Now that the din and dust has settled down, it is time to ponder why the Narendra Modi government had resorted to demonetisation of high-end value notes of Rs 500 and 1000.
Demonetisation is an act of stripping a currency unit of its status as legal tender and countries which had effected demonetisation earlier had bad effects on its economy and its citizens. Nigeria effected demonetisation in 1984 introduced new currency and banned old notes. The debt ridden country with high inflation did not take the change well and the economy collapsed. In 1987, Myanmar’s military regime stripped 80 percent of the high value units of currency to curb black money. The decision led to economic chaos, which in turn led to mass protests that killed many people. In 1991 Mikhail Gorbachev ordered large ruble bills from circulation to take over the market of black money. Not only did the move fail, it resulted into a coup attempt which removed him from power and disintegration of the Soviet Union.
Modi’s demonetisation was supported by personalities from Bollywood, cricket and spiritual fraternities, which include Amitabh Bachchan, Ajay Devgun, Akshay Kumar, Anupan Kher, Virat Kohli, Virendra Sehwag, Baba Ramdev and Sri Sri Ravi Shankar. 13 economists from the world over and India (a few are named here) include Larry Summers, World Bank ex chief economist; Amartya Sen, Economic Nobel Prize Winner; Meera Sanyal, Former CEO, Royal Bank of Scotland; Raghuram Rajan, former Governor of RBI; Dr Manmohan Singh, the man behind India’s Economic Liberalisation; Arun Kumar author of several books on black economy in India, have openly criticized demonetisation, termed it as a harsh measure especially when people were deprived of their own money amounting to infringements of fundamental rights.
In the 2nd week of January 2017, the unions of officers and employees of RBI, charged the Modi government for its interference in the functioning of RBI. In a letter to the RBI Governor, they said the autonomy and image of RBI has been dented beyond repair and termed the appointment of a senior Finance Ministry Official as a “blatant encroachment” of its executive turf of currency management. The letter further states, “We want to state very categorically that the RBI is fully capable of being able to co-ordinate the central banks currency chest operations which RBI has been performing over decades and we do not need any assistance from anywhere.”
In 1993 the N N Vohra Committee had significantly revealed the nexus between political society and mafia was behind generation of black money in India. In 2008 the German government made an offer to the Indian Government that it would co-operate to pass on the names of black money holders of Indian origin in foreign banks. Until this date no Indian government has acted to break the nexus between politicians and the mafia. The reason being politicians are also the ones who have the most black money.
Another step was to allow all political parties to deposit banned notes of Rs 500 and 1000 in their respective accounts as long as the amount of deposit was Rs 20,000, where no name and details of the depositor were sought. While the common man suffered miserably throughout the 50 days of demonetisation, the rich, the affluent and politicians were not at all affected. Fearing the mafia may use money power against BJP candidates in all the five state Assembly elections, demonetisation was the only way to break the backbone of the mafia. In an unprecedented move PM Modi appeared on the electronic media on December 31, 2016 announced sops for the common man and a gift of Rs 6000 for pregnant women to pamper voters which should have been done by the Finance Minister in the Union budget on February 1, 2017.
Modi’s demonetisation was a blatant encroachment on liberties of his own people, bringing small businesses to a grinding halt, causing deaths of poor people which has been rightly criticized by eminent economists and international news channels but sadly supported by the PM and his Finance Minister.
