Demonetisation: Reasons and excuses that seem more like afterthoughts

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".

Written by Vivek Deshpande | Updated: December 10, 2016 8:12 pm
Demonetisation, demonetisation justification, black money, demonetisation impact, demonetisation effects, reasons, justifications, narendra modi, narendra modi government, BJP government, finance minister, finance minister Arun Jaitely, Jaitely, cash crunch, cashless, people cashless, ATMs cashless, banks cashless, cashless economy, cashless transactions, indian economy, indian express news Of late, however, the main thrust of the government justification has been on the need to shift to cashless economy.(Illustration by C R Sasikumar)

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.

Views of the author are personal

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First Published on: December 10, 2016 1:50 pm
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    Earthkeeper
    Dec 10, 2016 at 10:10 am
    There are no shortcuts in life if you want to achieve something lt;br/gt;Demonitisaion is not just a short cut it is also wrong short cut
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      Praful Vora
      Dec 11, 2016 at 12:36 am
      Beurocrates have to help . Bankers ,printers and politicians have to help . There are multiple benefits and people will get the indirect benefits. There are corrupt bankers ,postmasters , lawyers and some officers and till they weed out . Nothing going to change in big way
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        Goyal Anandilal
        Dec 11, 2016 at 6:11 am
        Modiji ka munch is built in lacs of Rupees.
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          Goyal Anandilal
          Dec 10, 2016 at 2:50 pm
          Cashless means going back to Barter system.
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            Srinivas Reddy
            Dec 11, 2016 at 1:15 am
            Digital payments. ...mobile banking....mobile voting....soon???
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              Arundhati Yaro
              Dec 12, 2016 at 8:48 am
              Yes. Modi just shot himself in the foot, while shooting India's citizens in the heart. I read a few more stories like there at Flipside News. Too many stories and experiences that are in the red. This will be the downfall of the Modi sarkar.
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                Atul Bhardwaj
                Dec 10, 2016 at 10:45 am
                Politicians journalists and judiciary were in a cosy relationship.This had been upset with the advent of Modi.lt;br/gt;These corrupt people have been dealt a blow and this has resulted in a CJ visualising a scenario where there would be riots;this coterie is using their offices to paint a dire outlook.lt;br/gt;This article has to be seen in this light.
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                  Rajan Patel
                  Dec 10, 2016 at 1:26 pm
                  corruption can happen in other denominations too. Even by giving gold, diamond, jewelry.lt;br/gt;terrorist are still active after currency ban.lt;br/gt;What happens if the cashless system crashes, database, systems fails, gets hacked. As recently many debit cards were also stolen
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                    gc
                    Dec 10, 2016 at 9:23 am
                    Write as much as you can, shout as much as you can but in your support you will only hear your echo, because on the ground, people are sick of corrupt rotten Indian system and they know this is first of the many steps to cleanse and fix the system for their better future.
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                      gc
                      Dec 10, 2016 at 8:44 am
                      You can try to discredit the move as much as you can, but the fact is, that on the ground people are supporting it and they understand that it is first of many steps that will transform the 'rotten' corrupt Indian economy into a well oiled machine.Most of the people are sick of being dishonest because they had to, and they very well understand what this move will do.Write as much you can,shout as much as you want,on the ground,you will only hear your echo supporting you.People are with the move.
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                        gc
                        Dec 10, 2016 at 11:03 am
                        You can write and shout as much as you can to discredit the move,the matter of the fact is that benefits of this move will be felt and seen by majority of the people (poor,ried and everyone else who is sick of corrupt rotten system and wants to earn honestly and live tension free).The hoo ha about 'lines' will be over in a few days,the analysis and effects will start to come,THEN,just when you will start discrediting the benefits of this move,a NEW MOVE will come,and so on.Until NEXT GENERAL ELECTION,This cleaning will continue with ONE STEP AFTER another.YOU CRITICS WON'T BE ABLE TO CATCH UP AND COUNTRY WOULD HAVE CHANGED.
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                          Damodar
                          Dec 10, 2016 at 2:04 pm
                          Mr. Deshpande raises very good points about long-term effect of demonetization. People on this blog try to vehemently attack a person who disagrees with the government reasoning supporting the move. It would, instead, be nice if they countered each point.lt;br/gt;lt;br/gt;It is obvious that the story line fed by the government is changing g by the day. None of it makes sense when looked at in details. This particularly comes at the cost of the hardship to 95% of the potion that is labeled as corrupt. Also, limiting cash withdrawal to Rs. 2000 per day amounts to rationing by the government. If a person has paid taxes, what right the government has to limit his/her access to cash, and stand in line for hours to get it? Also, if demonetization is such a good policy, why not do it every year? How will RBI restore public faith in Indian currency if such a policy is adopted?
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                            Gopikanta Ghosh
                            Dec 11, 2016 at 10:48 am
                            Trying hard to cover the ber by fabricating justifications every day. But fact is country is ruined.
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                              Gopikanta Ghosh
                              Dec 11, 2016 at 10:49 am
                              What else they can do?
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                                Srinivas
                                Dec 10, 2016 at 9:28 am
                                We as Indians r basically pessimists we r habituated to useless debating and arguments bcoz we come to a predetermined conclusion that nothing is going to change by saying so we r happy to avoid hard work and change which is required for any improvement and we Indians r mutually jealous of each other even though we know we r not capable of being pioneering change what did all our educated economists Harvard yale cornell educated Ministers do all these years they just came like fashion show ramp walkers in parliment and made their buck while sun shined on their head.Its high time for some hard decisions demlnetisation is begining more harsher deciaions required.
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                                  Dr. Haque
                                  Dec 11, 2016 at 6:07 am
                                  Indian currency in itself is not something illegal or illicit that BJP government wants to get rid of it. If they are really keen on going to cashless system why are they printing more notes, no logic seems to satisfy the act of demonetization.
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                                    jagdish
                                    Dec 10, 2016 at 11:42 am
                                    Every revolution has little pain but some are exaggerated to terrorise common people. There is no inconvenience to get money either through ATM or bank. No economist can give exact effect . Their affiliations are comming fore but nothing else.
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                                      James
                                      Dec 11, 2016 at 9:39 am
                                      A decision which was 9 months in the planning should have been better implemented.That is not magic ,but cold reasoning.The Govt could have first introduced the Rs 2000 note,printed more Rs 100 notes and then announced demonetization.It seems that no study was made of the impact of removing 86 % of currency in one stroke.As for secrecy,a journalist in Gujarati paper came out with the story 10 days prior to the announcement by Modi
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                                        James
                                        Dec 11, 2016 at 10:41 am
                                        If people support the move its because they believe in Govt propaa that it will have increase benefits in the future.Those benefits will be missing like the 15 lakhs in our bank account
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                                          James
                                          Dec 11, 2016 at 9:14 am
                                          In keeping with ancient traditions
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                                            James
                                            Dec 11, 2016 at 9:58 am
                                            So you expect everything to be ok in the magic 50 days.We are seeing the new moves by the Govt.Every day there is a shift in the rules.Tell me can people get the withdrawal limit of Rs 24,000 per week from the banks or its only been announced but not implemented
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