A river of words has flowed on the intent and impact of the BJP/NDA government’s November 8 decision to demonetise Rs.1,000 and Rs.500 currency notes with effect from the end of that day. With this executive fiat, 86 percent of liquid cash was sucked out of the Indian economy. However given that these currency notes on the face thereof, contain a promise by the governor of the Reserve Bank of India and guarantee of the Central government to pay the holder the sum inscribed thereon, provision should have been made to pay legitimate holders of the invalidated notes a sum equivalent by way of new paper money on demand. But, the RBI and BJP/NDA government have substantially failed to honour this promise. According to all reports, only 10 percent of the new notes required to replace the demonetised currency of the value of Rs.14.18 lakh crore have been printed by November 25. The lack of preparation for this hammer blow imposed on cash-dependent citizens who are the majority, raises grave doubts about the purpose of this imperious diktat. The official version is that at one stroke, it has invalidated large cash hoards of tax evaders, corrupt government officials, terrorists as also counterfeit Rs.1,000 and Rs.500 notes in circulation. The government’s underlying presumption is that the only option available to anti-socials is to deposit or exchange demonetised currency notes in their possession at banks, which would expose them to scrutiny of presumed-to-be honest and efficient tax officials. This reasoning is flawed because it assumes that the targeted anti-socials hoard their ill-gotten wealth by way of currency notes in brimming rooms and warehouses. It fails to distinguish between the stock and flow of black money. The plain truth is that big fish anti-socials quickly invest ill-gotten wealth in assets such as land, buildings, precious jewellery or in foreign currencies held in offshore accounts. Therefore the majority of holders of the invalidated Rs.1,000 and Rs.500 currency notes are inevitably small-fry citizens, farmers and small-scale businessmen obliged to keep cash to pay off venal government officials, and the vast number of the country’s illiterate and/or ill-educated citizens with cash savings to meet marriage, medical emergency and daily purchases. These citizens have had to stand in queues for long hours to exchange old for new notes. This is why the demonetisation of 1978 didn’t work. On the contrary, corruption and tax evasion multiplied manifold in its wake. Corrupt businessmen, terrorists and counterfeiters apart, there is one genus which needs vast stockpiles of currency to distribute among vote bank managers and the electorate: political parties. With the Punjab and UP state elections scheduled within the next few months, the conclusion that opposition political parties are the prime targets of the BJP government’s demonetisation initiative, is inescapable. The tragedy is that the poorest and most vulnerable — and gullible — citizens will have to pay a heavy price for this cynical manoeuvre. Time to Stand up for Liberal Values The upset victory of real estate tycoon…
