Dr Mohammad Manzoor Alam
At the outset, it must be asserted that monetary and financial policies are made for the people, and people are not made for such policies. This basic principle seems to have been stood on its head in the present conundrum of ill-considered and ill-advised demonitisation of Rs. 1,000 and Rs 500 currency notes.
A hundred people have died, their deaths directly attributed to this sudden denial of access to their hard-earned money. For most Indians it has been like a bolt from the blue. The wholesale markets are virtually closed as most of the transactions are made in cash, which is scarce. In turn, it has led to the termination of hundreds of thousands of daily wage earners’ jobs.
The same holds good for huge armies of workers at construction sites where the workers are paid in cash on a daily basis. Markets across different trades have come to a standstill. People suddenly are forced to deposit their hard-earned life savings in banks under the orders of the government that they do not trust with their money. Because of the unpredictability of the government, over the last one year people had withdrawn a sizeable part of their deposits from banks, thus hugely increasing the volume of money in circulation, that is, money that is in people’s pockets. Theoretically, such a situation fuels inflation.
One of the rather obvious “reasons” behind the government’s rash and unprecedented step could have been to force people to deposit their money in banks. However, it was a legally questionable and morally indefensible act on the part of the government. Nobody has the right to confiscate people’s wealth in the name of “black money”. People’s hard-earned and saved (saving involves great sacrifice and deferment of immediate needs) money is not black money.
The people had taken part of their money out of banks exactly for the same reasons as the sudden demonetisation. People did not trust the government because it had suddenly introduced and enforced rules like the registration of PAN on purchases of jewellery, gold and withdrawal of cash above a certain limit. People feared a corrupt tax bureaucracy and tax laws that are manipulated by the rich, but hurt the average person.
Citizens are forced to stand in long serpentine queues outside banks and ATMs. After hours of standing in queue they are curtly told that there is no money left to give them and they have to return home empty handed. Several have dropped dead in the queue. Many have committed suicide. Often respectable citizens have been mercilessly beaten up and humiliated while trying to get a small part of their savings out of the bank. A soldier of the Indian army was beaten up so severely that the sturdy lathi of the policeman broke. This for the lip service of RSS-BJP to India’s armed forces.
It is important to remember that out of the Rs. 18 lakh crore in circulation, 85 percent were in Rs 1,000 and Rs 500 denomination. With the withdrawal of these notes only 15 percent of the money was left in circulation, this causing unprecedented hardships to people. Most of the informal sector jobs have been wiped out and the rest are threatened. Up to 40 percent of the salaried jobs in the formal sector can be eliminated.
In demonitisation, currency notes are not suddenly cancelled but new currency notes are gradually introduced in the system, and as gradually, older notes are withheld by the Reserve Bank. This is an unprecedented move that has dented India’s financial credibility in the world markets and deterred investment. Rahul Gandhi has said this could be a great scandal.
Manmohan Singh, an economist of world class, an economist whose opinion President Obama said publicly, he sought and valued. Dr Singh told Parliament that this move of the government was an “organised loot”. He warned that it could cut economic growth by as much as two percent, a prospect that is no less than a calamity.
There was little money in the system except the Rs 1,000 and Rs 500 notes that the people have been unfairly forced to deposit in banks. As currency notes are printed with imported technology and material there is no hope for relief for people for months. Until the money supply is normalised, there is going to be no respite.
It is by now clear that the announcement made by the Prime Minister about this move was falsely claimed to be made in the TV studio. It was a pre-recorded announcement sent to the Doordarshan which telecast it after editing. As the DD knew in advance, BJP-RSS too knew it much before the public did. Accordingly, they acted in advance to protect themselves from its effect.
In a transparently dishonest bid the BJP government has tried to put Samajwadi Party, Bahujan Samaj Party and Congress Party at an economic disadvantage in coming UP elections. In Punjab also, it has put Akali Dal and Congress at a disadvantage in terms of depleted election funds. By wiping out 85 percent of the money it has tried to starve these parties of election funds, while it has dishonestly used its power to whitewash its own funds. However, ultimately this cheating may not work as the people know about it.
There is a general sense of helplessness, betrayal and humiliation among the people, not only among those who have been turned back from banks after hours of standing in a queue or those who are beaten up by the police for no fault of their own, but among all sections of people because every Union minister, right from the PM downwards, has repeatedly called their years of earning with the sweat of their brow, “black money.” It is people’s own money, not black money, that the government has virtually confiscated.
The government has repeatedly lied to the nation. It announced that the Reserve Bank had enough money to pay everyone, while the fact is that the Reserve Bank is not going to have enough money for months. When parents of young girls preparing to get married in weeks and months began to break down, the government falsely announced that parents of girls who had fixed their marriages could withdraw Rs 5 lakh from their bank accounts. The next day it was cut down to half, i.e., Rs 2.5 lakh. After that, when the parents went to bank to withdraw Rs 2.5 lakh from their accounts they were flatly told that the banks had not been notified and they could not get more than normal withdrawal, which for cooperative banks, had been reduced from Rs 10,000 to Rs 2,000. The same limit was set for ATMs. Only the major banks had an Rs 24,000 limit.
This led to more deaths from sudden heart failures and suicides. Instead of words of sympathy a Union minister said there was nothing unusual in such deaths as 25,000 people died everyday in India.
Enough is enough. As with imported material and technology the government cannot hope to restore money supply in less than several months it has no way of restoring the country’s economic health without rolling back its ill-thought out policy. It must act now and ease the common Indian citizen’s unnecessary harassment and humiliation.