Demonetisation: Did PM Modi underestimate the incompetence of resources at his command?

Moral strength was the unwritten force majeure clause behind Narendra Modi's audacious demonitisation drive. But morality is a high emotion. When baser instincts drive our judgement, morality usually clasps the hand of reason and quickly makes a dash for the door.

 Demonetisation: Did PM Modi underestimate the incompetence of resources at his command?

Prime Minister Narendra Modi in Lok Sabha on Wednesday. PTI

As a mature politician more prescient than most of his peers, the Prime Minister must have foreseen the reaction that would set in when the adrenalin kick of morality dose wears out. Did he impose undue faith in the machinery at his command? Did he take into account that given the secrecy of the entire operation (the bank managers came to know of it at the same time as the public) he would need Jedi Knights, not government officials to minimise hiccups?

An idea can change the world. But whether that idea will hold the promise of ushering in change depends largely on implementation. Did the Prime Minister underestimate the clockwork and colossal synchronization of all governmental resources such a policy would demand? Even the best-laid plans can sometimes go awry if the last mile mapping is inadequate.

Pause for a moment to reflect on the numbers. In one stroke, 86 percent of the currency in circulation was wiped out affecting 1.25 billion people, many of whom still remain outside the ambit of financial inclusion. Consider also that almost 90 percent of all monetary transactions in India are cash-based. Add the fact that by 2022, India is slated to become the world's most populous country and a picture emerges of the enormous economic and political risk that borders on insanity.

In his subsequent speeches, the Prime Minister told us that he thought long and hard before embarking on the path. It didn't need his own words. Those familiar with Modi's work ethic as an administrator vouch for the fact that his thoughts precede actions. If that is so, the PM couldn't have staked his entire goodwill on just a dry cost-benefit analysis. As an astute politician, he must have banked on the higher moral judgement of people while taking an action that would rip to shreds their daily lives.

While introducing chaos in order, Modi must have gambled on two things. One, to the extent possible in limiting the shocks of such a tectonic exercise, all possible glitches and inconveniences have been factored in. Two, people would face mighty hardships but their moral strength will be enough to tide it over.

In his column for The Indian Express, Centre for Policy Research president PB Mehta writes: "When was the last time there was a policy measure that required, in a manner of speaking, the total mobilisation of society on this scale, where literally every citizen is being enlisted (or conscripted, if you prefer) in a policy cause? When was the last time literally every citizen is being inducted into a behaviour change, albeit temporarily?"

But eight days into the sudden decommissioning of high-value notes, it increasingly seems as if the government miscalculated the immensity of the crisis and is now looking witless and thoroughly unprepared. It failed to factor in the glitches and teething problems. It went horribly wrong in larger calculations. Its arms — the entire logistical infrastructure — are creaking, its brains — new set of rules every day — are imploding and it looks in the grip of pure panic.

This, in turn, is affecting the public whose reservoir of fortitude and forbearance is evaporating quickly. With Modi's political adversaries such as Mamata Banerjee and Arvind Kejriwal eager to churn the pot and stoke the fire, we are just a few strands of public patience away from witnessing anarchy on streets.

Economists say it will take four-five months for the crisis to subside and normalcy to be restored. Modi has asked for 50 days. But in reality, he has a fraction of the time. When baser emotions kick in, morality fades into the background. That is the gravest worry because Modi's entire demonitisation exercise is based on a morality project. He expects people to sacrifice and withstand inconvenience in pursuance of a greater, common good. But people cannot go cashless for 50 days. They need food on table, money in pocket and hope in mind.

If that hope increasingly turns into frustration as the entire administrative machinery melts before their eyes, they will stop paying attention to the morality project. And when that happens, the Prime Minister will have been served notice because the resources that he wields are simply not good enough. What's more, those have been further rendered ineffective by poor planning.

Even as banks struggle to comply with the rules, a new set of rules are being introduced every day. Often, there is a communication gap between the banks and the government which results in more confusion for the customers. On Tuesday, the RBI was quite clear in its directive that customers who exchange their non-legal tenders will be inked to ensure that they don't do it more than once a day. This was ostensible to cut the queue and ensure a better distribution of liquidity.

And yet we find Minister of State for Finance Arjun Ram Meghwal telling Bloomberg-Quint that it is up to the bank managers to decide if anyone with an indelible ink mark can be allowed to exchange old currency notes more than once.

On Thursday, economic affairs secretary Shaktikanta Das let loose another spate of rules. There are more allowances now for a family planning a wedding, farmers, APMC traders while daily exchange limit has been reduced to Rs 2,000 from Rs 4,500. The government says there is no shortage but this is just to better dispense cash.

Few would buy the logic. Why announce different ceilings now? Does it mean that these things were not taken into account earlier? If there is enough cash, why are the Rs 500 notes conspicuous by absence? Printing presses are running at full capacity over three shifts but it's still not enough to replace even 50 percent of the currency in calculation. This has resulted in banks going dry by afternoon. The government also seems to have missed the fact that when a crisis takes place, hoarding increases. There may be some cash in the system already but the net effect is drier because people are holding on to their Rs 100 bills.

As the government tinkers around, the impression grows firmer that either Modi did not fully think this through, or the bureaucrats failed to apprise him of the pitfalls. At the other end of the spectrum, the plebeians find that a hitherto strong leadership is suffering from unpreparedness, lack of thought and poor planning. These impressions are eating away at the moral strength of the exercise.

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Updated Date: Nov 17, 2016 18:20:48 IST