Demonetisation does not infuse confidence its objectives
Demonetisation has not made a significant dent in curbing black money even after the 50-day grace period sought by Prime Minister Narendra Modi. At the same time to soften the blow, he offered on New Year’s eve a number of relief and welfare measures for different sections of the people. Significantly, his address to the nation on December 31 skipped claiming success about the big ticket demonetisation launched on November eight. Though it lacked the desired planning causing immense hardship to the people in withdrawing their own money from banks, it cast a big burden on the banks.
Experts believe while tax collections are likely to depend on how the economy absorbs the financial shocks, the Prime Minister’s handouts will test fiscal discipline. What has been perplexing is the repeated chopping and changing of rules which confused not only the customers but also the bankers.
The focus should now be on getting adequate cash into the banking system to restore normalcy affected adversely by withdrawing 86 per cent of currency in circulation.
It has become imperative to restore confidence in the economy through carefully thought out strategies rather than acting on impulse. What cannot be lost sight of is the exemplary cooperation and patience displayed by the people which the Prime Minister has acknowledged in ample measure.
Modi made a multitude of pledges since he began campaigning in the run up to the April-May general elections in 2014. This year might turn out to be the most challenging for him requiring the reform to materialise having raised high expectations.
He has made certain announcements to keep the people enthused but not one of his multitude of pledges have materialised so far including bringing all the black money into the country. The honeymoon period for any Head of Government usually lasts 30 to 36 months which is fast catching up with Modi.
Assembly elections in five states will be held in less than a month in February-March which might well be referendum on Modi’s demonetisation. The results will be known on March 11. The crucial assembly election is in Uttar Pradesh which might turn out to be a do or die battle for the Prime Minister having a bearing on the next general elections in 2019.
People are wondering if Modi is periodically making major announcements to keep the attention focussed on himself. He has failed so far to bring back the black money stashed away in banks abroad and in tax havens or generating employment.
There is no doubt tackling black money and fighting the scourge of poverty are extremely important issues. This can only be achieved with proper planning coupled with sustained implementation of various poverty alleviation programmes. Therefore, people are wondering if demonetisation is another political gimmick or above that.
The functioning of Parliament has also been affected with the ruling BJP led NDA at the Centre accusing the opposition of supporting corruption. It is no secret that all political parties take recourse to black money particularly in fighting elections. In the circumstances it is widely felt that reforms must necessarily begin with political parties curbing the use of black money. They also need to put an end to allegedly spending far in excess of the limit stipulated by the Election Commission of India, a creation of the Constitution vesting with conducting free and fair elections in the country.
The prospects of “”acche din aane wale hai”” has proved to be hollow and elusive so far with the ruling coalition at the Centre having completed half its five-year term. Modi’s oft repeated theme of vikas or development — “”sab ke saath, sab ka vikas”” — has also fallen flat. All the governments since independence have failed to come to grips with the real issues and concerns of the poor.
Again a section of economists reason there is no correlation between demonetisation and the generation of black money; demonetisation and corruption; and demonetisation and counterfeit currency/terrorism. Demonetisation is neither a necessary nor a sufficient condition to achieve the above mentioned objectives.
Nonetheless, demonetisation may create some temporary deterrent in the minds of the people who are indulging in corruption and generation of black money.
The role of the Reserve Bank of India (RBI) cannot be overlooked as it is constitutionally charged with the responsibility of managing the currency of the nation. It had a crucial role to play in the wake of demonetisation but it failed. There is no doubt the RBI could have advised the government better, smoothened the process and ensured the problem to the common man was minimised. This is one organisation that is protected well enough to be independent. (Ends)
(T R Ramachandran is a senior journalist and commentator. The views are personal.)”