I have no objections at all of the demonetisation of the Rs 500 and Rs 1,000 notes, and the government has its reasons as explained by the Prime Minister and later on daily basis, by you. The PM does not have to be in India to manage the aftermath, as carping critics have demanded, because he has other things to do — the nuclear deal with Japan, for instance.
He has left you to deal with the matter, which is appropriate, you being the finance minister. However, things are not working as they ought to have, for the 'disruption' has turned into a chaos, and a new development on the political firmament which says much of what was intended may come to a naught. Politicians have found a way to keep unaccounted wealth in circulation among themselves.
That is by distribution of gold, not money in bags as in the past to buy votes, and this should raise the doubts, serious doubts among the patient but suffering citizens. To what purpose, asked a friend in an early morning call, "this charade" of demonetisation? He has a point, though targeting black money is not the only purpose. Greed will ensure the system to find ways to beat the current operation.
I'd like to believe that Narendra Modi’s promise in Japan, speaking to Indian audience that there could be fresh moves to deal with black money, materialises quickly enough to ensure that a new cycle of black money generation and management does not start. It is critical that it happened, because otherwise the common man is bound to believe that the current operation was a jugaad that was a jumla.
Now, about the manner in which the demonetised notes are being dealt with by the banking system. To say the least, it is a scandal and the patience of the citizens who said it was a good thing on Day 1 while in queues in banks may be wearing thin. If it has not already, that is. The problem lies in the logistics, admittedly gigantic, though the numbers you announce or are announced on your behalf seem, only seem, to sound good.
Seven crore transactions from 9 November to midday of 12 November, amounting to Rs 2,00,000 crore is fine, but it is only a tiny part of what remains to be done — upwards of 80 percent of currency in circulation or held hidden without taxes paid on it. But the logistics have not been handled well at all and this is where the ire pops up and threatens to snowball. Whoever planned the logistics needs to have his head examined, or far worse.
It cannot be that only or mostly Rs 2,000 notes are handed over in exchange or mostly in that denomination when withdrawn by cheque because it remains a dud in a market where lower denominations are far from enough. Those who hold such new notes would be like Henry Adams, the hero in Mark Twain’s The Million Pound Bank Note. Because he had the currency note of that denomination in Victorian London, people respected him, and allowed consumption on credit.
That is not happening. A ration shop was looted in a village because the people had not useable cash to purchase with. Even at chemists, one is asked to but other items — hair shampoo and such like — because the Rs 1,000 note was too high a denomination and so was the Rs 500. He had no change, so would the buyer please lengthen the list of items? How utterly helpful to ask them to accept demonetised note, and how utterly ill-advised to ensure there were no lower value currency around.
Those who have the 100s and the 50s are hoarding it for 'appropriate use', much like the venal hoarded the now-demonetised currency. Most of commerce is at low volumes. My vegetable vendor tells me that he has no cash to pay the wholesaler who has to pay the farmer in cash and therefore, unable to get his requirement for his retail shop. Credit and debit cards are being used, but some retailers are adding 4 percent to the bill before swiping the card.
It cannot be that only or mostly Rs 2,000 notes are handed over in exchange or mostly in that denomination when withdrawn by cheque because it remains a dud in a market where lower denominations are far from enough
How could it be that you initiate a complex process without proper preparation? On Saturday, it was said that, "such a massive currency replacement cannot take place mechanically overnight. It takes time". But it cannot be a long process, which has enabled, so try and game the system. One — jewellers sold gold at premium prices and collected old currency at a discount, two — agents popped up, according to media reports, to use Jan Dhan bank accounts.
Yes, overnight replacement is unlikely, but why is it that it was not planned that all ATMs are fit to deliver Rs 100 currency notes? Of course, two lakh machines require time to be recalibrated. But the Reserve Bank of India was in the loop and it had months ago asked banks to bring into play more of smaller denomination notes, but apparently, that did not happen. Couldn’t that have been ensured? If RBI had insisted on the fiat being respected, it would not have meant indicating a demonetisation ahead.
Those who told you and the PM that such a huge demonetisation operation could be carried out with just half the number of functional ATMs are the culprits. You with an incisive mind and a no-nonsense prime minister thought it was possible is a matter of surprise. The time lag in completing the replacement of invalidated currency gives the mischievous the opportunity to plan ways to beat your purpose. First, it was booking railway tickets, to later seek refunds, remember?
When utterly cashless, and being turned away from banks, become routine, the spirit of accommodation will wane, as it already is evident. The citizen may, like the worm, decide to turn. It cannot be that a bank in Connaught Circle runs out of cash and a post office virtually next door is without any new currency to dispense. Or only half the ATMs function, when all ATMs have to function at all times — no working hours for them even in normal times.