Demonetisation originated as an idea on 8 November to kill the black money build-up in the system, to end corruption and break the back of terrorist activities. But the obvious inference one can draw looking at a series of incidents that have happened since the demonetisation announcement by Prime Minister Narendra Modi is that the very idea is turning into a myth.
It is too early to assess the impact of demonetisation on the economy and its last stated objective of pushing the system to a cashless economy. But, one needn’t wait any longer than this to understand whether the currency swapping exercise is good enough to address the issues of black money build-up in the system, corruption and terror funding. Three separate incidents since 8 November tell us that it isn’t.
The first is an incident reported from Gujarat on 17 November, when two port trust officials were arrested for accepting a bribe of Rs 2.9 lakh in new Rs 2,000 notes that was launched on 11 November.
The second is the Nagrota terrorist attack that began on Tuesday morning and has so far claimed the lives of 7 soldiers, including two officers.
The third, and the most critical evidence, is the seizure of Rs 4.7 crore worth new Rs 2,000 currency notes by IT officials from two contractors and two government officials. The Rs 4.7 crore was part of a total Rs 30 crore haul.
Remember, the demonetisation implementation isn’t even over yet. The public has still got one more month to deposit the old Rs 500, Rs 1,000 notes. The new currency denominations of Rs 2,000 and Rs 500 remain extremely scarce in bank branches and ATMs. Close to Rs 5 crore of new currency notes in one box would be a rare sight even for the banker at the branch of a nationalised bank these days.
Then how did our Bangalore contractors and government officials manage to bring home this much amount in new bills. The Bangalore episode tells us that remedy to checking unaccounted assets is beyond merely swapping the currency notes. It has more to do with the loose systems in place and more importantly, the culture.
Until the time, the surveillance mechanisms are strong enough to track suspicious transactions, including those outside the purview of the banking system, the peril of black money build-up is here to stay. The currency ban would have slowed down illegal cash hoarding for a brief time, a few days or weeks at the most, before re-emerging in brand new notes. The argument goes similar to the corruption cases involving cash exchange and the terror funding. What difference the currency swap made to stop corruption?
The Rs 3 lakh bribery case in Gujarat is an eye-opener to the government and the society as to what is the mindset of corrupt officials to the currency swap. When the PM was announcing the currency ban on the evening of 8 November, these crooks would have been laughing aloud in their minds. After lying low for a few days till the government mints prints new currency notes and take it to the bank branches, they would have started calling for bribes in new Rs 2,000, Rs 500 notes, instead of the old Rs 500, Rs 1,000 notes. Only the currency notes changed in color and shape, the corruption didn’t.
Then comes the issue of terror funding. Like the earlier examples, the cash crunch would have paralysed the stone pelting in Kashmir against Indian army for a few days, because just like our contractor in Bangalore and port officials in Gujarat, the handlers of young, unemployed crowds in Jammu and Kashmir would also have been waiting for the new lot of currency to come. But, it won’t be long before things return to ‘normalcy’ again.
Nagrota is a big disappointment, not just for the government, even for the common man standing in ATM queues, hoping that this exercise will paralyse terror funding and large, organised terrorist attacks on Indian establishments would be a thing of the past. The incident tells us that one of the two possibilities -- that terrorists deployed for major assaults aren’t really dependent on cash or even if they need they have modes to continue to getting money--exists.
Demonetisation is still a game in progress. It is too early to assess the tangible benefits of it to the state-exchequer and whether the pain of the common man is justified at the end of it. But, even at this stage, it is equally naive to imagine that the note ban will kill illegal cash build up in the system, curb corruption and end organized terror.