The Reserve Bank of India has partially rolled back an arbitrary order restricting deposits over Rs 5,000, which could be made only once, requiring the presence of two bank officials and a “satisfactory explanation”. This is the first time that the RBI and the government have visibly reacted to public distress, as the 50-day grace period requested of the people to manage the collateral damage of the bold and well-intentioned demonetisation exercise runs out. Now, the government must prepare to deal with friendly fire even from staunch allies, who are having to face public anger in their own constituencies. Andhra Pradesh Chief Minister Chandrababu Naidu had taken first mover advantage the day after demonetisation was announced, putting his weight behind the move and alluding to his own prior demands for scrapping high-value notes. His Telugu Desam Party is an NDA ally, and he heads the central committee appointed to look into the demonetisation issue. This lends special significance to his apparent change of stance now.
On Tuesday, as Naidu spoke at a workshop for party MPs, MLAs and MLCs at Vijayawada, he accused the managers of the demonetisation exercise of ineptitude, and spoke of the unfairness of thrusting a digital economy upon the banking sector, whose infrastructure is unprepared for it. His account sounds more authentic than the vocal support of banking chieftains, for whom demonetisation may be an opportunity to achieve critical mass in the payments sector. Naidu’s illustration of the Centre’s poor management has been biting — his government had tackled a bigger crisis with greater speed in Cyclone Hudhud, he had said earlier. His party had dealt with an internal coup in the 1980s in 30 days, he pointed out on Tuesday.
In response to the uproar over inadequate preparations for demonetisation, the government had argued that the need for secrecy was imperative. This was true at the time, but that argument no longer holds. Now, the government should keep its ear to the ground if it is to achieve the stated objectives of demonetisation. It should pay special heed to proponents of demonetisation like Naidu, who now says that he is “breaking his head” every day in search of a solution to the cash shortage. Leaders on the ground cannot afford to ignore the distress of their constituents. Neither can the Centre, in truth. It must listen when accounts of unease come in even from supporters.