Skip to main content

Demonetization: Destruction of India’s growth story will be remembered as Narendra Modi's enduring contribution

By Anand Teltumbde*
Recall what Modi said to the nation in his first announcement on 8 November 2016: "This step will strengthen the hands of the common man in the fight against corruption, black money and fake currency." Black money, fake money and terrorist money was what he claimed would be destroyed at one stroke. Given the ground reality, none of this was tenable. But he could deceive the gullible masses into believing that he was a brave man, ready to take on the moneyed and the anti-national racketeers.

Black money, according to income tax estimates through their raids, was just less than 5% of the total illegitimate wealth. Black money is held in assets, gold, real estate and foreign banks. It is held in currency either by petty bureaucrats or politicians who need it to run their political machine.
Contrary to Modi’s beliefs, the big ticket corruption happens in the business world through cross border trade (under/ over invoicing) and tax evasions, perhaps digitally. Another source is politics, Modi’s own profession. So, demonetising 86% currency for such a small change could surely not be the reason. Next, the fake money estimates by the Indian Statistical Institute was to the tune of Rs 400 crores — not even a drop in the ocean of currencies demonetised; hence, this also cannot constitute a logical reason. The terrorists are not terribly dependent on Indian currency.
Modi, or rather his entire class, considers Maoists terrorists, but they are not. Nonetheless, they might certainly have been inconvenienced. But to surmise that neutralisation of their stock would end their movement was too naïve to become India’s prime minister. So none of these primary objectives behind demonetisation indicated by Modi was tenable.
While there were no benefits from demonetisation in economic terms, the costs were certain, and they were substantial. The printing costs of the new notes to replace the old ones is estimated to have cost in the range of Rs 12,000 to 16,000 crores. Add to it the costs of logistics; the cost of refurbishing and recalibrating two lakh ATMs spread all over the country; and, of course, the cost of economic activity being stopped by unavailability of cash, and the human cost actually incurred in terms of hunger and death.
As this began getting exposed, Modi resorted to shifting his goalposts. He twisted the entire rationale to that of promoting digitisation, or cashless (later moderated as less-cash) economy. Surprisingly, digital payment companies like Paytm were ready to cash in on this cashless rhetoric. In the absence of cash, some people in urban areas quickly switched to digital payments.
This manifest harassment of people was also not spared; it was flaunted as the success of demonetisation. Given the cost of digital transaction (surely Modi knew that his IRCTC, a company under the Railway Ministry, continued to charge 1.8% extra if you used credit card), once the currency is made available, people would revert to their convenient mode of cash transaction. Many people, including me, have given the relative economy with the currency vis-à-vis the digital cash; but when did Modi listen to others’ voices? As the RBI confirms, the level of digital transactions has indeed reached its pre-demonetisation level. Even digitisation of the economy could not help Modi save his demonetisation from being a flop.
In the absence of any cogent answers to the criticism coming from all quarters, and mounting negative evidence, the Modi-Jaitley duo clutched at every straw to justify their intrinsically stupid decision. In December, Jaitley used supposedly increased indirect and direct tax receipts to claim that demonetisation did not hurt the economy. Later, when the income tax returns data became available, Jaitley and Co. attributed them to the success of demonetisation — until people began showing them bigger growth in number of returns without any demonetisation in previous years.
Jaitley conveniently forgot that his own Economic Survey had revealed a weak investment climate and sharp decline in industrial credit off take, the lowest in the last 65 years, which has been showing up in the absence of new capital formation and the rise in job losses. But Goebbels’ disciples will not be deterred by these truths! Even the result of the first quarter after demonetisation, showing a dip in the GDP, did not deter them. In his Independence Day speech from the ramparts of the Red Fort, Modi, with characteristic confidence, made questionable claims, inter alia, about demonetisation having brought the generation of black money to a halt.
The first quarter after demonetisation registered a growth of 6.1 % as against 9.1% in 2016. It was much lower than even the 30 economists’ prediction of 6.65% in a Reuters poll. Now, in the next quarter, the first quarter of 2017-18, GDP figures show a further fall to 5.7 % against 7.9% in the same quarter last year, the lowest in three years. There was no surprise. The sane voices warning of such economic damage were drowned in the deliberate cacophony of government voices intended to confuse people.
The fact is that demonetisation has completely devastated the cash-based informal sector that contributes 45% to the GDP and employs over 80% of the workforce. The sector is precarious in nature and does not have the capacity to bear severe shocks like demonetisation. Contrary to what the government apologists say, it will take a long time to restore normalcy in this sector.
Demonetisation is about the economy — which the common man and woman hardly comprehend or relates to. But they certainly understand the hardship demonetisation has heaped on them for no fault of theirs. Their hardship will never be revealed by these figures being flaunted by the government. The common manwas made helpless; he had to stand in queues at ATMs to get his own hard-earned money. Millions like him had to go without food; some even lost their lives.
The common people will never forget the chaos created by the daily flip-flop of the RBI during those cashless days. There were as many as 62 amendments in procedure during the first three weeks. The common man bore all these believing Modi’s statement that it was good for the nation. But the truth is coming out: it has, in fact, done lasting damage to the country.On November 24, 2016, Manmohan Singh rightly described Modi’s demonetisation as “legalised plunder and organised loot”, and predicted that the growth rate might come down to 6% from a whopping 7.3 % in the third quarter ending September 2016. Many economists thereafter have predicted similar damage to the economy. The Centre for Monitoring Indian Economy (CMIE) has predicted that India’s GDP growth rate for the current financial year is set to slow to 6%, “on account of demonetisation”, and warned that there’s no hope of recovering from this slower pace for the next five years.
While Modi has squarely failed to deliver on any of the promises he made during the election, this destruction of India’s growth story will be his enduring contribution. This is what will be remembered by people for a long time to come.
Why did he do it? There was no economic reason behind such an ill-conceived and badly implemented demonetisation. On apositive note, it may have certainly served to neutralise the opposition’s, particularly Mayawati’s, stock of cash while the BJP remained unaffected on the eve of the Uttar Pradesh elections the BJP was so desperate to win. But more tangibly, it was meant to show off Modi’s proverbial 56” chest, making him a muscular leader who alone could take such bold decisions against the rich.
Modi has cast a spell over the masses with his oratorical skills and his hyperbolic speeches far too long. They believed in him, ignoring their own pains. They supported his demonetisation, thinking that he was punishing their tormentors, the rich. They gave him massive wins in post-demonetisation assembly elections. When they come out of their trance and realise the damage Modi has done to India, what will happen to the BJP’s apple cart that has set out to achieve Hindu Rashtra?
---
*Writer, political analyst and civil rights activist with Committee for Protection of Democratic Rights, Maharashtra. Source: http://indianculturalforum.in/

Comments

TRENDING

Mystery around Gujarat PSU 'transfer' of Rs 250 crore to Canadian firm Karnalyte

By AK Luke, IAS (Retd)*
While returning from a Board meeting of the Oil India Limited (OIL) in Ahmedabad some time in 2012, two officers of the Gujarat State Fertilizers and Chemicals Ltd (GSFC), Nanavaty and Patel,  saw me off at the airport. They said they were proceeding to Canada in connection with a project GSFC had entered into with a company there. As we were running late, I hastily wished them the best.

J&K continues to be haunted, as parts of India 'degenerate' into quasi-Kashmir situation

By Rajendran Narayanan*, Sandeep Pandey**
“Jab har saans mein bandook dikhe toh baccha kaise bekhauf rahe?” (How can a child be fearless when she sees a gun in every breath?) remarked Anwar, a gardener from Srinagar, when asked about the situation in Kashmir. On November 30, 2019, a walk through an iron gate in a quiet neighbourhood of Srinagar took us inside a public school. It was 11 am when typically every school is abuzz with activity. Not here though.

Savarkar in Ahmedabad 'declared' two-nation theory in 1937, Jinnah followed 3 years later

By Our Representative
One of the top freedom fighters whom BJP and Prime Minister Narendra Modi revere the most, Vinayak Damodar Savarkar, was also a great supporter of the two nation theory for India, one for Hindus another for Muslims, claims a new expose on the man who is also known to be the original proponent of the concept of Hindutva.

Indians have made 119 nations their ‘karma bhumi’: US-based Hindu NGO tells Rupani

Counterview Desk
In a stinging letter to Gujarat chief minister Vijay Rupani, the US-based Hindus for Human Rights (HfHR), referring to the report citing his justification for the Citizenship Amendment Act (CAA) – that “while Muslims can choose any one of the 150 Islamic countries in the world (for residence), India is the only country for Hindus" – has said, he should remember, Hindus have made several countries, including USA, their home.

Dalits rights meet planned on how citizenship law 'negates' Ambedkar's equality focus

By Our Representative
A Dalit rights meet has been planned at the Dalit Shakti Kendra (DSK), Sanand, Ahmedabad district, to discuss implications of the Citizenship Amendment Act (CAA), passed by Parliament on December 10-11, for Dalits, Adivasis and other marginalized sections. Announcing the decision, DSK director Martin Macwan said, the meet would take place on December 25, 2019, at 11.00 am, to commemorate the anniversary of burning of copies of Manusmriti by Dr BR Ambedkar.

What about religious persecution of Dalits, Adivasis, asks anti-CAA meet off Ahmedabad

By Rajiv Shah
A well-attended Dalit rights meet under the banner “14 Pe Charcha” (discussion on Article 14 of the Indian Constitution), alluding to Prime Minister Narendra Modi well-known campaign phrase of the 2014 Parliamentary elections, “chai pe charcha” (discussion over cup of tea), organized off Ahmedabad, has resolved on Wednesday to hold a 14 kilometres-long rally on April 14 to oppose the controversial Citizenship Amendment Act (CAA), enacted on December 10-11.

Upendra Baxi on foolish excellence, Indian judges and Consitutional cockroaches

By Rajiv Shah
In a controversial assertion, top legal expert Upendra Baxi has sought to question India's Constitution makers for neglecting human rights and social justice. Addressing an elite audience in Ahmedabad, Prof Baxi said, the constitutional idea of India enunciated by the Constituent Assembly tried to resolve four key conflicting concepts: governance, development, rights and justice.

Tata Mundra's possible closure? Power ministry's 'pressure tactic' on consumer states

By Bharat Patel*
Tata power has announced to the Union Ministry of Power that Tata Power may be forced to stop operating  its imported coal-based Mundra Ultra-Mega Power Project (UMPP) after February, 2020. It is not only unfortunate but also criminal that irreversible damage has been caused to the fragile ecosystem of Mundra coast for a project that will have a running life of only seven years.

Population control? 10% Indian couples want to delay next pregnancy, but fail

Counterview Desk
Shireen Jejeebhoy, director at Aksha Centre for Equity and Wellbeing, previously senior associate at the Population Council, India, argues that the debate on the country's population was fuelled by Prime Minister Narendra Modi’s Independence Day address to the nation, where he drew attention to “concern” about the challenges posed by this ‘exploding’ population growth, needs to centre around the promotion of rights and education, instead of the language of explosion and the threat of coercion that this term implies.