From cash to cashless society

Madhusudhana Rao S

Former Prime Minister Dr Manmohan Singh who rarely opened his mouth during his tenure as head of the UPA governments twice had earned a dubious distinction of speaking for 7 minutes in Rajya Sabha on Thursday. Though he spoke in his characteristic monotone, Dr Singh put enough ammunition in his words to blast his successor Narendra Modi on demonetization. In his scathing attack, he used two expressions that no opposition leader has dared to say so far to denounce Modi’s decision to ban Rs 500 and Rs 1000 notes a fortnight ago.

Dr Singh, widely regarded as the father of India’s liberalization programme in the 1990s, called the demonetization ‘a monumental mismanagement’ and forecast a 2 percentage point fall in GDP. But he went beyond moderate criticism and warning by saying “it is organized loot and legalized plunder.” Since he is an economist and has held several important positions related to finance and economy in India and abroad, surely, he knew what he was talking about. In contrast, Modi is not an economist, not even a bureaucrat. He is a politician to the core and his decisions invariably will have a bearing on his party’s future course.

Modi, in his address to the nation, on November 8, told the people that he wanted to exorcise the ghost of black money and put an end to corruption and fake currency notes that are being used to fund terror operations in the country. To realize the three objectives, Modi invoked the magic formula of demonetization. In a timeframe, setting deadlines to exchange old 500 and 1000 notes and introducing a new denomination of Rs 2000 notes, the Modi government managed to suck in lakhs of crores of unaccounted for money from the hands of people. In the first few days, there was chaos as the people rushed to banks and post offices to swap their old notes, to deposit money in their accounts and draw some amount in new notes from their accounts, with restrictions on all transactions.

Thus the ban on two high denominations of currency has vacuumed money from the market in a matter of days, resulting in an acute cash crunch. People were forced to spend less even on essentials. Liquidity crisis has hit everyone, from a roadside vendor to a realtor, corner grocer to hair cutter, commuter to flier, small and medium industrialist to big manufacturer. The impact is perceptible. The agony of the people and the hardships of poor and rural population are visible. Scores of people are reported to have committed suicide or lost their lives standing in queues or due to mere exhaustion of collecting money from banks for their daily needs. Calling it ‘financial emergency,’ Opposition parties have launched verbal tirades in Parliament and outside of it against the Prime Minister to roll back his decision. For nearly a week, opposition protests spearheaded by Congress have stalled the proceedings of both Houses of Parliament. The winter session is proving to be a repeat of earlier sessions that would witness the decibel power of honourable members’ vocal chords. 

The crucial question, however, is whether Modi is justified in his ‘monetary surgical strike.’ His adversaries like West Bengal Chief Minister Mamata Banerjee and her counterpart in Delhi Arvind Kejrival and Congress vice-president Rahul Gandhi went at it hammer and tongs, followed by leftists and others. Even the Prime Minister’s decision has been challenged in the Supreme Court and in various regional courts to mount a legal challenge. It looks anti-Modi forces have unleashed an all-out war against him to prove his decision is ‘unconstitutional,’ anti-people and politically-motivated with an eye on Uttar Pradesh State Assembly elections.

While we leave the legality of the issue to the highest court of the land to decide, the second one on which the opposition parties have united is worth looking at. Their vehement protests are based on the premise that the common is suffering by standing in long lines for hours in front of banks, ATMs and post offices; small change and even hundred rupee notes have disappeared from the market; poor people are starving because daily wage workers are not getting their payments; vendors and small shop keepers have lost business as there is no money in the consumers’ pockets; marriages could not be celebrated in the usual style as high denomination notes kept at home became worthless overnight; office goers have to take leave to draw their own money from their savings accounts; even if they get some money it will be in Rs2,000 denomination that none would like to accept it for fear of losing change etc. Dr Manmohan Singh’s succinct remark in the Rajya Sabha on Thursday sums up all the hassles: This is the only country where people can’t draw their own money from banks.

All this is true. But do all these justify a rollback of demonetization? When it is done with a purpose, why blame the measure instead of its implementation? That’s exactly what the opposition is doing. Even if we don’t trust the surveys that have given an overwhelming support to the demonetization and dismiss BJP’s victory in by-elections held after Modi’s announcement as a flash in the pan, ordinary people do believe that what Modi’s attempt to flush out black money and end corruption is worth a try. After all, at one point or the other, a leader worth his salt has to say enough is enough and let’s do something. Surely, it will hurt, in this case, those sitting on mountains of illegally-gotten wealth. Who are these people? We need not go to great lengths to seek an answer. Their wealth is manifest in the palatial buildings, weddings, real estates, five-star lifestyles, political power, among many other things.

It is estimated that one-third of Indian economy runs on black money which is nothing but cash transactions. The wealth acquired through various ways and illegal means is concealed and protected and used to live like a king. There are many ‘kings’ in this country who are sitting on heaps of uncounted and unaccounted money. When they have failed to disclose and return the tainted money and if a stick is used to flush it out, is it ‘an organized loot and legalized plunder’?

We need to know. If it is, what other measures could have possibly got the money out? Dr Manmohan Singh is a learned man. He is also aware of the black money that has been plaguing the country. And, the scandals and scams that rocked his tenure. Still, he likened to describe Modi’s move as looting and plunder. Did he mean it or parroting his master’s voice, one wonders.

This is in no way giving a clean chit to Modi. He said he had been working on it close to 10 months and only a handful of people knew about it. That means it was a solo decision. While secrecy is utmost important in such operations, he can’t escape the culpability of causing considerable hardships to the common man and liquidity problems in the market. Without disclosing his cards, Modi could have averted the cash crunch by anticipating the present crisis. This would have been possible had he taken financial experts into confidence. If ego had taken the better of him, he would have learnt a lesson by now, especially in matters that concern the national economy.

The bitter truth or the fact is, this country runs on cash, legal or illegal. For a majority of people cash in hand is safer than that in bank. This culture is slowly changing, thanks to credit/ debit cards and e-money payment options. It’s wishful thinking that in a few months’ time, the diehard habit of carrying cash from a few hundreds to crores will disappear. As long as cash is considered the king of money, transformation from a cash society to cashless society like in the West is impossible. Black money and corruption go hand in hand and they thrive whatever measures the government contemplates. The scourge can only be checked, not curbed and rooted out.

The need of the hour is, as the first step has been taken, the government, the opposition and the people have to find a common ground to work towards achieving the objectives without politicizing and attributing motives to the issue. The sooner it is done the better for the country and the common man for whom the opposition parties are claiming to be fighting for.

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