menace has also come into serious questioning. Now remains the cashless economy argument to support the move.
Over the last one month, the government announced a slew of measures to minimize the severe inconvenience caused to ordinary citizens, labourers, farmers and other poor sections across the board. The huge setback caused to the country’s economy due to slowing down of trades and businesses on the wake of currency crunch is being passed of as temporary. As recent as on Thursday, Finance Minister Arun Jaitley announced many rebates and incentives to encourage digital transactions.
While many economists of highest stature have dissected the black money argument of the government to show how the demonetisation move is actually going to end up as a vain bid to stamp out corruption, most of the supporters and even top leaders from the ruling BJP have been citing “common people’s support” to the move to drive home its sanctity. Not many Modi-supporting economists have tried to put out any strong economic calculations and arguments to rebut the claims made by the critics of demonetisation.
Two things that the government itself is not denying are hardships caused to people and setback to economy. It is, however, rationalising these as the “price we need to pay to clean up the system”.
Of late, however, the main thrust of the government justification has been on the need to shift to cashless economy. Surprisingly, however, some very respected experts have virtually condoned the negative impact of the move by pushing arguments that don’t befit their intellectual acumen and integrity. Nandan Nilekani, architect of Aadhar card, was trying to stress that the impetus the move is likely to be the universalisation of Aadhar-based digitisation of financial and administrative transactions. A very eminent administrator like former Chief Election Commissioner S Y Quraishi has also ventured to say that demonetisation will be to good effect if it is going to take us forward on the path of long-cherished electoral reforms, chiefly funding of political parties and elections.
Jaitley claimed on Thursday that demonetisation has led to doubling of plastic currency use percentage at fuel outlets from 20 to 40 pc. He has also announced rebate on such transactions, which he said would reduce the need for hard currency notes. Fair enough. But the question is do all these things need demonetisation as a necessary prerequisite? If the government would have announced Rs 10 lakh insurance cover for railway commuters using online reservation facility even without demonetisation, it would still have hugely enhanced the use of plastic currency. Clearly, demonetisation was not needed to encourage use of plastic currency or digital transactions. In fact, demonetisation wouldn’t have caused as much damage as it has done now had it been effected after significantly enhancing the use of plastic currency and digital transactions first thereby vastly reducing dependence on hard cash currency use.
Similarly, it is difficult to understand how and why electoral reforms couldn’t have been undertaken without demonetisation. They could and should still have been. Not only would it have prevented rise of speculation and conspiracy theories about the ruling political party getting the privilege to exhaust its suspect funds before the announcement but would also have lent a great “charity begins at home” credibility to its reformist countenance.
Clearly, the measures and steps being undertaken now as also the silver lining that some experts are preferring to view about demonetisation didn’t need demonetisation and are either afterthoughts or benign overlooking of the unnecessary and avoidable disturbance demonetisation caused to national life.