Idea of demonetization is debatable but its implementation has shown singular ineptitude
By RMS Liberhan
The announcement on the 8th November caused pandemonium, shock and dismay, as perhaps it was intended. The nobility of its objectives were stridently advocated from all platforms, including the rooftops. This will wipe out the black money and this will break the back of terrorism and more than anything else, this will pave the way to become a cashless society. The last objective has been immediately achieved. All of the population has become cashless. A brilliant move of the government! Or is it?
We are being sedated by some pithy one-liner wisdoms. ‘The honest must have a premium”; ‘there is no gain without pain’. The latter looks more like an illusory promise in which one wants to have faith but how do we convince the cynical in our population. The printed promise, repeated 15 lakh crore times on our currency notes did not amount to much, so who will guarantee the touted gain post this continuing pain? To quote the famous and renowned American author and diplomat, Professor Galbraith who wrote on Money, “Most things in life, automobiles, mistresses, cancer- are important only to those who have them. Money, in contrast, is equally important to those who have it and those who don’t. Both, accordingly, have a concern for understanding it”. Yes, where money is concerned, everyone wants to know the easiest way to make it and spend a lifetime in this quest. Most people discover, to their dismay, that it is usually hard labour that begets a living wage. But having earned it, nobody, but nobody, could have imagined the pain in getting ones’ own money for the daily needs simply because it was termed illegal tender through a televised announcement. As the rumour mill goes, only a few chosen ones were privy to this flash of a magic wand to hasten us into honest prosperity.
The euphoria is now giving way to gloom, as the time goes by and the deprivation becomes endemic. The country’s economy, ever vulnerable to elements and externalities, is on a downward skid. Economists can endlessly argue about how much and for how long, but it is in a dip for sure as of now. The decision makers seem to have forgotten that at least 75 percent of our population makes two ends meet despite the government and not because of it. Our arms of governance are unable to reach vast segments of population because of system’s apathies and managerial deficits. Banking services with their fancied ATMs are limited, so are POS machines and a bagful of other plastic facilities, generally used by the middle class set. Cash has always been regarded as a Goddess that enables the holder to negotiate life’s twists and turns, especially on an everyday basis. All give and take among the poor and the voiceless happens in cash or personal credit from the local money-lender usually on severe terms. To add to the woes and render 85 percent of the currency in circulation as illegal without replacing it, in sensible denominations, has to be the misstep of the decade at the very least or a shocker of some magnitude. The ease of doing small business gets a huge jolt and the already strained purchasing power is cramped. The idea of near total currency replacement, therefore, itself is debatable but, over and above all else, its implementation has shown singular ineptitude, not to put too fine a point on the over fifty alterations to the policy in barely forty days, as each one of them added to the pain of the change.
India is not a black and white canvass, with neat contours which can digest one prescription for its many ills. Indeed, it has countless shades of grey and some even transit from one kind of grey to another. One size fits all, has never been a workable solution in the various endeavours of our public policy and governments in the past have calibrated change rather than go for abrupt and drastic replacement of the way of life of the common citizen. Thus, mayhem had to be the consequence, given the size and scale of this induced monetary upheaval. Anxiety and panic has been widespread, not amongst the affluent though, as the architects of this policy perhaps hoped or intended, but only amongst those who earn their daily bread and only then get to savour it, have no bank accounts or savings and their work is dependent on a functioning economy. The functioning economy has been disrupted and has gone into a withdrawal mode. And the huge unorganized sector having no safety nets to cushion the setback, has taken the biggest hit. As per 2010 statistics, the organized sector employs about 465 lakhs people and the unorganized sector has ten times the number. With employers worried about meeting personal and family expense in the order of priority and then of the employees, the latter have been put to grass, at least temporarily. How long can this temporary lay-off last is to be seen, but it surely will be a good length of time, before demand picks up in the economy. Assuming, it is as short as six months for recovery, is the loss of productivity and social cost for the humans an affordable price? Lost employment impacts all segments and is hard to reclaim, particularly, by those who return to villages and far-off places in the interim. And pray, who provides the vibrancy to the economy in the meanwhile, the FDI sailing into our shores or the promised government spending on infrastructure?
Spectacular policy choices come with a burden of spectacular execution. Since ‘surgical’ is the lexicon of the era, precision is the underpinning of all operations. Doctors of competence do not cut up the patient and begin a search in the anatomical maze before they find the right organ to repair and revive the body. Every step of the way has to be known or anticipated. Politics, as much as medicine deals with real human lives and not for a moment can this simple truism be lost sight of. Sadly, some real lives have been lost and surely more will be, in the withdrawal melee. A one trillion dollar subordinate economy addicted to ‘jugaads’ has gone into disarray. The symptoms are all there as the withdrawal pains begin to hurt. The political instincts, perhaps, misread that the need was for a facilitative and not a restrictive environment for good times to come.