Demonetisation decision was a blunder: Ex-Maharashtra CM Prithviraj Chavan tells Firstpost

Nagpur: On the third day of the Winter Session of the Maharashtra Assembly in Nagpur, the 29-day-old process of demonetisation made its appearance. It was on 8 November that Prime Minister Narendra Modi announced that notes of the Rs 500 and Rs 1,000 denominations would no longer be considered legal tender. Subsequently, new Rs 2,000 and Rs 500 notes were infused into the system.

Speaking with Firstpost, former chief minister and former minister of state of the PMO, Prithviraj Chavan launched a scathing attack on the decision taken by the Modi government. “Claiming that this move is aimed at curbing corruption and putting an end to black money is election jumla by the prime minister. The decision to demonetise was taken with one eye on the upcoming elections in Uttar Pradesh and Punjab,” said Chavan.

While only six percent of black money is in currency notes, the rest of it — 94 percent — comprises investment in real estate, gold, shares and other things. “So in trying to stamp out the six percent of black money that is in currency notes, this demonetisation move has caused a headache for more than 100 crore citizens of India. The decision was a blunder and it will effect our rural economy,” said the former chief minister.

He claimed that the decision was taken in a hurry, without preparation or homework. “Nobody knew of the difficulties when the decision was made. In order to control black money, the implementation is non-existent and and now, we are taking the economy cashless?” asked Chavan, adding, “This too will fail in the future.”

“Many millionaires keep their black money overseas. But the Modi government is not doing anything about this money. It is only focussed on the six percent of black money found in currency notes in India,” he said, “But, the interesting thing is that in the past 29 days after demonetisation, more than 90 percent of Rs 17 lakh crore is back in banks. Was all of this black money?”

Chavan went on to say that nobody knows the reality of black money. “The ruling party MLAs and MPs are also unhappy with this decision, but nobody dares to oppose the decision or the hurried manner in which it was announced,” he said, “After the decision, every citizen of the country believed that Modi would wipe away the scourge of black money from this country. But the prime minister breached the confidence. Will he (Modi) now announce that the elections in Uttar Pradesh and Punjab will be conducted with credit cards, debit card and cheques? There will be no money transactions in these election. So what’s the benefit of demonetisation?”

Suggesting that the former RBI governor Raghuram Rajan opposed the decision, the senior Congress leader said, “Rajan had clearly said that scrapping Rs 500 notes was not possible in the current system. clearly told that to scrap Rs. 500 notes is not possible in the current system. Countries like Myanmar, the erstwhile USSR and North Korea suffered due to demonetisation as we have all seen.”

At the same time, Chavan has demanded that Maharashtra chief minister Devendra Fadnavis push for the withdrawal of Rs 2,000 notes. He also appealed to the chief minister to discuss the issue of withdrawing such a high-value denomination.

“This (demonetisation) will hurt the Indian economy, particularly the rural economy,” noted Chavan, “As per my information, the RBI is not ready for a quick process of demonetisation. They want two months to print new Rs 500 notes. And if you look at the dates for when the Code of Conduct begins for the Uttar Pradesh and Punjab elections — likely to be announced on 15 January, 2017 — it becomes clear that the decision by Modi was completely political in nature.”

On the topic of going cashless and e-wallets, the former chief minister called it a good idea. However, he asked, “Do we have internet connections and WiFi systems in rural areas? Did nationalised or private banks reached the last villages in the state? How can we provide more than 12,000 villages the service? In countries like the US and Kenya, cash transactions are quickly growing in volume. This idea to go cashless will be a big failure like demonetisation if e-wallets are promoted without adequate preparation.”

Chavan went on to state that he didn’t understand why District Cooperative Banks (DCB) are not being allowed to function the basic duty of a bank. “If Finance Minister Arun Jaitley has intelligence on money laundering by DCBs, then the licence must be cancelled. Jaitley cannot take arbitrary decisions,” said the former chief minister, “Eighty percent of rural transactions have been stopped. The Bhiwandi and Malegaon power loom sectors have totally shut down. The labour of this section is dependent on daily cash transactions. So who is responsible for the whole mess in the state and country?”

“Earlier, we were talking about going corruption-free, then black money-free and a month later, we are going cash-free. This is a complete blunder as I see it,” the former chief minister signed off.