The demonetisation of Rs 500 and Rs 1000 currency notes is now a reality and hopefully in next few days things will stabilise. Without a doubt this is a step in the right direction and hopefully pay rich dividends in times to come – notwithstanding the short term hardships being faced by small traders, daily wage earners and normal households in the country. Spurious currency will be out of circulation for some time at least till unscrupulous people can find new alternatives. Terror funding will be a major casualty. Corrupt government officials would be cursing the government for making their extortion based wealth worthless barring a small part that they will manage to convert through various means. Business men who cheated on taxes of all kinds and hoarded cash amounting to crores for rainy days or for retirement will be in a shock. Businesses that thrived on cash transactions without records will be hit for a six. Without a doubt more people and businesses will shift to cashless transactions and be part of the banking system in the near future.
One of the hardest hit in this round of demonetisation has been the politicians and their parties. With elections due in the Uttar Pradesh (UP), Goa and Punjab in next few months, the politician has been hit where it really hurts. All their plans would have gone sour with no alternative that could be put in place in the short time available. Smajwadi Party and Bahujan Smajwadi Party in UP must be the biggest sufferers since money power has always been the bedrock of their campaign strategy apart from caste/community based vote bank politics. Communist Party of India (M) must have been hit hard in Bengal since they thrive on unaccounted small and big contributions from their party cadres in a big way. As expected there are allegations that Bhartiya Janta Party (BJP) may have forewarned some of its political units in different states and managed to save some of their own illegal cash. However as of now there is no credible evidence in this regard apart from a one crore deposit by their Bengal unit just prior to the demonetisation announcement. Surely one crore is not a large amount that should worry the opposition. In all probability BJP too would have suffered from this announcement in the same manner as any other party. What is more important is that the decision could easily backfire politically for BJP if things do not improve drastically in next few days. A prolonged period of hardship for the man on the street could seriously affect BJP’s chances for success in UP, Punjab and Goa.
Most opposition parties are in a Catch 22 situation. If they oppose the government’s scheme they would be seen as standing up for corruption and black money. If they support the action they would lose an opportunity for political exploitation of short term hardships being faced by people. So while most state that the government’s decision is a fair one, they are targeting the government on its unpreparedness, lack of planning and sloppy execution. However most of their arguments do fall short of credibility since secrecy and suddenness were key factors for success of the scheme. There are two main limitations that are responsible for the cash crunch and resulting chaos in the initial period. The country has over two hundred thousand ATMs that have to be reconfigured and loaded with new cash in situ. This is a huge physical effort exercise that obviously cannot be completed in a matter of few days. The other reason is the logistics involved with transportation of new currency notes to bank branches which began only after the announcement on 08 November. It is a pity that opposition parties, despite being aware of these limitations, have not played any constructive part in the whole exercise. In fact it may not be wrong to say that they are only adding fuel to fire by instigating people to agitate. The false pictures circulated by a prominent Congress spokesperson of serpentine queues at a bank are a case in point. The pictures in reality were those of voters waiting to cast their vote in Kenya in Africa and had nothing to do with India.
The segment of the society that is not in focus in the current demonetisation drive is the organised business sector that includes industrialists, industries, large business houses, rich agriculturists, politicians, brokers, dealers in commodities and others whose transactions run in crores of rupees on a daily basis. Barring a few of these entities who use their own money, most play around with public money borrowed from banks. It is not surprising that by one estimate our banks have bad loans of over one lakh fifty thousand crores. The question is how will these people be brought to the book and forced to return what they borrowed with no intentions of repaying. In India one often hears ‘Industry may be dead, but the industrialist never dies’. It is actually a gospel truth in Indian context. This segment needs to be disciplined since most government officers and highly paid executives are either tempted or coerced into dishonesty by such entities apart from the fact that corruption at such high levels invariably has political backing. In India politics is all about power and money and politicians do not shy away from means foul or fair to achieve both. The roads to Swiss bank accounts or Panama Canal bogus companies designed for money laundering are travelled only by these high net worth individuals and entities. Does the government have the will and a plan to sort out this mess? If this is not done the common man will certainly have a right to feel that the government chose only soft targets. To maintain its credibility in its fight against corruption and black money, the government will have to do something equally or more drastic in this regard.
It is indeed heartening to see most common people in urban and semi urban areas supporting government’s actions. Most are convinced that current pain may be worth it in overall interest of the nation. Unfortunately the media does not seem to have made any sincere effort to understand and report the situation from rural and underdeveloped parts of the country. Therefore one is not aware of the real effects in such areas. People in rural areas do not have easy access to banks or ATMs or even post offices. It is possible that due to limited cash availability and needs in such areas the adverse effects may be marginal. On the other hand one may argue that in absence of other forms of payments and shortage of Banks/ATMs, unavailability of even small cash needs may make the problem more acute.
In hindsight one may charge the government for lack of in-depth planning that should have addressed important needs of the common man more effectively. However it cannot be denied that if more administrative and banking personnel were involved prior to the announcement of the scheme, chances of the information leaking out would have been progressively higher. That would have defeated the whole aim of the exercise. Therefore the government had to draw a fine line somewhere. But government should certainly have anticipated and been better prepared to counter the obvious methods that some people with hoards of black money were expected to adopt in their quest to convert black into white. That perhaps has been one of the major failures on part of the authorities.
In the final analysis it is certainly heartening to see the positive response from the public to the whole issue despite the obvious difficulties. One hopes that the worst is over and the nation will move towards normalcy in next few weeks. The government has its task cut out to institute measures that will restore confidence across the nation and ensure that daily business, particularly at small and micro levels, returns to normal in shortest span of time. It will be important to ensure that those who deposited some of their savings and cash holdings within reasonable limits are not harassed by the authorities in months to come. Meanwhile the drive to move towards plastic money and on line transactions in a major way will have to be intensified where educating the common man on its benefits will play a big role. Banks and financial institutions will have to come forward to make up for investment and working capital needs of small businesses that currently rely on cash infusion. Government departments dealing with tax collection must be forced to change their approach from harassment to co-operation so that tax compliance is welcomed rather than avoided. These authorities must refrain from issuing notices on routine basis for harassing existing tax payers for information and explanations that already exist in their data banks. Instead they should ensure that tax payer base sees an exponential growth in overall interest of the nation. The responsibility for eradicating graft in such offices will primarily lie on the shoulders of senior officers who will have to rise to the occasion in more ways than one.
The question that most knowledgeable people are asking is “Can Mr Modi achieve what Mr Lee Kuan Yew did for Singapore to make India corruption free?” The task for Mr Modi is definitely many times more challenging in view of India’s size, large population and deep rooted corrupt practices. There is no doubt that the Prime Minister has the will, conviction and the courage to go ahead. It is for the supporting cast – government machinery and citizens – to take the Prime Minister’s agenda forward by playing their part sincerely to make India corruption free. We all have to remember that any fight against corruption will never be easy and the nation as a whole will have to encounter some hardships on the way – but the price paid will be well worth the final rewards.