This week too, I must stay with the subject of demonetisation.
When change takes place, there will be winners and losers. Wisdom is required to cap the gains of the winners and limit the losses of the losers. Greater wisdom is required to ensure that no one is utterly ruined. Such wisdom can only come from full information and knowledge.
Piecing together bits of evidence that are freely available in Delhi—especially from the government and BJP sources—it is now absolutely clear that the Prime Minister was not told:
1. That demonetising R500—and R1,000—notes will result in 86%, by value, of all currency notes being withdrawn from circulation and use.
2. That printing capacity is limited and replacing the demonetised notes (2,400 crore in number) will take seven months if every note is replaced by a note of the same denomination; more time if a note is replaced by smaller denomination notes; and less time if the notes are replaced by R2,000 notes.
3. That it will take a month or more to recalibrate the 2,15,000 ATMs and stack them with the new notes (if sufficient notes are supplied).
Skeletons tumbling out
Without full information, and without asking the right questions, the Prime Minister unilaterally took the decision to demonetise high denomination notes (R500 and R1,000). His confident demeanour and rhetoric swayed the people. The vast majority believed him when he said that demonetisation will stamp out black money, corruption, fake currency notes and terrorist funding. They believed him when he said that the inconvenience will be short-lived (his finance minister even fixed the following Tuesday [15 November] as the day on which things will become normal!). They believed him when he asked for forbearance for 50 days. They stood patiently in long lines, for long hours, and did not protest too much even if they returned empty-handed.
Until last week, the Prime Minister had the upper hand. Then, the skeletons started to tumble out of the cupboard. Every promise of the government turned out to be hollow and false. The myth around demonetisation began to unravel. The winners and losers were identified. And we found to our shock that the lives of millions had been utterly ruined.
Winners and losers
Who are the winners? The hoarders who laundered every note in their hoard. The launderers and brokers who earned huge commissions. The bank officers who converted the demonetised notes and handed over bundles of new R2,000 notes to the tax-evaders and the corrupt officials. The petty government officials, including policemen, who cajoled or threatened bank officials to open a backdoor exchange counter to exchange old notes for new. Together, they have succeeded beyond imagination and practically ensured that every rupee of the R15,44,000 crore will be returned to the banking system!
Who are the losers?—The average person who was compelled to make several visits to the bank to withdraw money from his own account. The person with a few old notes who had no access to a bank branch (because of distance) and exchanged her notes at a discount. The homemaker who had to scrounge for money to provide at least one meal a day for her family. The patient who had to forego his treatment at a hospital because he did not have money in his hands. The student who got his meal at the langar in the neighbourhood gurdwara. The farmer who could not buy seeds or fertilisers or hire labour and took a hit on productivity.
Those utterly ruined
Who are those who were utterly ruined?—The labourer who was laid off in industrial hubs like Tiruppur, Surat and Moradabad. The daily wage earner who could not find work in farms or mandis or on construction sites. The self-employed, selling flowers or fruit or pav-bhaji, whose customers vanished for several weeks. The artisan plying his trade (carpenter, electrician, plumber) who got no calls. The small businessman whose sales fell by as much as 80%. The truck owner and truck driver whose trucks were idle for several weeks.
Among the worst affected were the farmer-producers whose produce suffered a crash in prices, as will be seen from the table:
In the case of tomatoes, carrots and spinach, seasonal factors may have caused a decline in prices. In other cases, it is undeniable that lack of money, and the consequent fall in demand, was a major driver. As far as the farmer-producer is concerned, the loss of income is brutal and final — and no one has come forward to compensate him. Eleven crore people, on average, standing in a queue before bank branches and ATMs every day; the promise of being allowed to withdraw up to R24,000 every week dishonoured; loss of daily wages or daily income that cannot be recouped; fall in commodity prices for which there will be no compensation; tragic deaths, the number of which is nearing 100—not even a natural calamity could have wreaked such havoc across the country.
Website: pchidambaram.in @Pchidambaram_IN