In 2014, when Bharatiya Janata Party won the Lok Sabha elections, it rode on the massive popularity of the then Gujarat Chief Minister Narendra Modi. And Modi rode the anti-corruption horse to the Parliament as a first time member of Parliament. And he began well.
The initial reports that came out of power circles suggested that corruption, bureaucracy and red tape at the highest levels had indeed come down. More people were reporting to duty on time and the pace at which Government business moved increased.
And then came 8th of November, 2016 – the eve of demonetisation. A historic day for reasons which in the immediacy seemed good and extremely calculated but lost its significance thereafter.
What was Demonetisation?
In a televised address to the nation on the 8th of November, PM Modi announced that 500 and 1,000 rupee notes would no longer be a legally valid tender. This effectively meant that both these denominations got reduced to piece of printed paper. An announcement to the effect was made by the PM Modi in his address too.
What followed was sheer chaos. People ran from pillar to post buying items of all sorts by the hundreds. Electronic items, Gold, jewellery and other valuables were bought till midnight, which is when the old notes would cease to be worth.
In the following days, the Government made rules on a daily basis. If the issue of how marriage ceremonies were to be conducted cropped, a rule was passed. Frequently changing daily limits of how much one could withdraw were announced. This harakiri went on for the next 50 days, the time which Modi had himself asked to be given.
At the end of these 50 days, the Government still looked like it came out victorious. That it had beaten all expectations to come out on the top. It seemed as if the BJP could finally say we did it.
The ill effects of Demonetisation
One year later, it is sufficiently clear that the noteban did not have any desired effect whatsoever. Due to liquidity crunch in the market, millions of jobs were lost. Small traders and businessmen, who deal in cash on a daily basis lost out customers.
Sale of all non-essential items took a big hit and even the biggest companies reeled. Consider for example the small units in Tamil Nadu, which could not produce anything for nearly two months after demonetisation was announced. These units had already faced a lot due to the previous year’s Chennai floods. Small businesses and their cash flow had come down by as much as 25% post November 8. Due to the impact on small businesses, even the larger units’ sales went down between 35% to 50% over the past one year.
No one has perhaps calculated all the man hours lost due to people standing in long serpentine lines from morning to evening. Unconfirmed reports also said of people dying due to continuous exhaustion from standing for long hours.
Apart from that, logistics business in the country came to a total standstill, which in turn led to rise in prices of essentials. The vicious cyclical impact of note ban was so much that the economy is yet to recover. Though the Government claims otherwise and also pats itself on the back, small businesses are yet to recover.
Shifting of Goal Posts
The most disturbing aspect of note ban was not a decision taken overnight. It was a decision taken without any planning and the Government failed to acknowledge it. It has been one year and there has not been any acceptance of the same. Demonetisation per se was not a failure in itself. It was an idea with great intent but horribly executed. Like those botched sterilisation operations, the idea was good. But the operation killed the essence of the aim.
One of the most disturbing things about demonetisation, which continues till date, is the shifting of goals. When PM Modi announced his decision to discontinue the two high denomination notes, making India corruption free was the primary aim. Curbing black money, managing escalating prices, checking fund flow to illegal activities and breaking the terror nexus came next. Stopping naxalism came next. And then came Digital India. With it came the false pretence of promoting a cashless society, which later changed to a less-cash rhetoric.
Time to accept fault?
One year later, it is safe to argue that the Government must now accept its failure. It must, even if in hushed tones, accept that they did kill small businesses. The Government must own up and accept that the operation was botched up. A financial incentive for the businesses that shut shop during those 50 days is also imperative.
Apart from this, the Government must also release the true figures of what the demonetisation exercise actually attained. Though the objectives were well and pretty clearly stated, none of them have been actually achieved.
The Reserve Bank of India must also release the total currency that came back into the banking system. The false claims of the number of Jan Dhan bank accounts increasing in number must also be checked and verified.