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Wednesday, 25 April 2018
Indian Prime Minister Modi's Demonetisation: Is it Good or Bad For India And The Global Village?
When the world was busy with the American presidential election results on 8th Nov 2016, Indian media suddenly interrupted their programmes to show PM Modi; who using his executive authority declared a ban on the Rs500 and Rs1000 bank notes from that midnight. As if it was a nostalgic stimulus from its first PM Nehru's 'When the world sleeps India wakes up at the midnight hour', it almost kept Indians awake with uncertainty. With the black money holders not having a chance to cash in that night, society facing endless serpentine lines the next day, money not reaching the villages after that, cash not being available for marriage, buying of seeds and giving away daily wages even after that and making a feast out of all that opposition ganging up against the government India was shaken to the core. It seemed, the only ones, who made money were the economists and the media, who organised endless debates.
Yes this demonetisation brought about a lot of problems to the people of India and other countries, where Indian currency is grudgingly accepted i.e. Nepal.
1. The suffering of its people:
People in different countries suffer when their nations go to war, face natural disasters or chose a revolution. Indians had none of them. Furthermore, even if demonetisation alone is seen as a cause of the suffering, people did not suffer in previous ones. So what happened this time?
Though designed to make the black marketer suffer and pay, this demonetisation seems to have made the ordinary people suffer instead; that too for a prolonged period of time. In fact, almost as a fodder for a socialist revolution, this suffering has been mostly borne by the poorer sections of the society. Having left the barter system long ago and not quite caught up with the banking ways, and therefore, exchange being done entirely on cash the farmers, the labourers and the traders faced the heaviest brunt. While the rich used their poor workers to get their cash in the long serpentine lines, the poor even had to forfeit their daily wages to get theirs in them.
Let alone the hard earned cash problem, making housewives 'expose' their hidden cash, it defiled family secrecy too. Even if we forget the government's lack of thought about the cash needed for marriage, buying grain in time and giving wages; and even have some sympathy for the repeated ministerial damage control meetings, one cannot forget the deaths of people while cueing. Tharoon called it a disaster. One, however, wonders how the then USSR managed long queues. Tharoor called it a disaster.
2. Corruption alleviation:
With cash constituting just 10% of the black money according to the economists (rest being in
gold, houses and in foreign bank accounts) demonetisation obviously could not do much to dent the black money problem. In addition, with necessity being the mother of invention to the bad guys too, and them being more cautious in addition, it did not quite dent their corrupt ways either. Now, to the horror of all, the new advanced notes even merged with the old ones in the hands of the corrupt.
While attack on its army base took away the shine of 'helped in ending terrorism', the 'it was already decreasing' took away the glow of 'it stopped stone throwing' in Kashmir.
4. Legal issue:
Even if we were to disregard the anger of 'Why on earth did they have to make different sized notes', with paper notes specifically screaming 'Bank will give this amount to you', some even termed the 'denial' illegal.
4. National prestige:
The Western Press hasn't been kind either. They have ganged up against mod's demonetisation exactly the way they ganged up against him during the pre-election period. If those were to be taken as International opinion on India, then the demonetisation certainly dented India's international image.
This demonetisation wasn't a first timer; it wasn't Modi's idea originally; it wasn't done for his financial gain and it wasn't done by him alone. It was done by a team sworn in secrecy for 6 months, who were asked to live in his house. However, with the economists just looking at the loss of GDP, sociologist and the media criticising the people's suffering, politicians forgetting their genetic differences and ganging up against Modi, and the general masses just wondering how to get cash for they occasions yes this demonetisation has been decried by many through their own angles. However, if a deeper holistic look is given to the issue, a significant benefit to India can be discerned.
1. Even though a doctor was caught photocopying cash and cheating people, and the larger note size only delayed cash distribution, the new notes are said to be technically advanced.
2. The Data Gained:
In today's world, the Internet is full of companies that are eager to take our data through the filled forms. The data so gained is so important that companies become big by selling that very data from us. Data is extremely important. It is said that The Catholic Church could rule over Europe for so long because of the secret data received through confessions.
Not having the proper data, till now, the government and its own bank could only guess the amount of cash in the circulation. Now, the bank knows the exact amount. Not only that, the central bank has the data of the distributing bank, the numbers, the handlers and what not. In fact, it has the entire history of the cash circulation. Almost like in the stock market, now the bank's computers can not only help digitally detect unusual transactions, they can detect the source of the illegal cash too.
Thus, the government will not only look like having a good grip on its cash, and subsequently its economy, it will be practically scientific in its approach too. The significance of this in planning projects and enhancing competency is huge for a nation, whose production is severely hampered by its culture of corruption.
3. Necessity is the mother of invention:
Akin to 'necessity is the mother of invention', the demonetisation has invoked new methodologies in both the bad and the good camps. While the former has found ways to misuse even the new notes, the later has had to modify its ways into using electronic gadgets like mobile phones for cash. While ceasing the opportunity the country's IT guys are coming up with new aps and therefore digitalising the nation, and the tax officials and the banks are getting more cash back, as a measure to ease pain the government has been forced to think of offering unusual programmes that benefit the poor. As if the missionaries were at work in this Hindu India, the neglected and cashless bank accounts of the poor suddenly became important had cash and therefore became 'born again accounts'. At the end, India as a whole seems to be gaining.At the end, India as a whole seems to be gaining.
4. The cleaning up:
A. General corruption:
With the cash exchange taking place outside recorded methods, this measure alone cannot abolish the 'exchange corruption', but the pinpointing of its source can help identify the culprit. While this has helped the apprehending of influential public figures, demolishing 'it's a witch hunt', it has brought even its own party cadres in the fray. The force of the guilt of not being able to bring home the black money as promised in the beginning, did play its part in these measures.
B. Political corruption:
All parties, including the BJP, are corrupt and have the unaccounted black money. Almost like the AAP party changing Indian electoral politics, this measure helps in the making of political money, in general, cleaner. With the ticket distribution for election depending on the black money, this will have enormous benefit in the bringing of honest and capable leaders to the elected bodies.
5. Terrorism reduction:
Even if the cash forms less than 10% of the black money, it constitutes a much higher percentage of the entities that kill Indians through both Maoist and Islamic terrorism. Yes, being run not only by the untaxed money but printed money too, Mumbai underground guys, the North East insurgents, the Naxals and the Pakistani terrorists have been a menace to India. This demonetisation certainly has had an impact on them. Although attack on army camps in Kashmir suggests otherwise, and 'Stone throwing in Kashmir was already going down' say the naysayers, the compulsion of robbing banks is clearly indicative of the cash crunch felt therein. Being foreign in origin and the global players having an interest in it, Kashmir terrorism cannot be stopped so easily.
6. International image:
Even if the implementation of the dictat didn't bring about good reporting internationally, the timing of the announcement was not reported as bad. But then, let alone the timing, the Chinese official paper The Global Times thought that the boldness of the act was unthinkable even in their one party nation!
7. Benefits to the BJP:
With it being successful implementation dependent, in addition to the believable sweet sloganeering of 'beat the corrupt guys', the act was a huge risk for the ruling BJP. Yes all parties use black money; and cash for seats isn't uncommon. Therefore, all parties that are so used to relying on black money will be affected and Indian politics will see better days. But then, almost in an Orwellian way of some being more equal than others, some parties are more corrupt than others. Fearing none, some even flaunt cash in the form of garlands. Being lesser of the evils, this makes BJP, unlike some other cash starved parties, reap the benefit of the demonetisation. Calculated announcement before the UP election, thus, can't be regarded as imperfect. Also the associated, 'Only the corrupt parties are opposing demonetisation' disunites the opposition attempting to unite against the BJP. In addition, the timing of it being around the American election results, did lessen the hostile international caucus. Thus, BJP's gain cannot be discounted.
8. Symbolic benefit:
Almost as a no hoper, this act did nothing to bring cash from the foreign banks - as promised and expected. In addition, even the new currency has entered the old black market, locally. But then, surprisingly, almost as powerfully as saying 'from now on ..' in his invite to the SAARC leaders at his oath taking ceremony, this dictat has powerfully aired Mr Modi's second salvo - 'from now on..' - in the fight against corruption.
This gives hope for both. Although, people suffered, even died; almost reminding 'man is what he thinks', this is energizing the formed 'Modi Modi..' craze. Suddenly scientific data, innovative gadgets, trust on the country's leader and hope for the future are merging together to give a new confidence to the Indian people.
Could they have done better?:
In the intension, timing, recognition of corrupt Indian ways, cash production and distribution, yes the concept and timing were faultless. Even if secrecy is given its due, the rest didn't make a good performance. In the 6 months available, production of cash should have been enough and stored even for the desired controlled distribution. 'Continue to print' was a bad idea. In distribution, a corrupt sluggish ineffective system that made only 10% reach the end point should have been known and central data coming out of that system should not have been taken as gospel. Instead, since it was a major issue, end points of distribution should have been checked at least to see if they worked. Even if secrecy hampered ways in the pre-announcement days, post-announcement days should have seen work done in a war footing. This means printing cash by more companies, hiring vehicles to transfer money to remote corners and hiring an army of temporary staff at end points of distribution - bank and cash machines. Even involving the paramilitary, as needed. Although seeing the pain of the people, the government was sensitive enough to do meetings, it instead went on beating round the bush in general.
The global impact:
Finally, flooding the market with cheap goods, China has made life easy and even luxurious for the ordinary folks globally. Adding cheap labour 'spice' to that Chinese 'dish', a cost effective, productive, well behaved and progressive India can only be good to the world. The demonitisation by Mr Modi, thus cannot be said to be bad, even globally.
In this scenario, the sliding down of India to below top 5 most promising markets as aired by The Financial Express is nothing but a noting down of temporary stock market like emotional reaction.