This is not the first demonetisation, and I daresay not the last. Governor Pitt executed one in 1735 in colonial Madras (read the lovely piece by historian Sriram); and there were 2 others in 1946 and 1978.
I wasn’t even born during the first 2 and still naive during the third one. Yet I presume there is one environment that sets apart the 2016 demonetisation from its predecessors. During the predecessors, “cash was king”. The banking system was neither deep nor wide. Plastic money (cards) was probably at its infancy (1978) and the term digital banking had not even been invented. So the hardship to honest citizens must have been greater in the past than now? But the cacophony from the media suggests otherwise. Why?
Please for a moment, suspend the question as to whether demonetisation is the right strategy; first, examine only the hardship question. Let me share my first hand experiences. My initial reaction was panic and anger. Events this week proved that I was overreacting. In one week, my wife and I visited 3 different ATMs in our locality and easily got cash. Yes, there were queues, but the turnaround was fast – never waited more than 25-30 minutes! Unlike me, none in the queue was anxious. They patiently waited their turn, even helped some guys who did not know the ATM process. I had many, many conversations with those in the line, and there was never even a whimper of discontent!
May be, these were the upper- class bourgeoisie who loved ATMs? May be the Working Class is languishing? In the last one week I have travelled a lot on auto-rickshaws (they collect fares only in cash), and every auto-wallah I travelled with, was pro-demonetisation. My work often puts me in contact with the street vendors in the food market and they too appeared unfazed. I am sure they faced inconvenience, but it was not critical at all. The Iron-wallah accepted an old Rs.500 happily because she was confident she could exchange it legally for a new one. The Nepali who cleans my car daily, said that he would take his salary next month when he could get a newly minted Rs.500: this guy was offering me credit!
Perhaps, the banks are turning people away? I visited the bank where I have an account and so did my wife and son. Everywhere, the bankers are working hard and coping with the new situation. Despite the crowds, they have been pleasantly helpful to customers, even assuaging the odd ruffled customer. One newspaper reported that an old man died while waiting in a bank queue; the next day they had to apologise because it was found that the said bank did not even have a branch in the alleged place! Talk of stereotypes: I usually perceived bankers as insensitive bureaucrats, but this time they are champions.
Every day the situation has been improving. On the third day after demonetisation, the ATMs were dispensing money. I got my share after 25 minutes in queue. Strangely, the newspaper headline on the next day was “Currency crisis deepens”! Yesterday, I travelled on the highway and crossed the Toll-gate. My taxi driver said “no problem sir, the government has suspended highway tolls till the crunch eases”! Yesterday the banks disbursed cash exclusively to senior-citizens. Tomorrow, they are going to use petrol pumps to dispense cash (this may be an overkill?)
May be we city-dwellers are ignorant of sufferings in small towns? A couple of days ago I had a chance meeting with a guy from Nagercoil (small town in the southern tip of India). He said, you Chennai guys have to wait for a long time, but in Nagercoil I got money immediately (better than my 25-minute wait)!
And the celebrated hardship? I think there are some selfish forces that are at work, and they are invoking Sacred Cows and Shibboleths to make us believe that that the end of the world is near.
Firstly, the corrupt troika of politician-businessman-bureaucrat. These would like to increase the panic to such a level so that the demonetisation is revoked and they get a chance to redeem their notes which are presently value-less. They would even like to guilt-trip you with farmer deaths and suicides. For decades after the Green Revolution, politicians of every shade have done nothing for agriculture, except shed crocodile tears. Now they created this shibboleth, that a farmer’s suicide is more important. Any suicide or death is tragic, why pick only the farmers? Because it is sacred cow that gives you media attention.
An educated guess (since I have no first-hand experience) about the really rural poor: they are not affected by demonetisation, as they were not monetised (in white or black) in the first place. The guys crying hoarse are the rich landowners and hoarding middlemen who hold caches of tainted money.
Meanwhile, the media is in the race for limelight. So they add colour. Like, so-and-so died of heart attack while in the Bank queue, mischievously implying that the bank was causa proxima for the death. “Currency crisis deepens” is clever penmanship, but fuelled by a desire to increase circulation by means foul-but-not-fair.
Vested interests are displaying diversionary tactics. For example, the Opposition says that the ruling BJP converted a significant lot of high value notes just before demonetisation. I am inclined to believe that their allegation is indeed true. Yet, look closely at the allegation. They are not bothered about black money per se — they are angry that they have not been given equal opportunity to stash black money!
A learned judge has reportedly said that demonetisation may spark riots. If true, was it in keeping with his position? Besides , somebody pointed out, where is the cash to pay rioters to pelt stones?
Sadly, a new class of players has emerged in the Black Money market. This class has added to the decibels in the demonetisation outcry. During the old demonetisation exercises the only villains were a handful of super-rich; the “common man” was untouched. Today a number of small businessmen, government officials and professionals have joined the gangs: people whom we believed, respected middle class morality. (See Dhirendra Kumar’s article in Economic Times). Really, the gangrene has set in.
It is not my hypothesis that there have been no problems. But how can anecdotal evidence be so different from media reports? Perhaps, there is an evil nexus that wants any measure to fail so that they can exploit the economy unfettered. Caution and not panic, is the watchword.
Finally, let us re-visit the question: Is demonetisation the perfect answer to the problem? I think not. Black money has other forms like, Land, Gold, Participatory Notes and Secret Foreign Bank accounts. Even if this demonetisation “succeeds”, there is humongous work to be done; and there is a huge risk that this demonetisation may fail totally. Yet, both could trigger measures to break the parallel economy. Thus, it is better to fail in a sincere operation, than spend a lifetime of mouthing aphorisms. Everybody wants a surgical strike, but there is an expectation that the operation will be done in the out-patient ward! Isn’t that odd?
Disclaimer: I find any political discussion (this post included) stressful. Yet when a whole lot of criminals and pretentious liberal intellectuals are yelling, I thought it is my democratic right to voice a moderate middle-class view. If you agree with me, great. If you disagree, I am not going to lose sleep over it. I have made my choice, you make yours.