Indian Prime Minister Narendra Modi, in a televised speech to the nation at 8 pm on November 8 announced his government’s decision to withdraw Rs500 (Dh27.1) and Rs1,000 bank notes from circulation at a mere four hours’ notice creating paranoia and trepidation among millions of its citizens.
The arguments offered for this move was that it would hurt at the very core of “black money” — a colloquial term for ill-gotten wealth — and that it would also cripple the counterfeiting industry that is believed to be funding a terror organisation.
If this is a war, the obvious casualties of any war are usually the poor and the passive. The worst hit are the daily wage-earners, labourers and domestic workers who get their means of sustenance, self-respect, mobility and security from possessing petty cash in hand. A series of news reports in the last 72-hours originating from various parts of India have already pointed out to the trials this population is undergoing and which is often being cheated while exchanging their hard earned money.
This demonetisation has already led to the killing of one farmer who committed suicide in fear of losing all his savings. Two elderly men have died while standing at the unending queues at banks trying to exchange their money. It seems the bullet of demonetisation has missed its target by a long shot.
There is a societal understanding which sounds more like a fable that the rich and the corrupt use higher denominations to stash away “black money” underneath mattresses, pillow cases and trunks buried under the earth. It is believed that this move will force people to unearth the same and while exchanging large amounts of old notes for the new legal tender would make the banks suspicious which in turn would convey their suspicions to the tax authorities. Banks have been asked to report any cash deposits over Rs 250,000. “Black money” would thus get exposed, and this would discourage others from hoarding the same in the future.
However, the corrupt who mostly consist of politicians, bureaucrats and their intermediaries who call themselves businessmen or often consultants that also form the core of the government are no fools. In this world of creative ‘investment banking’ consisting of various instruments originating out of various offshore tax-havens which play footsie in bourses across continents, little will be achieved.
Bombastic figures
Many applauded the move calling it a “surgical strike” on tax evaders and a continuation of the ongoing war on terror. Within the confines of the government’s echo chamber, which includes the social media, bombastic figures are being circulated as to the quantum of “black money” in the country and how in one move Modi has eradicated it which will also help regenerate investments within the country in a short period of time. It will be good to remind my readers that these are gross assumptions by individuals who claim to have insider information on any topic “that the nation wants to know” about. In reality, no one can exactly estimate the figure since majority of the money is widely believed to have been sent abroad.
As per the data given by the Reserve Bank of India (RBI) the total amount of cash in circulation in the country is equivalent to $255 billion (Dh935.9 billion), of which 86 per cent of the money is in denominations of Rs500 and Rs1,000. It means that the millions of uneducated and disfranchised people also own those denominations which has given rise to this kind of uncertainty, chaos and mistrust over the currency all over the country. Government also believes that this process will lead to a sharp fall in inflation and property prices which is the biggest exhibition of ill-gotten money in India. In truth, the prices of commodities may fall for a few days due to a lack of consumers as they are all cash-strapped. Property prices will continue to hold at abysmal rates mostly due to high land prices.
Some of these economic conjunctions could have worked if the government had altogether abolished the higher denominations and had not reintroduced Rs500 and Rs2,000 denominations which also reflects the high inflationary trend. In all developed countries, the highest denomination in circulation is not above 100 while countries that suffer from corruption have denominations as high as 10,000.
The government will soon realise that demonetisation as a means of eradicating the menace of “black money” though tried and tested earlier, has never been a foolproof success. It will only result in loss for the Bharatiya Janata Party at the upcoming state elections as the poor and the marginalised who voted for Modi believing in the message of Acche Din (good days) are now being heckled and pilloried while the rich find new innovative ways to siphon off their ill-gotten wealth.
Archisman Dinda is a journalist based in Kolkata, India.
