Cash Chaos

The abrupt decision of the  Government of India to cancel cash notes of Rs 500 and Rs 1000 has caught the people unawares in general. For the last few days, customers have been standing in long queues in front of their respective banks in order to deposit their stocks of rupee notes in their respective accounts. But they can withdraw only a small, sometimes a tiny, fraction of the money deposited although the deposited money was meant for meeting their expenses in the immediate future. After depositing thirty thousand rupees, one can withdraw five hundred or one thousand or at most two thousand rupees. Most ATMs at the time of writing, across the country are defunct. The explanation is that banks have not been provided with enough liquid cash to cope with the vacuum created by the government's decision and that resumption of the ATM activities requires some time-consuming technical restructuring. Various sorts of brokers have jumped in to take advantage of the situation. From the very moment after the announcement of withdrawal of these higher denomination notes, they are exchanging these notes for handsome commissions. One can exchange a thousand rupee note for eight hundred rupee notes, and the difference goes to the broker as commissions. The Union Finance Minister, having shed crocodile tears, has exhorted the countrymen to keep patience, forgetting that to a person who is in urgent need of money for the medical treatment of his son or daughter, such exhortations are practically useless.

The attempt of Narendra Modi and his men to project this decision as a drive against corruption is hardly credible. Scams like loot of natural gas from the K G basin, Vyapam, fraudulent pre-poll talks about bringing back ill-gotten money in foreign banks (such talks are no longer heard)—all these testify to the corrupt nature of this government, wish has been seated in power with the support of big players in the economy. It is intriguing that the billionaires (in terms of US dollars) of the country have not expressed any disapproval of Modi's decision. The obvious reason is that they scarcely transact their business in 500 or 1000 rupee notes. Of course, some persons accustomed to under reporting their incomes, e.g. bribe-loving bureaucrats, politicians and policemen, professional men like some doctors and lawyers, middle-ranking businessmen etc, may suffer temporarily. But these men too do not usually keep their wealth in liquid money. Yet they may suffer some temporary losses, but they are certain to go back to their usual mode of functioning after the present chaos is over and the circulation of new notes comes to be stabilised. Hence the decision of the Modi-Jaitley combine is more a political ploy than the reflection of a genuine desire for currency reforms.

Now opposition parties are claiming that news of demonetisation of old higher-currency notes of rupees 500 and 1000 was leaked to selected ones in the ruling BJP with media-reports indicating that heavy cash-deposits were made in bank-account of West Bengal unit of BJP. Election Commission may direct all political parties to put date-wise cash deposits in banks by them say from 01.04.2016 on website mentioning bank-details including account numbers. No, that is not going to happen. Nor are opposition parties, interested in it.

Presently just 20-percent disclosure of contributions made to political parties is made public where contributions below rupees 20000 not being disclosed, with some ultra-rich political parties claiming not having received any one-time amount more than rupees 20000. This limit of non-disclosure should be reduced from present rupees 20000 to rupees 4000.

Despite the swan song of steady growth-induced development, Indian economy is in a mess. As Modis cannot get rid of bad debt due to favour shown to Indian big business houses, they are now trying to coercing ordinary people, wage earners, labourers and middle and lower-middle class people to tighten their belts. This demonetisation gamble may boomerang. BJP's electoral fortunes, in the immediate future particularly in Uttar Pradesh don’t look bright.

12-11-2016

Frontier
Vol. 49, No.21, Nov 27 - Dec 3, 2016