It has taken three weeks for the governor of the central bank of the world's fastest growing major economy to break a silence on a grand plan to suck out more than 80 percent of cash floating in the system in a nation of more than one billion people.
Was there a grand plan behind the reticence? It would seem not.
Reserve Bank of India governor Urjit Patel's reluctance to speak out, and then a measured assurance that "genuine" pains shall be addressed after a controversial move that has frozen Parliament on its tracks smack of an ad-hoc approach the Narendra Modi government seems to be adopting in the wake of its 8 November decision to demonetise Rs 500 and 1,000 notes.
There has been one response/speech/decision everyday in the past couple of weeks on an average to mitigate pains or explain the actions, while news, tweets, TV visuals and jokes bring stories of pain and outrage from across the economy.
Critics may call these responses as one of knee-jerk reactions or firefighting after a social uproar but the government seems to be confident at best and brazen at worst as it moves ahead with a crackdown on black money, never mind the fact that a legitimate cash economy of street vendors, farmers and landless rural workers are umbilically tied up with the black bathwater that the government wants to throw out.
The broadly accepted reasoning to justify the ad-hoc approach is that there was a need for stealth to prevent money-laundering or other steps that might let the big fish escape the black money dragnet. On the other hand, there is every reason to believe that once the cat was out of the bag to catch the black mice in question, the government has been more reactive than pro-active. Is the government tying itself into knots on the issue? Is there a better way of doing things than those involving contorted jalebi-like measures that are not exactly sweet? Is Jalebinomics the accompanying ideological framework to a commando-like "surgical strike" on the black economy?
It seems the government is happy at the mere fact that it is aiming in the right direction, and good intent justifies the means and methods it is pursuing. But consider the measures implemented so far and it seems there was no plan at all, not to speak of plans A, B and C any modern administration would have for such a gargantuan task.
One day the government announces it will use indelible ink to prevent proxy crowding of banks by those aiming to turn black money into white. Another day it announces easing of the use of demonetised currency by farmers to buy fertilisers. On a third day it stops the long queues on its tracks and says, "Sorry but you have to deposit money, and you can't be just exchanging your old cash for new." And then the prime minister bats for a cashless digital economy and Jan Dhan Yojana takes centrestage, almost as if the mission was less about catching the black sharks and more about going millennial in money matters.
Suddenly, in a swift weekend coup, the RBI announces that the the bulk of the piles of cash that commercial banks are sucking in under the demonetisation will be further transported to the central bank through its cash reserve ratio (CRR) mechanism, sending the bond markets into a tizzy, even as global agencies down-rate India's GDP growth.
It dawns on us now. What is happening is a simple exercise of old-fashioned power. The government seems to think, rightly or wrongly, that once a big stick is wielded, the carrots can come slow. You could call it the arrival of "Daroga Capitalism" in India.
Darogas are an integral part of India's public memory. The Mirriam Webster dictionary calls the term as one representing a "chief officer; especially : the head of a police, customs, or excise station. The word of Persian origin has a strong political flavour and cultural connect in India since the Mughal times.
The daroga can be good or bad, but socially, darogas are usually feared and respected and often avoided. The daroga can mean well but is usually suspicious and extremely aware of the potential of his powers.
The government seems to be behaving like one. This guilty-until-proven-innocent kind of approach to catching tax evaders is one that certainly has fans among those who believe in the law-and-order school of economics but the problem is that shoals of small fish have been haplessly caught in a net cast wide to catch the big ones.
And there are other nagging questions: Can you cast a net to catch whales? Or worse, are there black money sharks out there who can bite their way out of the net?
As a half-hearted "Bharat Bandh", ironically, cause more inconvenience to the already inconvenienced masses of the cash economy, the only hope for India's economy is that the gains of Jalebinomics and Daroga Capitalism will far outstrip the evident pains.
(The writer is a senior editor and journalist. He tweets as @madversity)
Published Date: Nov 28, 2016 04:11 pm | Updated Date: Nov 28, 2016 04:11 pm