Demonetization: The essential objectives

[Disclaimer: All the views expressed in here are personal and do not reflect the opinion or the position of the organization that the author works for.] 

It is becoming evident from the long lines at ATMs across India, and the troubles faced by the farmers and small-time traders, that the implementation of the demonitization initiative has been quite poor.  Clearly, it could have been planned better and executed better.  As Supreme Court of India warned, if things don’t improve, we could see riots in this country.

But the poor implementation is not good enough reason to conclude that this exercise will not achieve its objectives.

So what are those objectives? 

Unlike most people in India, including those who actually introduced this initiative – namely the Prime Minister and his team, I don’t have unrealistic expectations from the current initiative of denotification of the existing 500 and 1000 rupee notes.  

According to me, the objective of this exercise is not that much about curbing counterfeit money, nor about trying to ‘get out’ the black money from their hideouts.  Yes, the introduction of new currency notes would obviate the problem of counterfeit notes, but only for a while, because if the enemy is insistent on copying and releasing even the new notes, they could do so, given some amount of time.  And, unlike what most people hope, there is no need for black money to be deposited into the banks.  If that money cease to exist, it is good enough.  The shortfall in circulation or non-existence of the black money is good enough for the Government to infuse more printed notes, thereby giving itself a fillip in public spending on infrastructure projects. 

Demonitization: Will it work?

I hear lot of criticism launched against Demonitization.  I cite some of them here.

‘Poor people are suffering’

‘It is the common man who is hurt.  Look at the long lines at each ATM.  They are standing there for hours’.

And yet the narrative is not as simple as it sounds.  When these people standing in line at ATM are asked if they are facing trouble, almost all of them say, ‘Yes’.  But when asked if this move is good, they all say, ‘Yes’.  Then they add, ‘This is an inconvenience, but in the larger good, this is OK.  On the whole, we support this initiative from Prime Minister Modi’.

So, it all depends on what part of narrative you want to hear.  If you hear only the first part, it does clearly say that people are inconvenienced to a great extent.  But if you hear the second part, common man endorses Modi’s demonitization. 

Did Government bungle up its implementation?

Yes. 

First, it did not prepare itself with enough new rupee notes it wanted to introduce.   It should have had enough stock with it before announcing the demonitization of old notes.   The paucity of new notes is creating lot of trouble to many businesses, including the common man.

Second.  Why did they not create 500 and 2000 rupee notes the same size as old 500 and 1000 rupee note? That would not have required the calibration of ATMs which is currently underway, and is causing the impediment in delivering cash to people.

It definitely looks like Indian economy has come to a standstill.  However, given few more days, with more new notes brought into circulation, the problem of paucity of notes will fade away and normalcy will be restored.  

Demonetization: Defining moment in Indian History

I am not a Modi-Bhakt. In fact, I have been a big critic of Narendra Modi, when it comes to his tolerance of religious intolerance in this country.  And yet, today I stand in support of his historic decision to invalidate the legal tender for the existing 500 and 1000 rupee notes that are in circulation.

Those who meet me usually ask me for a solution to some of the problems that we face in India, probably because I tend to maintain the attitude that I do have a solution to such problems ;-).  So, over the last many years, when anyone had asked me, ‘How do we root out black money in the country?’ my answer was, ‘In fact, the solution is quite simple.  I would make the 500 and 1000 rupees notes invalid as of today.  And everyone has to come to the bank to exchange and get new notes starting tomorrow.’

The discussion would then usually go into whether the political leadership in India would ever do it.  The answer would be – ‘it is not a very pragmatic decision for a political leader, he would invariably alienate most of his colleagues in politics, because politics in India is funded mostly by the black money.   One would really need balls to do it, and our politicians rarely have that’.

And yet, three days ago, I get a call from a good friend.  ‘Watch the news’, he said.  Unfolding before me was the one of the most defining moments in Indian History.   Prime Minister was announcing the demonitization of 500 and 1000 rupee notes.

In 1947, Nehru in his famous Tryst with Destiny speech, said:

A moment comes, which comes but rarely in history, when we step out from the old to new, when an age ends, and when the soul of a nation, long suppressed, finds utterance.

On 8 Nov 2016, Modi in his speech announcing demonetization of old 500 and 1000 rupee notes said:

There comes a time in the history of country’s development when a need is felt for strong and decisive stand… there come moments, those moments come but rarely.

And we will all remember this moment twenty years from now, where India stepped from the old into new.  Where an age ends, and a new age begins. 

And yet I find some criticism, some naysayers.  

How could you not celebrate this moment?

Yes, there would be some hiccups.  Never will such a transition be smooth for everyone.  When Telangana was struggling for statehood, many people complained of inconvenience caused by strikes and bandhs, and I asked, would you rather allow a large section of people not have their freedoms just because you are inconvenienced?

Like how a small child cries in pain when given vaccination for her own good, these are nothing but small inconveniences that we face right now, but we would have found a cure to curbing black money in this country.

Let’s celebrate.  And take inspiration to do something bold!

This message is for all state governments across the country.  Pass those bold bills, take those bold decisions.  Go against the tide, piss your colleagues, challenge the status quo!  Reform, rectify, improve, break down, invent, be creative! 

Carpe Diem!

For a change, be bold!

Thank you, Mr. Modi. 

Coming from people like us, you should take it as a compliment! ;-)

Why do our roads and cities continue to fail us?

In August 2015, we landed in Taiwan a day after Category-5 Super Typhoon Soudelor made a landfall with destructive winds reaching 215 km/h, with torrential rains causing widespread damage and disruptions, accumulating 632 mm of rain in 12 hours, where a record-breaking 5 million households lost power on the island, and yet the roads were intact, and the city came back to life within a day.  Looking at how well the city looked and functioned, we couldn’t believe that they had experienced such a powerful typhoon the day before. 

In September 2016, Hyderabad city faced a 24-hour long rain fall from the active south-west monsoon, accumulating 164 mm of rain, but that brought the city to a standstill, resulting in inundation of several localities, breaching of drainage system, with many of the roads completely damaged, causing hours of traffic jams across the city.

Hurricanes, tornadoes, typhoons, storms, flash floods - these are some of the extreme but routine natural weather conditions that hit most parts of the world.  Developed countries tend to face them as much as any other country.  And yet, the roads in those countries don’t get damaged the way Indian roads take a hit after a single large rain.  Those cities don’t get inundated and don't come to a grinding halt so easily as Indian cities do.