Bimal Jalan, whose tenure as Reserve Bank of India Governor (1997-2003) almost coincided with that of the first NDA government of Atal Bihari Vajpayee, on Tuesday questioned the timing of the government’s demonetisation decision and said there must be a very good reason, war or security threat, to demonetise a legal tender.
In an interview to The Indian Express, Jalan, under whose watch India weathered the Asian crisis, said, “When you demonetise a legal tender, there must be a very good reason to do it. War, security threat. What demonetisation does is to give, as it were, a message to people that this government will not tolerate black money. The second part, which is equally relevant is, why now.”
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Further, Jalan felt, there was no need to be secretive about it. “There is no reason to my mind to be secretive, unless there is an emergency. I want to do it in three weeks, or two weeks or one week. as in a surgical strike. But this is not the same thing. On that, there can’t be two views. I am talking as a citizen here,” Jalan said.
The government has frequently said that maintaining secrecy was key to the success of demonetisation. Addressing the nation on the demonetisation decision on November 8, Prime Minister Narendra Modi had said, “Secrecy was essential for this action. It is only now, as I speak to you, that various agencies like banks, post offices, railways, hospitals and others are being informed.”
Jalan said telling people the government was concerned about black money was also about giving them a notice. “It could be done in a way where people are prepared. Telling people that we are concerned about black money is also about giving them a notice. Supposing, instead of being a secret decision, if it was announced in public. what would have happened?” he said.
Had notice been given, black-money hoarders would have deposited money in banks. “But this is precisely what they are doing (with the decision being kept a secret) now, maybe not to the same extent. But a notice would have been given. So ‘why now’ is not clear to me.
Yes, we must not allow black money to be part of our financial system or the transaction system. The second part is not everybody is a black money holder,” Jalan noted.
The former RBI governor said 90-95 per cent of the people don’t hold black money. “We are from the organised sector and we have jobs.
This is where we need to strike a balance, doing something with a notice and doing it in a way where the majority of the people are not hurt. You see the end is fine, you have to carefully choose the means to achieve this end,” he said.