Mr Jaitley, a few questions for you

<b><i>Was the disruption of the economy caused by scrapping Rs 500 and Rs 1,000 denomination notes motivated by sound economic reasons, or prompted by extraneous considerations?</i></b>

Long queues formed outside banks across India as people scrambled to obtain legal tender after the Central Government demonetised  Rs 500 and Rs 1,000 notes on November 8; Photo by Arvind Yadav/ Hindustan Times
Long queues formed outside banks across India as people scrambled to obtain legal tender after the Central Government demonetised Rs 500 and Rs 1,000 notes on November 8; Photo by Arvind Yadav/ Hindustan Times
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NH National Bureau

The ill-advised quip of Marie Antoinette to her starving subjects that if they didn’t have bread, they should “eat cake” triggered memes over the weekend targeting Prime Minister Narendra Modi. The advice that “if people don’t have cash, let them use card” appeared next to an image of the PM dressed as the French queen.


The bitter, even distasteful, meme may have been triggered by the Prime Minister himself when he told a group of NRIs in Japan that the big scamsters in India were now standing in queues outside banks to withdraw barely Rs 4,000, following the Government’s demonetising Rs 500 and Rs 1,000 currency notes. Not many Indians forced to stand in those queues were amused.


What has been puzzling experts and the common man even more is the decision to disrupt the economy barely a week before Parliament meets for the winter session on Wednesday this week. Is there a method in the madness and could there be more to the decision than what meets the eye?


Finance Minister Arun Jaitley’s admission that ATMs had not been calibrated for the sake of ‘secrecy’ provokes yet another question. Since the decision to issue new currency notes of Rs 2,000 denomination has been on for several months, why couldn’t the recalibration of ATMs have been done first and then followed by demonetisation? Would demonetisation in January, days after the issue of new currency notes, have led to any great loss to the economy?


These and several other questions remain unanswered as Indians struggle for cash.

After  a few banks  reportedly ran out of cash before closing hours,  queues began forming in the wee hours, long before banking hours began for the day; Photo by Raj K Raj/ Hindustan Times
After a few banks reportedly ran out of cash before closing hours, queues began forming in the wee hours, long before banking hours began for the day; Photo by Raj K Raj/ Hindustan Times

While people’s struggle to carry on with normal life continued into the fifth day, transporters warned of a disruption in the supply of milk, vegetables, fruits and medicine. A transport operator owning 10 trucks needed Rs 35,000 for operational expenses daily, claimed All India Motor Transport Congress. With restrictions on withdrawing cash up to Rs 24,000 a week till November 24, it warned, transport could come to a grinding halt. There were similar warnings from jute industry and tea gardens, where workers are paid fortnightly or every week in cash.


Rumours of demonetisation have been circulating in banking circles since April this year, when the State Bank of India chairman Arundhati Bhattacharya publicly blamed the rumours for an unprecedented surge in cash withdrawals. In an interview to The Economic Times, she had, in fact, stated that for the first time ever deposits in SBI had lagged behind advances.


Curiously, in the September quarter, the situation took a ‘U’ turn with an unexplained spurt in deposits. Jaitley, when the question was put to him last week, dismissed it as of no significance, saying that the explanation lay in payment of arrears under the 7th Pay Commission. While the FM addressed two press conferences in three days last week to reassure people, several questions related to demonetisation continue to agitate the people’s mind.


Some of these questions, posed by experts and the common man alike, are the following:


1. Is it true that the Government was influenced by Pune-based NGO Arthakranti Pratishthan, believed to be close to the RSS, and ignored expert advice? The NGO has been advocating demonetisation of currency notes of high value denomination, abolition of income tax, restricting cash transactions to Rs 2,000 and promoting all transactions through banks. Experts however had dismissed the proposals, pointing out that the country has a long way to go before it could hope to become a cashless economy. The NGO’s claim that it motivated the PMO to take the decision has not been denied yet. Does it mean that the PMO and the Finance Ministry plan to act on the other proposals also made by the NGO?

There seem to be reasons to believe that some sections of the people close to the ruling party were given access to the new currency notes.


2. What explains the haste? Reports suggest that security printers expected the new currencies to be launched around the New Year. They were following a schedule and a supply chain which was known to both the Reserve Bank of India and officials in the finance ministry. Logically demonetisation should have waited till the system was in place. But demonetisation was done in a great hurry and without adequate preparation. What prompted the hurried decision?


3. What is the logic behind the decision to issue Rs 2,000 currency notes? If the argument is that notes of higher denomination are used for hoarding black money stocks and, therefore, Rs 1,000 notes have to be demonetised, then the decision to issue Rs 2,000 notes makes no sense. The common man deals with notes of smaller denomination, but there is a shortage of Rs 100 notes. How and who are the Rs 2,000 notes going to help?


4. Why did the Government fail to put curbs on sale of gold? Immediately after the demonetisation, there has been a mad rush to buy gold. Clearly, those with black money have converted part of it into gold, sending gold prices soaring. Was there a case for putting curbs on the sale of gold and who has this failure to curb benefitted?


5. Wasn’t the Government aware of the creaking banking system? The inadequacies of the Indian banking system are not exactly a state secret. Even in a relatively developed state like Tamil Nadu, the reach of banks in the rural areas is low. Regional rural banks, cooperative banks and post offices have not been efficient in disbursing cash either and this was highlighted time and again in the course of implementing the rural employment guarantee programme. Yet the Government seems to be expecting the banking system to do the impossible at the cost of disrupting core banking services, customers and pensioners.


6. How was the design of the new Rs 2,000 currency note leaked? The Government itself has ordered an inquiry into the leak of the design of the new Rs 2,000 currency note, which has been circulating on social media since September this year. According to photographs of the new Rs 2,000 currency note trending on social media, the design was first shared by the well-heeled and then spun outside the orbit till it became viral in October. Photographs of wads of such currency notes were circulating on social media long before the PM’s address to the nation. There seem to be reasons to believe that some sections of the people close to the ruling party were given access to the new currency notes.

Who are the Indians who transferred Rs 30,000 crore abroad between June 2015 and May 2016?

7. Was the report in a Gujarati eveninger a joke ? On April 1 this year, a Gujarati eveninger from Rajkot, Akila, carried a report under the headline, ‘Decision to discontinue Rs 500 & Rs 1000 currency notes’. A strap above the headline described it as a historic decision against black money, corruption, fake currency and evils of terrorism—the exact words used by the Prime Minister to justify the decision in his address. The newspaper editor Kirit Gantara however told The Telegraph that it was supposed to be an ‘April Fool joke’. He had written the report himself, he claimed, and added that it was just a coincidence that the decision was actually taken by the Prime Minister seven months later. But, a report designed to either shock or entertain readers, and one written by the editor himself, would surely have found a place on the front page? Were people alerted about demonetisation beforehand?


8. Why did the RBI twice enhance ceiling on remittances abroad? Who are the Indians who transferred Rs 30,000 crore abroad between June 2015 and May 2016, according to a report in The Economic Times? The report quoted official sources admitting to a sudden spurt in remittances from an average of $100 million to over $400 million after June 2016. This amount apparently went out of the country for foreign consumption as opposed to domestic savings and investment. Aided by the RBI, which enhanced the ceiling from $75,000 to $125,000 in June 2014 and thereafter to $250,000 in May 2015, these Indians sent out the money to purchase property abroad, for study abroad, as gift, maintenance or for investment.


Could they have had an inkling of the Prime Minister’s impending surgical strike?

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Published: 14 Nov 2016, 12:16 AM