Demonetisation: Fresh directive on old Rs 500 is another U-turn by Modi govt

Despite the hardships to common man, the Narendra Modi government always had the moral ground to defend its decision to demonetise 86 percent of currency notes--- a bold step for the larger ideas of killing black money, fake notes and usher in an era of cashless economy. But, the government doesn't have any excuse to justify the repeated flip-flops on the roll out.

Representational image. Reuters

Representational image. Reuters

On Thursday, when the government announced that the deadline for using old Rs 500 notes at petrol pumps and for airline tickets at airports has been cut short to 2 December, instead of December 15, as announced earlier, it became the latest of the U-turns during the implementation of demonetisation exercise.

The last was on 24 November when it abruptly stopped the facility to exchange old Rs 500, Rs 1,000 notes at bank counters as against the earlier promise by the Prime Minister himself and the Reserve Bank of India (RBI) that the facility will continue till 31 December. No adequate explanation was offered even then for going back on the earlier promise.

Now, the question is why on earth the government wants to promise something to the citizen, only to roll back the facility or go back on the promise just a few days later? What has changed between 24 November and now to stop the use of Rs 500 notes on petrol pumps and buy air tickets? If the fear is that people will misuse the airline booking leeway (to book and cancel to get rid of the old notes), why was this allowed in the first place?

Even the abrupt termination of old note exchange facility at bank counters, some one month before the promised date, was an avoidable decision and only points to lack of foresight. Such breach of promise could even upset those standing in long queues but still support the PM thinking of a larger national cause.

According to a PTI report, the government has also dropped its earlier announced plan to allow the use of Rs 500 notes for payment of toll at national highways from 3 December. Toll payment in both old Rs 500 and Rs 1,000 notes was accepted till 2 December, and from 3 December, it was to be limited to Rs 500 notes. But now, this facility too has been withdrawn.

This sort of U-turns are unfortunate because despite the widespread criticism in the way demonetisation was implemented, the very idea of demonetisation was never a hated concept by the common man on the street, forget economists and experts. Even though the peasant in the rural village didn't understand the whole concept, he knew that this was being done for some good of the society. Hence, it is necessary to live through the difficult days.

But, the flip-flops confuses him and prompts him to doubt all other rules in place. There is a difference between reacting to the situation on ground during the roll out of a complex exercise in a large economy and failing to frame the fundamental rules that defines the implementation of the larger plan. The frequent changes in the cash withdrawal limits at banks/ATMs can be tagged in the first category, while the U-turns on deadlines to exchange old notes at counters and now asking not to use them for certain essential activities falls in the second.

Ever since the demonetisation announcement on 8 November, there has been a series of changes in rules by the government. In the case of exchange, the daily limit was first set at Rs 4,000, then increased to Rs 4,500 and later the limit was reduced to Rs 2,000. Then the government introduced a new method -- of marking people who come to exchange notes with indelible ink and late to stop the exchange facility itself one month ahead of the promised time. Today's (Thursday) announcement to discontinue use of old Rs 500 notes in petrol pumps and airline ticket booking marks the latest.

Once again, former prime minister, Manmohan Singh's comment in Parliament on demonetisation implementation becomes relevant. "It is no good that everyday the banking system comes with modification of the rules, the conditions under which the people can withdraw money. That reflects very poorly on the Prime Minister's office, on the Finance Minister's office and on the Reserve Bank of India. I am very sorry that the Reserve Bank of India has been exposed to this sort of criticism which I think is fully justified.”

The short point here is flip-flops in rules by the government do not augur well for the two main stakeholders in this gigantic exercise---the government itself and the common man. It breaks the trust element and give rise to suspicion. The government should refrain from such adventures, especially given the persisting cash crunch on the ground.

Updated Date: Dec 01, 2016 15:03 PM

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