Demonetising exercises are nothing new for India. But the ‘deft strokes’ didn’t really kill black money. Why else are we going through the process again?. It is difficult to find a coherent reason for the present exercise. Watching the massive lines of harried citizens on television and reading stories of cash running out in banks and ATMs, and of traders downing shutters because of elusive customers, one can’t help but wonder at the futility of it all.
The Prime Minister assured the nation that the transition will be smooth – there might be difficulties at the beginning, he said, but it’s for a larger cause. The teething problems, however, are spiraling into something more macabre. There have been deaths which have been reported due to cash crunch within the first week of demonetisation. Three of these reported deaths were due to the patients’ inability to receive medical services in time, since they couldn’t be paid for.
Though 86 per cent of the currency (in value) is being sucked out of the system, so far there doesn’t seem to be timely, and adequate, transfusion and circulation of cash. It is hard not to ask how the government expects small and micro enterprises and the common man to survive?
Rural India is taking a big hit. In villages there are few bank branches and even fewer ATMs. Cash circulation is worse there. Landless labourers and small/marginal farmers don’t have money; families are going to bed on empty stomachs. For instance, Malegaon village in Nanded district has only one ATM which reportedly stopped working immediately after Modi announced that the current Rs 500 and Rs 1000 notes were illegal. Villages like Malegaon are heavily agrarian-based, therefore almost 80 per cent of the monetary exchange is based on cash. The banks (only two) in the village inhabiting 10,000 people, are circulating Rs 2,000 notes, which is barely helping the farmers who don’t have small change to return as balance. Their work has come to a standstill. Subsequently, there has been a staggering fall in the price of the goods and grains that farmers sell. In Malegaon, traders have begun taking advantage, robbing farmers by offering to pay Rs 2,500 per 100 kgs of soybean rather than its original price of Rs 2,800. Those who’re desperate are unfortunately taking whatever money is coming their way.
It’s a pity that the government is unable to discern what is clearly a straightforward example of a hurriedly thought, poorly planned and shoddily executed strategy. Three days ago, Finance Minister Arun Jaitely announced that people would have to wait for 21 days longer, before the ATMs would begin functioning properly, since the ATMs weren’t calibrated to dispense new-sized notes. The government should have ensured in advance that new ATMs were privately designed, built (perhaps at the same time new notes were being produced) and replaced as soon as the old notes were scrapped.
People are facing tremendous problems and these problems are escalating each day. Would the step to completely weed out black money work, considering there are reports that people are already finding loopholes in the system and figuring a way around ban? The price of gold for instance, has scaled up. Ten grams of gold which was earlier priced at Rs 30,000, is now being sold by jewelers at Rs 34,000-35,000. Jewellery shops are willingly accepting old currency notes and since purchases made below Rs 2 lakh don’t require a PAN card, the fear of traceability is put to rest.