SHRINIVAS DHARMADHIKARI | 27 DECEMBER, 2016
“A wise man...proportions his belief to the evidence.” By David Hume (1711–1776)
On November 13 in Goa, Prime Minister Narendra Modi asked for 50 days to normalize the disruptive situation created by his Demonetization project. And that was just the beginning of the political balderdash.
“Burn me alive if I am wrong”, the Prime Minister announced. As always, these verbal eruptions were accompanied by his trademark tears symbolic of hypocrisy and gross underestimation of public intellect. His off- the- cuff time estimate to tide over the problem not only indicates the extent of unpreparedness but also a total lack of sensitivity to the sufferings of average Indians. In short it is a case of mammoth failure in economic governance.
During these nearing end 50 days, the BJP Government kept on shifting its primary rationale for its Tughlaqi move from recovering black money to making economy cashless to fighting counterfeit currency and terrorism.
Each of these claims proved short-lived.
Reliable unofficial estimates indicate close to 95 % recovery of currency notes of Rs.500 and Rs.1000 in circulation. Besides the recovery of stocked black money has not even crossed the Rs.1000 crores mark. In fact a stock of black money was caught in our own Kalangute panchayat area where all the notes were in the new Rs. 2,000 denomination!
Close on the heels of this was a statement by the Finance Minister Arun Jaitley, that India can never be cashless.
As regards counterfeit currency and curbing financing of terrorism, a slain terrorist was found carrying two new notes of Rs. 2,000!
And last but not the least, none of the economic experts think that the economy will reach normalcy before March 2017, this being the most optimistic scenario against the fear it may go on as long as October 2017.
This may perhaps be an appropriate moment to remember boxer Mohammed Ali’s famous quote, “Everybody has a plan till it gets punched in the face.”
To me the worst part of the demonetization saga was the way the average poor and lower middle class Indian was made to suffer for no fault of his/her own. And secondly the lack of concern on the part of the Indian elite and the political class (with few honourable exceptions) to this distress.
Close to 100 ordinary folks lost their life standing in the queue outside banks or ATMs while most of the well-connected elites and politicians got their new currency delivered at home.
During these 50 days, no one spotted even a city corporator level politician in the queues nor any of our film, sport, mass media celebrities for that matter. This state of a fractured society and insensitive elite is epitomic to the state of French society before the revolution and its aftermath.After all, the “axe forgets but the tree remembers”.
During all this time, I have always wondered about the naiveté of small section of society. I call them the Modi Bhakts who almost believe that demonetisation follows a divine disclosure by God, and that if they stand in the “last queue’ as it were, they can be assured of final emancipation.
At the risk of repetition, I must quote here one establishment economist Dr. Montek Singh Ahluwalia who during a television show urged viewers to differentiate between black money and black wealth. Black money is very much in circulation along with white (or tax paid) income. So it is this black money that provides employment and income mainly to the poor and risk prone persons engaged in the unorganized sector,living on the fringe of our society.
Besides it also sneaks into the circulation of new notes as smoothly as tax paid income. What can be recovered through demonetisation is the black wealth that is piles of notes tucked behind bathroom walls and false ceilings; a Bollywood fantasy indeed. No one is foolish enough to stock his assets prone to automatic inflationary devaluation in this manner. Real estate and Gold are the options used.
Now the real issue is how do we address the issue of Black Business which is at the root of black money generation? This calls for a change in two of the major stakeholders’ ways of operation. One, what is required is a robust tax compliance regime which calls for a Government with political will and accountability to the electorate and tax payers.
Second is public morality and social ethos. Society must look at tax avoidance with zero tolerance and contempt reserved for a criminal. “Otherwise the populism of the "dumb mob" will be a socially costly detour from reality”, as stated by a famous political scientist.
(The writer is a metric consultant based in Pune)
(Cover Photograph ROHIT RAJVARDHAN)