Cashless again in India: Is this Modi government's demonetisation 2.0?
Each one of us needs to be mindful of this quote attributed to master strategist Chanakya: “Learn from the mistakes of others. You can't live long enough to make them all yourselves.” But the Modi government, less than 40 days away from beginning its fifth and final year in office, has apparently not learnt from its own mistakes.
This seems to be the moral of the story as an unannounced demonetisation has kicked in with automated teller machines (ATMs) going dry in several states, including Maharashtra, Andhra Pradesh, Telangana, Gujarat, Rajasthan, Uttar Pradesh, Madhya Pradesh and Manipur, apart from poll-bound Karnataka. In Delhi too, people are experiencing dry cash days as ATMs have run out of cash at many places.
The sudden phenomenon has been rather weird because the cash in circulation today is more than what it was on November 4, 2016 - four days before Prime Minister Narendra Modi announced demonetisation of Rs 500 and Rs 1,000 notes, accounting for over 85 per cent of the total currency in circulation at that time. Currently, the total currency in circulation is a little over Rs 18 trillion, whereas the figure just before demonetisation was Rs 17.97 trillion.
The shortage of cash may have erupted due to the following factors:
■ Mismanagement of cash flow by banks.
■ Recalibration of ATMs to support the new currency notes.
■ Logistical issues as while many banks are cash surplus, but their counterparts in semi-urban and rural parts of the country - which have reported cash crunch - are facing depleted or no-cash ATMs.
■ Spurt in demand for cash to make payments for agricultural activities.
■ Cost cutting measures by many banks have resulted in cash vans being sent only once a day to replenish their ATMs as against the recent past practice of at least twice a day.
■ Almost double withdrawals by individuals due to the ongoing festive season.
The Union finance ministry as well as the Reserve Bank of India have braced themselves up for tackling this abrupt crisis and are taking counter measures on a war footing. For example, the RBI has directed banks with surplus cash to help other banks facing a shortage of funds and decided to boost circulation if Rs 500 denomination notes within next seven days.
Responding to cash crunch finance minister Arun Jaitley tweeted:
Have reviewed the currency situation in the country. Over all there is more than adequate currency in circulation and also available with the Banks. The temporary shortage caused by ‘sudden and unusual increase’ in some areas is being tackled quickly.
— Arun Jaitley (@arunjaitley) April 17, 2018
Jaitley’s deputy SP Shukla went on record saying this: “We have cash currency of Rs 1,25,000 crore right now. There is one problem, some states have less currency and others have more. The government has formed a state-wise committee and RBI also formed a committee to transfer currency from one state to other. It will be done in three days.”
Politics over cash crunch
However, the latest cash crunch has triggered a political storm, a characteristic feature of the highly divisive Indian polity. Madhya Pradesh chief minister Shivraj Singh Chouhan gave a political twist to the cash crunch by alleging a “conspiracy” behind the disappearance of Rs 2,000 currency notes. Chouhan, while speaking at a farmers’ convention on Monday (April 16), said that Rs 2000 currency notes were missing from the market even as the notes in circulation were more than pre-demonetisation.
Sample his statement: “The currency worth Rs 15,00,000 crore was in circulation before demonetisation. After this exercise (demonetisation), the currency in circulation increased to Rs 16,50,000 crore. But notes of Rs 2,000 are missing from the market... Where these notes of Rs 2,000 denomination are going, who are keeping them out of circulation? Who are the persons creating shortfall of cash? This is a conspiracy to create problems. The government will act tough on this.”
The Congress party too was quick to take to Twitter by asking whether it was the Modi government's “gross mismanagement” or a “deliberate move". In another tweet, the Congress said, “The people of the country forced to suffer even after 1.5 years of demonetisation show the acute failure of the BJP government.”
The irrepressible Mamata Banerjee, chief minister of West Bengal and leader of Trinamool Congress, went to the extent of talking of a “financial emergency” with her following tweet:
Seeing reports of ATMs running out of cash in several States. Big notes missing. Reminder of #DeMonetisation days. Is there a Financial Emergency going on in the country? #CashCrunch #CashlessATMs
— Mamata Banerjee (@MamataOfficial) April 17, 2018
Needless to say the Modi government could have done without this embarrassing situation. This at a time when PM Modi is currently on an official tour in Europe and, domestically speaking, the Karnataka Assembly election is less than a month away.
The Opposition, particularly the Congress, will definitely score brownie points on this over the BJP government, a party which while in Opposition used to throw barbs at the Congress-led government of policy paralysis and administrative lapses.
This awkward episode will inevitably dent the image of the BJP - “The party with a difference”.
As if the bank frauds were not enough, now the BJP government is not even able to run the banking system properly.