It has not just been amusing but almost comical to watch (and read) ardent, staunch fans of Narendra Modi (hereinafter referred to as Modi-Toadies, courtesy Salman Rushdie) recklessly come up with one nonsensical argument after the other to somehow try and justify their supreme leader’s demonetisation faux pas (which he imposed on a hapless nation on the 8th of November), in the wake of the incriminating data contained in the recently released annual report of the Reserve Bank of India. With the RBI announcing that 99% of the banned notes came back, it has become patently evident that demonetisation was at best a myopic, unimaginative, ill-conceived and pathetically executed idea that hardly looks like a well thought out policy, but instead reeks of the handiwork of some illiterate, ignorant cheapjack forger! Demonization achieved none of the objectives set out by the Modi government, not just on November 8th, but almost every other day till the 31st of December, as it regularly kept shifting goal posts, from black money to counterfeit currency to terror funding to cashless economy to less cash economy, and so on.
More than a hundred people lost their lives and the lives of millions across the country were thrown into disarray. Mr Venkiah Naidu’s insensitive response in parliament, comparing the people’s hardship to child birth, and saying, “once the child is born, the mother's happiness knows no bound," epitomised the sheer mindlessness and lack of understanding of the situation on the part of the government. Somebody should have told Mr Naidu that to the loved ones of those who lost their lives, the pain can never be temporary, that their loss is permanent, and that he was one among the perpetrators of such a gross violation of their fundamental right to live. Meanwhile, the prime minister, who set out on a trip to Japan (as is his wont) was seen joking about how people did not have money to conduct their daughters’ weddings, or to arrange for their mothers’ funerals (in front of an appreciative group of as-insensitive-as-their-messiah Modi-toadies). Just as you were about to think how a head of state can be so cold-hearted and inconsiderate, lo and behold, you see him standing on a podium in Goa, screaming at the top of his voice and gesticulating and sobbing, asking the people of India to give him just 50 days to weed out ill-gotten wealth in the country (that, by the way, was the first change of goal post; at the time of his initial announcement, he had said everything would be back to normal in a matter of a week or two at best).
It has been almost ten months since the Rs 1000 and Rs 500 notes were banned (which constituted a whopping 86% of the total cash in circulation) by the Narendra Modi government, the news of which was announced to the people of India by the man himself, over national television. So where do we stand now in terms of black money and terror funding and cashless economy et al? Statistics show that none, not one, of the objectives set out by the government has been met. It turns out that the fears expressed by most economists (people who have studied the stuff and hold genuine degrees) including the likes of Amartya Sen, Arun Kumar, Jean Drèze, Thomas Isaac, and Manmohan Singh, immediately following Modi’s initial announcement, that this is going to be a colossal failure and that it is going to hurt a booming economy and pull it backwards have come true. Manmohan even went to the extent of calling it organised loot and “legalised plunder of the economy” on the floor of the house, and he warned that it will bring down India's GDP growth by a massive two percentage points. The GDP figures announced for the latest quarter have proved him right, with it clocking a three-year low of 5.7%. Mr Arun Kumar had, in fact, warned that this is going to be a futile exercise and that “the scheme was imposed on the country with little or no forethought”. He said that “it must be understood that the black money the government was targeting is only about 1% of the black wealth held in the country and only 3.5% of the black income generated in 2016”. He went on to say that even if all the black cash in circulation was sucked out somehow, the effect on the black economy would be minimal, and that “80% of the currency in 1000- and 500-rupee notes in circulation was not black money, but rather white money used by businesses and citizens”. With 99% of the invalidated currency coming back, his warnings have proved prophetic. Prof Sen called demonetisation a “gigantic mistake” and Mr Drèze said, “demonetisation in a booming economy is like shooting at the tyres of a racing car.” Kerala’s finance minister, Mr Thomas Isaac said it was an “insane decision.”
Modi chose to take a dig at the economists and their educational qualifications (his own being a bit iffy) by indulging some vulgar punning, saying that “hard work is better than Harvard”. But with the economy choosing to take a nosedive, he had to do something in terms of damage control. And what does he do; he chooses the Independence Day address to the nation from the ramparts of the Red Fort to lie to the nation again, saying that Rs.3 lakh crores of black money had come back to the banking system. This was in direct contradiction to the statements made by Mr Arun Jaitley and his underling, Mr Santosh Gangwar, in the period between December 2016 and August 1, 2017. Subsequently, the data released by the RBI, India’s central bank, showed that it had received notes worth Rs 15.28 lakh crore (notes worth Rs 15.45 lakh crore was rendered invalid by demonetisation!)
Mr Arun Jaitley came up with a risible new explanation. He said that the objective of the exercise had not been confiscation, but the “formalisation of the economy, attack on black money, less-cash economy, bigger tax base, digitisation, a blow to terrorism.” Sounds pretty cool, but none of these have been achieved either! While the “attack on black money” bit now sounds more like a joke, although there was a jump in digital transactions during the period of the cash crunch, this has since come down drastically after banks have been re-monetized. Whereas, according to the individual income tax returns data (e-filing) from the Income Tax Department’s records, the number of filings increased from 43.3 million to 52.9 million between financial years 2016 and 2017. This is not significantly more than what was achieved between financial years 2015 and 2016. As for it curbing terror funding, the available data shows a different picture. According to the South Asia Terrorism Portal (www.satp.org), the comparison of data from 10 months before the notes ban (January through November 2016) and the 10 months after shows a 38% rise in the number of terrorist incidents in Jammu and Kashmir. The number of security personnel killed has risen by 2%. In naxal-affected states, terror incidents are down 45% but the number of security personnel killed is up by a whopping 82%. Again, the claim that demonetisation was used to reduce cash (and thereby curb corruption!) looks all set to go out of the window when you look at the three-month average pace at which cash is re-entering the system, and the levels of cash in circulation should be almost back to pre-demonetisation levels in two to three months.
The argument that the Modi-toadies cling on to desperately is that the people accepted demonetisation and that is why the BJP won in elections that were held post demonetisation. The fact remains that policy decisions that deal with the economy cannot be evaluated on the sentiments of the electorate. Moreover, elections took place in five states, and, as Mr P Chidambaram pointed out, if the BJP’s win in Uttar Pradesh proves that people have accepted demonetisation, what does its electoral losses in Punjab, and Goa and Assam (where they came second) prove? However hard Modi-toadies (or Modi and his toadies) try to justify this utterly brainless move and try to hoodwink people, every argument will bring them back to where they are, holding an empty sack. Demonetisation has been an abject failure as a policy and it is becoming increasingly evident that the mastermind behind such an ill-judged, myopic and vacuous policy is not someone well-versed or qualified in economics, but it has the fingerprints of someone who believes that he studied 'Entire Political Science' all over it!