On November 8 around 8.15 pm, Prime Minister Narendra Modi made an unscheduled telecast. He announced that in order to ‘fight corruption, black money, fake notes and terrorism’ the notes of denominations of Rs 1000 and Rs 500 are hitherto invalid. This was a step in the direction towards the movement for purifying our economy and country. It is a little odd to have new Rs 2000 notes replacing the Rs 1000 ones.
In fact, there is a sudden cash crunch. It has been estimated that around 5 to 6 per cent of black money is actually held in cash. The demonetisation of Rs 1000 and Rs 500 notes would, therefore, have no immediate impact on the operation of black money. India is still dominantly a cash economy with the highest cash to gross domestic product ratio in the world (of above 10 per cent) and a huge informal sector still depends overwhelmingly on cash transactions. This sector became immobile with the dawn of November 9. Banks have not been fine-tuned to store sufficient numbers of low-denomination notes so as to meet the sudden requirement. ATMs had not been calibrated to disburse Rs 2000 notes. Sufficient supply and availability of new Rs 500 and Rs 100 notes was similarly missing. A person having access to plastic money would roughly be in the income range of Rs 25,000 per month. This leaves a huge section, which dominantly depends on cash transactions. Making an overnight change of 86 per cent of the total currency in circulation is pregnant with the possibilities of structural dislocation. This dislocation could be foreseen. Suitable measures to meet the exigencies could have been evolved if there was adequate advance micro-level planning. Secrecy per se is of some significance when we are invalidating particular classes of currency. But suitable precautions were feasible.
The value of high-denomination notes in circulation in 1978 was Rs 130 crore. As on November 8, 2016, Rs 500 and Rs 1000 notes cumulatively accounted for Rs 14.18 lakh crore, i.e., around 84 per cent of the total value of all notes in circulation. In 1978, a much lesser percentage of the total currency in circulation was of high-denomination notes. The impact of demonetisation has, therefore, been more intrusive and pervasive. Black money that is stated to be in circulation flows through the channels of the economy.
The present demonetisation has definitely added to the distress of farmers, paddy traders, daily-wage earners and others in the low income group. A courageous move was not accompanied with copious planning. This has resulted in a high cost in terms of the adverse impact on the economic activities. Ordinary shops dealing with fruits, vegetables and flowers have been affected to a great extent. In many cases, business has come down by half and traders have been forced to sell their stocks at cut prices or on credit. Notwithstanding Modi’s drive through the Prime Minister’s Dhan Jan Yojana, a large sector of the economy is beyond the purview of the banking sector. Nothing drastic may happen in terms of the corruption or black money, but there would be great deal of hardship on a large number of innocent persons. There is a possibility of increase of newer corrupt means of laundering money.
What is being promised as a glorious future is that of the present young generation. They have, therefore, a role to take stock of the demonetisation scheme and modulate their actions by an adequate assessment. In this demonetisation episode, maximum inconvenience and hardship have been principally borne by the common man. History tells us that the demonetisation whether in British days or in 1978 had not really yielded what they professed. let our youth brigade undertake a study of the demonetisation scheme.
The highest denomination note ever printed by the Reserve bank of India was the Rs 10,000 notes in 1938 and again in 1954. But the note was demonetised in January 1946 and again in January 1978 as per the data disclosed by the RBI. The high-denomination notes of Rs 1000, Rs 5000 and Rs 10,000 were reintroduced in 1954 and all were demonetised in 1978. The Rs 1000 note made a comeback in November 2000. The Rs 500 note came into circulation in October 1987. This move was justified on the grounds of inflation, but there was no note above the denomination of Rs 1000. A decision to introduce a note of Rs 2000, while demonetising Rs 500 and Rs 1000 notes is a little incongruous. There is a fall in the value of purchasing power of the rupee and the people. The basic requirements for a decent and dignified survival must be assured by the Government as a welfare measure and as a moral obligation. In this exercise, the youth power must assert itself in the process of decision making and to save themselves from the eventual impact of the present-day drastic steps.
We should not have forgotten that even in this digital age, a vast majority of Indians continue to carry on their day-to-day transactions in cash. Millions of people in this country still do not have a bank account notwithstanding the Pradhan Mantri Dhan Jan Yojana. The scramble for cash over the last three weeks has had an adverse impact on a cross section of the society. The earlier demonetisations had not pinched the average man because the holding of notes of such denominations then was not of a high level in the hands of the common man.
Many experts have gone to the extent of saying that the decision to recall high-value currency notes could have been implemented from a deadline, say December 30. This could have given a breathing time to introduce sufficient numbers of Rs 2000 and Rs 500 notes so as to reach the grassroots level. Alongside, notes of lower denominations should have easily been accessible and available in the hand of the trading class. There is an apparent mismatch between the means and the ends.
The elections in the coming months at different levels will indicate the public perception and the endurance level of the voter, dominant amongst them being the youth power. It is to be seen how far this great hardship can be swallowed by the taxpayers and a hugely cash-strapped sector, whose lifeblood is the cash system. let there not be a situation in which we become adventurists. The printer’s devil has not spared the new notes. Anyone of those can make the life of the common man more difficult and more harassed. Surely, we cannot countenance such a situation and have to be active and participatory in the movement towards building a better India. In this venture, no one can be left out. Each cog has in its own place on the right wheel. We have to join our hands to make the Government wake up to certain lapses and cause remedial measures without any avoidable delay. This affects our existence with dignity. Surely, this concerns us all!
(The writer, a Senior Advocate, is a former All India Service officer, a former diplomat, a former editor, a former President of Orissa High Court Bar Association and a former Advocate General of Odisha. jayantdas@hotmail.com)
