Mainstream, VOL LIV No 49 New Delhi November 26, 2016
Real Danger and Basic Question Today
Monday 28 November 2016, by
The economic dislocation caused across the country following the Modi Government’s thoughtless measure of pulling the high-denomination Rs 1000 and Rs 500 notes out of circulation continues to adversely affect millions of our citizens.
The total currency in circulation throughout India is Rs 16 lakhs crores. The notes taken out of circulation amount to Rs 14.5 lakhs crores. This meant 85 per cent of the total currency was rendered useless over-night. The ostensible reason for the step, according to the government’s public declaration, was to curb the proliferating black economy—an objective which none of the opponents of the move has objected to. But the point is that this step will only affect a small proportion of the black economy. As retired Professor of Economics at the Jawaharlal Nehru University, Arun Kumar, an authority on black economy in the country [and author of the book, The Black Economy in India, published by Penguin (India)], has pertinently asked, “Is it necessary to punish all to tackle the three per cent who generate the big black income?”
The government at the Centre is on an over- drive. Today’s newspapers have highlighted the results of a survey on the Narendra Modi App, a link tweeted by the PM—in 24 hours five lakhs participated in the survey that showed 90 per cent support the demone-tisation of Rs 500, Rs 1000 notes.
However, this is only the government’s publicity stunt. The reality is reflected in Parliament: in both Houses the Opposition parties have united against the demonetisation move. And at least two CMs—those of West Bengal and Delhi—are in the forefront of the battle to reverse the government’s decision. As for Parliament, the PM’s initial moves to ignore both the Houses naturally incensed the Opposition which wanted him to be present during discussion on the demonetisation issue; but there was no sign of him.
Eventually he came to the Upper House this morning and the Opposition decided to participate in the debate on the subject. The first speaker was former PM Dr Manmohan Singh and he described the implementation of demonetisation as a “monu-mental mismanagement” which could bring down India’s economic growth rate by two percentage points. Uncharacteristically he said deaths of several people following demonetisation and distress among the poor, farmers and small traders had convinced him that the demonetisation project had led to “legalised loot and organised plunder”, adding: “Already 60 to 65 people have lost their lives, possibly more. This move will weaken and erode the people’s confidence in our economy and banking system.” Replying to those who had said the project would help the country and people in the long run, he quoted John Keynes to assert that “in the long run all of us are dead”.
Effective Opposition speakers Derek O’brien (TMC) and Naresh Aggarwal (SP) also put the govern-ment on the mat.
However, the PM was absent in the House after the lunch recess. So it was quite legitimate for the Opposition to express resentment over the PM‘s behaviour and they could not be satisfied by the Leader of the House’s assurance that he would return to the House. So the House was finally adjourned. And Arun Jaitley, the Finance Minister, then went into the political mode accusing Manmohan of having presided over a dispensation which saw the maximum generation of black money.
Let the reality be understood in full: the PM’s measure was not actually intended to tackle black money. As Prof Arun Kumar has shown, black money cannot be tackled in this way. Moreover other eminent economists and bankers had warned him against demonetisation which, they felt, could lead to disaster. The PM’s sole aim was to place the BJP’s opponents in UP—the Congress, SP and BSP (which, according to him, were the principal beneficiaries of black money) —in trouble with the electoral prospects in mind.
Urban India is definitely feeling the pinch of demonetisation. But that is only one part of the problem. As the Minister for Agriculture in West Bengal explained the other day, if the present economic dislocation continues till December 15, the rural populace and agriculture will be most hard pressed and we shall be facing a famine-like situation.
That is the real danger which we cannot, under any pretext, overlook. But who is responsible for this state of affairs? That is the basic question today, the sixteenth day after the PM’s momentous announcement.
November 24 S.C.