Demonetisation has probably been one of the biggest steps taken by the government since it came to power that has affected every individual. The move’s appropriateness and consequences have been interpreted in a varied manner, depending on which side you are on. If you are a votary for the government, then it’s viewed as a revolutionary step, while if you are on the opposite side, it would be considered a major blunder. This is where HK Dua steps in and provides disparate views on the subject, presented by experts. To eschew any bias, he has picked up articles written by 12 authors, each with their own inclination. The reader can choose what appeals to her.
Dua, who is probably one of the most respected editors in the media, starts off with a blunt piece on the subject, views that are echoed by several others. Most authors would agree that the goalpost was changed when the initial objectives were not being achieved. Second, if there was reason to withdraw high-currency notes for whatever reason, bringing in a Rs 2,000 note was a contradiction in terms. Third, the public was put to a lot of misery for trying to reach out to their ‘own money’. To make it dramatic, some authors have used terms like ‘hard-earned money’ to move the reader. Fourth, the implementation was poor and indefensible. Not really, as supporters like Bibek Debroy would argue that it had to be done in secrecy or the point would be lost. Fifth, nobody knows how much money was identified as black and came back into the system. This is the common thread in all these pieces.
Suresh Prabhu, who is part of the government, extols this scheme and writes about how the Railways now operates mainly in the digital mode and most purchases are done this way. But surely, one can’t argue that the objective of demonetisation was to get the Railways digitised!
Hence, this is a partial view being taken. Debroy looks at this as just the beginning and gets into an explanation laced with jargon, outlining the impact on GDP, or rather GVA. Coming from the NITI Aayog, it can be called a pro-demonetisation view, which is fair enough. There is some talk about what constitutes black money, which can be through illicit money or drugs or mafia or regular transactions that dodge the tax system.
Arun Kumar, who has written a book on the same subject, but taken a negative view, also delves into some theoretical and conceptual issues.
Besides Dua—who is critical of this move—saying it has affected growth, employment and disrupted all markets, there are other strong views supporting him, including Sitaram Yechury and Manish Tewari.
Residing in the Leftist wing, Yechury treads on the political aspect and links this move to the state elections held at that time, where an impact was to be made, as rival parties would have less cash to work on. He also points out that the ruling party still had enough money or cash to spend on the state elections, thus raising the issue of something fishy going on. There is also the ubiquitous Marxian angle thrown in, of how the workers got to suffer on account of job losses.
This is, however, a pertinent point that comes forth in other essays, including Dua’s succinct analysis of the subject. Manish Tewari’s article would bring a smile to the reader for the humorous tinge brought in by comparing the entire episode to Muhammad Tughlaq’s trysts with changes in currency, which is less known, and the more popular change of capitals. The latter may look out of place, but the comparison still is quite droll.
One article that stands out is the one written by Anil Bokil, whose views might have been brushed aside as being sheer drivel in the past, but gained substantial referral value during this phase. His theory is based on scrapping almost all high-denomination notes, as also the tax system. But all bank transactions, which would ultimately matter, will be taxed at a certain rate. While it may sound quite revolutionary, the basis of his theory could be questioned. At some stage, he links high deficits and government spending to the printing of notes. But the government does not print currency to meet deficit, as automatic monetisation of deficit has been abandoned long time back and, hence, there is a lapse in argument. Further, he puts some data linking per capita income with the highest denomination of currency and concludes that it’s very high in India, which is out of context. His view is still worth including in any such book and the reader could decide whether to agree or not.
Chandra Mohan has spoken of the cost involved with the disruption caused and final effect on growth. KS Nayar has written about how the plantation industry in Kerala was seriously affected by the absence of cash. This is an interesting case study and should be juxtaposed with Suresh Prabhu’s take on the impact on Railways.
By getting in diverse opinions, the book provides a level playing field to the authors. Politicians, academicians, journalists and practitioners have all expressed their views here. There are evidently no easy conclusions to draw, as there are merits to all the arguments put forward. What, however, can be put out by the government is data on the notes that were returned, the black money identified by the tax department and the additional revenue collected. This will provide some evidence on the success of demonetisation.
The issue on terror funding or counterfeit money is hard to quantify at this stage. The cost of this exercise could be in terms of GDP growth foregone and employment lost. If the collections are high, the cost would probably be justified. This can be the main message to be derived from this book.
Madan Sabnavis is chief economist, CARE Ratings