Skip to main content

Harvard review calls Modi's noteban "failed" exercise, says it wasn't based on sound theory, cost-benefit analysis

By Our Representative
The prestigious "Harvard Business Review" (HBR), in a strongly worded commentary to mark one year of noteban, has said that demonetization in a "complex economy" should been preceded by "a sound theory; a rationale for why the underlying assumptions are valid, and the evidence for those assumptions; and cost-benefit analyses, including accounting for the systemic effects, unintended consequences, and learnings from similar actions elsewhere."
Titled "One Year After India Killed Off Cash, Here’s What Other Countries Should Learn from It" and written by Bhaskar Chakravorti, senior associate dean of International Business & Finance at the Fletcher School at Tufts University, the commentary says, "It’s unclear if any other experts have been consulted on the India policy."
Expressing surprise that the only “expert” who might have been the inspiration was "a hitherto unknown mechanical engineer-turned-turned-social-activist named Anil Bokil", HBR says, all that he did was 'a five-point plan for 'principled, prosperous, and peaceful living' and a 94-page PowerPoint manifesto that he pitched to Prime Minister Narendra Modi."
Pointing to the factors that should have been considered before "invalidating cash" of Rs 500 and Rs 1000 notes. HBR says, "Invalidating 86% of the value of cash in circulation should be an automatic red flag, because it could bring the economy to the brink of chaos."
Then, it says, "90% of India’s workers are in the informal sector, where the predominant form of payment is cash. It is hard to imagine a scenario in which such “double” invalidation would not constitute a body blow to the workforce and the economy."
HBR continues, "In a recent analysis of income tax probes, the cash component of undeclared wealth in India was estimated to be only about 6%. In other words, the policy instrument was aimed at the wrong target: most undisclosed wealth is held in noncash assets. All of this data was readily available and should have given the policy makers pause."
Also not considered, says HBR, was the fact that "in Indian society, there is access to money-laundering networks and creative schemes for getting around rules and regulations." Thus, during noteban, "people with large holdings of the old banknotes sold them at a discount to brokers who then distributed them across a network of other people to deposit smaller amounts at banks so that they would not trigger an audit."
The result was, says HBR, "India’s central bank, the RBI, recently reported that of the estimated 15.28 trillion rupees ($239 billion) in currency taken out of circulation by demonetization, almost 99% had been returned to the banking system. The original argument for demonetization unraveled because of the strategy of leaving the holders of illegal cash stranded with useless banknotes appears to have mostly failed."
As for the rationale that the "demonetization was good for weaning the country off its dependence on cash and moving transactions to digital platforms, thereby leading to greater efficiencies, transparency, and growth of online commerce, thereby catapulting India more forcefully into the digital age", HBR says, "Unfortunately, here, too, the policy’s impact has fallen short."
"According to additional data from the RBI, while digital transactions did spike post-demonetization (when consumers had few alternatives), they have now dropped below the peak levels in both volume and value. Growth in digital transactions has been slowing each month since demonetization", it says, wondering, "It is not clear why invalidating 86% of the country’s cash was necessary to promote a single payment platform."

Comments

TRENDING

'Enough evidence' in Indian tradition to support legal basis for same-sex marriage

By Iyce Malhotra, Joseph Mathai, Sandeep Chachra*  The ongoing hearing in the Supreme Court on same-sex marriage provides space for much-needed conversations on issues that have hitherto remained “invisible” or engaged with patriarchal locker room humour. We must recognize that people with diverse sexualities and complex gender identities have faced discrimination, stigma and decades of oppression. Their issues have mainly remained buried in dominant social discourse, and many view them with deep insecurities.

Savarkar 'criminally betrayed' Netaji and his INA by siding with the British rulers

By Shamsul Islam* RSS-BJP rulers of India have been trying to show off as great fans of Netaji. But Indians must know what role ideological parents of today's RSS/BJP played against Netaji and Indian National Army (INA). The Hindu Mahasabha and RSS which always had prominent lawyers on their rolls made no attempt to defend the INA accused at Red Fort trials.

Buddhist shrines were 'massively destroyed' by Brahmanical rulers: Historian DN Jha

Nalanda mahavihara By Our Representative Prominent historian DN Jha, an expert in India's ancient and medieval past, in his new book , "Against the Grain: Notes on Identity, Intolerance and History", in a sharp critique of "Hindutva ideologues", who look at the ancient period of Indian history as "a golden age marked by social harmony, devoid of any religious violence", has said, "Demolition and desecration of rival religious establishments, and the appropriation of their idols, was not uncommon in India before the advent of Islam".

Victim of communal violence, Christians in Manipur want Church leadership to speak up

By Fr Cedric Prakash SJ*  The first eleven days of May 2023 have, in many ways, been a defining period of Indian history! Plenty has happened in a rapid-fire stream of events. Ironically, each one of them are indicators of how crimes and the criminalisation of society has become the ‘new norm’; these include, the May Day rallies with a focus on the four labour codes which are patently against the rights of workers; the U S Commission on International Religious Freedom (USCIRF) released its Annual Report on 1 May stating that conditions for religious freedom in India “continued to worsen in 2022”; the continued protest by the Indian women wrestlers at Jantar Mantar for the expulsion of the chief of the Indian Wrestlers Federation on very serious allegations; the Elections in Karnataka on 10 May (with communalism and corruption as the mainstay); the release of the fake, derogative and insensitive film ‘The Kerala Story’; the release of World Free Press Index on 3 May which places India

Delhi HC rules in favour of retired Air Force officer 'overcharged' for Covid treatment

By Rosamma Thomas*  In a decision of May 22, 2023, the Delhi High Court ruled in favour of petitioner Group Captain Suresh Khanna who was under treatment at CK Birla Hospital, Gurugram, between April 28 and May 5, 2021, for a period of eight days, for Covid-19 pneumonia. The petitioner had to pay Rs 3,55,286 as treatment costs, but the Ex-Servicemen Contributory Health Scheme (ECHS) only reimbursed him for Rs 1,83,748, on the basis of government-approved rates. 

Swami Vivekananda's views on caste and sexuality were 'painfully' regressive

By Bhaskar Sur* Swami Vivekananda now belongs more to the modern Hindu mythology than reality. It makes a daunting job to discover the real human being who knew unemployment, humiliation of losing a teaching job for 'incompetence', longed in vain for the bliss of a happy conjugal life only to suffer the consequent frustration.

Unlike other revolutionaries, Hindutva icon wrote 5 mercy petitions to British masters

By Shamsul Islam*  The Hindutva icon VD Savarkar of the RSS-BJP rulers of India submitted not one, two,or three but five mercy petitions to the British masters! Savarkarites argue: “There are no evidences to prove that Savarkar collaborated with the British for his release from jail. In fact, his appeal for release was a ruse. He was well aware of the political developments outside and wanted to be part of it. So he kept requesting for his release. But the British authorities did not trust him a bit” (YD Phadke, ‘A complex Hero’, "The Indian Expres"s, August 31, 2004)

Polygamy in India "down" in 45 yrs: Muslims' from 5.7 to 2.55%, Hindus' 5.8 to 1.77%, "common" in SCs, STs

By Rajiv Shah Amidst All India Muslim Personal Law Board (AIMPLB) justifying polygamy, saying it “meets social and moral needs and the provision for it stems from concern and sympathy for women”, facts suggest the the practice is down from 5.7 per cent of Muslim families in 1961 to 2.55 per cent in 2006.

India joining US sponsored trade pillar to hurt Indian farmers, 'promote' GM seeds, food

Counterview Desk  As many as 32 civil society organisations (CSOs), in a letter to Union Commerce Minister Piyush Goyal on the Indo-Pacific Economic Framework (IPEF) and India joining the trade pillar, have said that its provisions will allow the US to ensure a more favourable regulatory regime “for enhancing its exports of genetically modified (GM) seeds and GM food”, underlining, it will “significantly hurt the livelihoods of Indian farmers.”

Modi govt 'wholly untrustworthy' on Covid data, censored criticism on pandemic: Lancet

By Rajiv Shah   One of the world’s most prestigious health journals, brought out from England, has sharply criticised the Narendra Modi government for being “wholly untrustworthy on Covid-19 health data”, stating, the “official government figures place deaths at more than 530 000, while WHO excess death estimates for 2020 and 2021 are near 4·7 million.”