PM Modi’s demonetisation decision, without doubt, is a masterstroke. But not the narrative around it. The narrative is high on use of similes, metaphors, and anecdotes but low on details, plans, and strategies that signify maturity and certainty, proportionate to the bold decision. The narrative deploys creative imagination to evoke images and feelings among the public even for what the demonetisation move is not.
The narrative could have been more honest, precise and given a peep into the next steps the government intends to take in its fight against black money. The current narrative conceals much more than it reveals. Even so, it has appealed to the masses but not necessarily to a reasoned mind. In striking a conciliatory note with the masses one doesn’t necessarily have to antagonise with a reasoned mind.
One expected a more mature narrative on a move that has hit one of the foundational blocks of a modern economy which is expected to have multi-dimensional effects. Here are some of the pointers to where the narrative could have better.
Objectives of demonetisation versus its consequences: What are the key objectives of the government’s demonetisation move? Inarguably, to check the black money, corruption and fake currency. PM Modi has repeatedly mentioned this in his public speeches. However, the narrative on demonetisation has sought to obfuscate the discussion by mixing the key objectives of the scheme with its possible consequences. For example, suggesting that demonetisation will check the practice of bribing of voters during elections or will clamp down on the narcotic drugs, is only indicating its consequences. By putting a halt on black money, one will in effect put a halt on all activities, good or bad, that such money was funding. For example, if some Bollywood movies were funded through black money, then the making of such movies too will get adversely impacted in similar manner as funding of terrorist outfits. A clear separation of the objectives from its consequences would have appealed to a reasoned mind too.
A stock versus flow of black money: The demonetisation is expected to primarily affect the accumulated stock of black money as on November 8. But with nearly R8.5 lakh crore worth of banned currency already exchanged or deposited in bank accounts between November 10 and November 27, it is not clear how much of the black money will actually get flushed out of the system. In any case, the expected gains are appearing much smaller than may have been thought initially, thanks to the financial ingenuity of the people as well as the government’s attempt at giving tax defaulters another chance to declare their undeclared income.
However, larger gains from the demonetisation are now being eyed from its possible effect on the generation of black money in future. These gains can be realised by getting the public hooked onto using digital money which will enable cashless transactions and will also make those transactions tax-compliant. What the demonetisation drive does is sets a fertile ground for pushing people to go cashless. Unfortunately, the narrative on demonetisation fails (i) to bring clarity on its effects on the stock of black money versus its flow, and (ii) in being transparent and candid about the expected gains from each of these.
Intended beneficiaries—a false dichotomy: The demonetisation narrative has sought to distinguish the intended beneficiaries of the drive along the income or wealth scale. PM Modi noted, “Because of corruption, black money, the middle class had been exploited and poor people were devoid of their rights.” Hence, the move is aimed at “giving rights to the poor and preventing the middle class from being exploited.” By creating a false dichotomy of the rich and the poor, it has negated the fact that some rich and wealthy can be honest too, in the same way as some non-rich can be corrupt too.
Demonetisation by itself will not protect the rights of the poor; nor will it prevent the middle class from getting exploited. What it will indeed do is set the stage, create conditions, for their betterment. Not immediately—the immediate effect, if anything, may be negative for them—but over medium to longer term. And whether or not their betterment happens depends on what supportive government policies and programs get rolled out and implemented.
Where the narrative is spot on, however, is by linking the demonetisation drive to support honest countrymen, to support earnest tax payers, to empower the common man in his fight against corruption, to creating India that is corruption free for our future generations and so forth.
Demonetisation—just a beginning: The narrative pitches the move to be just the beginning of the government’s struggle against black money, thereby, implying that government will come up with other measures in due course to address the black money stored in other asset class notably, gold and benami property. The narrative could have included a little more on government plans going forward, for not every measure requires the same level of confidentiality and a “surprise” factor as was the case with this move. A more communicative narrative would have been a little more reassuring.
To conclude, while the demonetisation decision is clearly “historic” and created a “new normal,” the accompanying narrative that failed to appeal to a reasoned mind, certainly is not. Perhaps, a learning moment for those behind the crafting of the narrative!
The author is a development economist formerly with the Bill and Melinda Gates Foundation and the World Bank.
Views are personal