Demonetisation has embassies unhappy; Modi government must take stock of diplomats' woes

Prime Minister Narendra Modi announced on 8 November that his government has rendered Rs 500 and Rs 1,000 notes as illegal, citing the drive as an effective solution for an economy riddled with black money, counterfeit currency, and to counter terrorism. Many didn’t know what to make of it, some called it a “masterstroke”, others a “foolish idea”. As the days pass on his 50-day waiting period, and economists, policy watchers have had time to reflect on the demonetisation move, the side-effects are becoming more apparent. How will demonetisation affect foreign policy? A recent PTI report claimed that the demonetisation move is taking a toll on Indian diplomacy because Russia lodged a “strong protest over cash shortage affecting the functioning of its embassy in Delhi and threatening retaliatory action.” [caption id=“attachment_3102330” align=“alignleft” width=“380”]  Representational image. PTI[/caption] Before we give into theatrical imaginations, a “retaliatory action” would be that the issue will be escalated to Moscow and the Indian ambassador in Russia will be called in. What seems to be the issue, you ask? There has been a restriction on withdrawal imposed on embassies for about Rs 50,000 per week. Russian ambassador Alexander Kadakin wrote to the Ministry of External Affairs that such an amount “totally inadequate as regards (to) the embassy’s salary and operational expenditure requirements.” The official quoted in the PTI report also suggested that other retaliatory options would include putting a similar restriction on cash withdrawals for Indian diplomats posted in Russia. Russia, however, is not the only country expressing its frustration with demonetisation — not so much with the move, but with the withdrawal restrictions. According to The Times of India, Hans Dannenberg Castellanos from the Dominican Republic, ambassadors of Pakistan, Sri Lanka and Ethiopia have also sent letters to the MEA. “The worst hit are Nepal and Bhutan where Indian currency is a legal tender,” says the report. The disgruntled diplomat group, led by Russia is hoping for increased ceiling for withdrawals, dedicated bank windows in bank branches and removal of cash curbs for foreign visitors. The government, according to a report in _Business Standar_d, has set up an “inter-ministerial task force” to ease the problems of diplomats. Now, the most obvious impact that one can ascertain from the way things are going is that this hurts the goodwill between nations, at a very individual level. The Narendra Modi government has maintained the necessary optics in terms of foreign policy and diplomacy. As argued in this _Firstpost_ piece , foreign policy has been the most visible dimension of this government’s term so far. But the government’s negligence in taking care of the growing dissatisfaction and negative impact of demonetisation on embassies and for diplomats will mar the good reputation that India has built so far. The BJP government has prided itself on turning the focus of its international efforts towards India’s neighbours — the “neighbourhood first policy” might get off course as countries like Myanmar, Bangladesh, Bhutan, Sri Lanka and Nepal — where the Indian rupee is a legal tender and use of which is actually encouraged. Handshakes, press conferences, signed MoUs, photo-ops are all great, but if the people working behind the scenes — foreign bureaucrats, diplomats and embassy workers — are unhappy, the shiniest jewel in the BJP crown could lose some of its sparkle.