The programme began well and the intentions were good. Many previous governments may have contemplated but lacked the courage to implement it. There were teething troubles. Luckily the Opposition has no alternative to propose except for peremptory (not to say foolish) calls for an immediate recall of the ban on old currency. The government will come out with credit when the inconveniences are forgotten, and the dire predictions of economic damage are not realised.
But that said, what can we learn from this most bold of policy moves in the last 70 years?
The lessons are all sobering. First of all, we have to conclude that the elite civil service in the PMO is not fit for purpose. Even if the initial decision had to be kept a secret, after the announcement, the response to citizens’ complaints has been slow. The fiasco of the ATM machine recalibration was sad. Obviously, no one at the top had any inkling of how ATM machines work.
The elite civil service has obviously no idea of how ordinary people live, transact their business, get their money. They probably never have to do such ordinary chores in their daily lives.
There has to be a thorough reform of the civil service. During the run-up to the 2014 elections, many of us floated reform proposals. Mine was about ways of cross fertilising the public sector servants by sending them to the private sector and have private sector people come into the public sector. Nandan Nilekani is an ideal example of how a smart private sector person can tackle big problems. We need more such people.
The principal aim of the experiment was to get at the black cash hoards. The response has been tremendous. But one can see that from the government’s point of view, it has been too good. The expectation was that some proportion of the old currency would not return to banks and would be rendered valueless. But then the government did not contend with Indian jugaad. The black money hoarders have used many ingenious devices — Jan Dhan accounts, using proxies to deposit money into their accounts, buying foreign currency from their banks, buying gold and land quickly at exorbitant prices etc. Much of the black money has been whitened during the last month.
The government seems to be pursuing the depositors on the suspicion that the money must be black. The latest injunction to make old Rs 500 notes ineligible is an example. Rules are changed so often that people are lost. Why go on relentlessly putting people to inconvenience just because the planners did not anticipate the cleverness of the hoarders? Enough is enough. Most old money is in banks.
The real problem is the lack of new currency. This was never integrated into the plan because the aim was to get at the old money. It was a mistake to print Rs 2,000 notes. The old denominations should have been replicated with the same size. Let me try a radical suggestion. Why not recycle the old notes after stamping ‘NEW/NAYA’ in high-quality ink? That would expand eligible currency fast. When the new currency arrives, the recycled old currency can be withdrawn.
The Prime Minister has many more radical reforms to pursue. He better get himself a better civil service.