Demonetisation haste: History has a warning for Modi
On returning to India after his tour of Japan, Prime Minister Narendra Modi must have been briefed by his advisers about the situation in the country on account of sudden demonetisation.
One would have expected his speech to have been compassionate and understanding, even though the government had not expected the move would lead to panic among the masses. But what we heard was emotional rhetoric.
He said: "I left my family for this country. Hang me openly if the situation doesn't improve. The poor are sleeping peacefully."
The government was not aware of how things were going to pan out because of its decision. While addressing a press conference, finance minister Arun Jaitley appeared to be calm and collected and seemed to suggest that a hue and cry was being created unnecessarily.
He was questioned how a country like India, which functions economically largely through cash transactions, was going to deal with the demonetisation decision or, for that matter, how the move will not adversely affect the poor, the lower middle class , small traders, wholesalers and retailers?
His response was such: "It's high time that those people should understand the situation and start having cashless transactions."
Cut to the situation on the ground: there was huge queue outside the SBI bank branch next to my house in Malad. Many people had come around 6 am just so that as soon as the bank opened, they could get at least Rs 2,000 in cash.
The situation was similar when ATMs opened on the first day and people had to spend sleepless and anxious hours on the ground.
Then there was an interesting interaction with the house maid who obviously doesn't make cashless transactions.
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| Sanjay Gandhi's sterilisation drive to curb population growth was meant to change India, but he and his team were in a hurry. (Photo: Reuters) |
The salary paid to her on November 2, just six days before the PM's announcement about demonetisation, is now useless for her as it was paid by withdrawing money from the nearby ATM which was dispensing only Rs 500 and Rs 1000 notes (now decommissioned).
The helpless woman came on November 10 and said she was facing money problems as there were long queues at the bank and that she wanted a day off.
So said the driver too - he also had a simple query, that if at all the government wanted to start transactions in banks, why did it release the high denomination note of Rs 2,000, for which no one had valid change, instead of first releasing the new Rs 500 note?
The "surgical strike" has apparently made people more creative. Many in Mumbai lined up at petrol pumps and toll plazas to get change, so much so that the toll plaza had to be closed down (we are yet to know if the government will pay them from its pockets), first till November 11 and then 14.
Government hospitals were told to accept cash but they did not have enough change; doodhwalas, raddiwalas, vegetable vendors and small shopkeepers have simply shut down their shops till the time they are sure of having cash in hand.
From the government's side, there is no fixed time by which the situation will be normal.
"It's indeed a bold decision to flush 86 per cent of the currency out of circulation and replace it with new notes, but did the government not think about the repercussions?" economist Ajit Ranade told me.
Now the textbook definition of demonetisation is to remove high value currency from circulation, and that too in a phased out manner. What the government seems to be doing is to replace the old currency with new high denomination currency.
Many say gone are the days when black money was stocked in cash (not denying that some must still be following old ways); now it's converted in durables like land, real estate, gold etc. So generation of black money can't be stopped unless it's root cause is hit hard - which is corruption.
That seems far from happening. A wise BJP leader once told me: "It's not enough that you take steps to fulfill promises made during elections; people should feel that steps are being taken." And it looks like the PM understands this well - that's why, despite India's economy largely working on cash, only such a sweeping and dramatic decision can give the feeling that the government is doing something to curb the menace of black money.
If the demonetisation move would have been implemented phase-wise, it wouldn't have had the effect that the sudden decision on November 8 has had.
Lastly, at this point no one can challenge the intentions of the PM and his team for taking such a drastic step. But sometimes one must look at history - whenever leaders in a hurry tried to change a country such as India in a flash - and what happened to such leaders.
Sanjay Gandhi's sterilisation drive to curb population growth was surely thought to change India, but he and his team were in a hurry. What they didn't realise was that a country as vast as India adopts to change or new ideas with time, whereas bans or a push or shove only create an atmosphere of fear.
The excesses that were undertaken at that time cost the Congress hugely when it suffered a humiliating defeat in north India in the post-Emergency elections. Sanjay Gandhi's intentions might have been good but the way it was executed was a problem.
The current drive with good intentions may end up that way. Emotional rhetoric can't be successful always when the situation on ground demands introspection.