Demonetization: Two Reasons to Denounce and A Suggestion

Subhas Chandra Pattanayak

Reports now galore that the new currency notes to take over the place of demonetized denominations were in the making for last six months, which means, the Prime Minister was waiting for six months to enforce it at 8 pm on November 8.

As a concerned citizen, affected by the climate of counterfeit currency notes having penetrated into our banking system, I had immediately appreciated Mr. Modi’s action. But on further study, I find the PM’s action is of defects and deficiency.

I have two reasons to say so.

Firstly, Modi has taken this step without approval of the cabinet. We are a democracy, melted into plutocracy; but never an autocracy. The country is bound to be governed by a Council of Ministers headed by a Prime Minister. In this instance, which has affected the entire country, Mr. Modi has acted like an autocrat, not like the Prime Minister.

On the other hand, elimination of counterfeit notes requires locating and eliminating the sources thereof, which is an administrative responsibility. In Manmohan Singh regime, when note sorting machines were installed in the nationalized banks to catch the counterfeit notes, it was clear that the central government was a party to this offense against the country. Conduct of Manmohan Singh government in this matter has not been properly studied so far, though during his period, the number of counterfeit notes detected in India had menacingly multiplied. According to RBI, the number of fake notes had jumped by 20% in the period between 2010-11 (435,607) and 2011-12 (521,155) (Hindustan Times, August 26, 2012). A PTI news shows, fake notes had a five-fold increase in circulation, when Manmohan Singh was the Prime Minister.

A personal experience may help in understanding this syndrome.

I had to deposit certain amount of cash in the accounts of my nephew, so that he would draw the same through his debit card at New Delhi to procure for me some articles worth a few thousands. I drew the money from my accounts in the counter and out of the same, handed over an amount to the same cashier with the pay-in-slip for my nephew’s account. The person started examining the notes, which he himself had given me, even though I had not left the counter and on receiving the pay-in- slip, he was watching me separating the bunch I was to give him. I asked him, “Do you doubt the genuineness of the notes you had given me”? He had no reply. When he had handed over the cash to me against my cheque, he had not tested them in the machine. But while taking the same notes from me, he had to examine them. It strongly suggests that the bank was aware of the possibility of fake notes mixed in the notes they were to give to the costumers.

This being the common scenario in all the Bank branches in India, the presence of fake notes should have been subjected to administrative action. Modi clearly failed.

Secondly, Modi has wanted us to believe that it would eliminate black money. But, this is “based on an utter lack of understanding of the nature of black money says renowned economist Prof. Prabhat Patnaik.

Actually when we talk of “black money” we have in mind a whole set of activities which are either entirely illegal, such as smuggling, or drug-running, or procuring arms for terrorist organizations, or are undertaken in excess of what is legally permitted, or are not declared at all so that taxes are not paid on them, he has pointed out, defining such activities as “black activities”.

According to him, in any business (activity) money is “held for a shorter or longer period (e.g. during the C-M-C circuit)”.

This is true as much for “white activities” as for “black activities”, so that the belief that the differentia specifica of “black money” is that it is held while “white money” is used for circulation, is completely without any basis. All money circulates, with occasional pauses when it is held, whether it is employed in “black activities” or “white activities”.

Therefore, Prof. Patnaik says, the essence of unearthing “black money” lies in tracking down “black activities”, not in attacking money-holdings per se.

“And”, he stresses, “this requires honest, systematic, and painstaking investigation”.

Modi government has not done this investigation to track down the “black activities” so far.

What should be done now?

The general public of this country, particularly the industrial workers, shop workers, agricultural workers, marginal farmers, daily wage earners, small traders, self-employed small scale operators, low-paid government servants, who have no enough money in their possession, have suffered immensely due to the sudden collapse of the Banking system induced by the Prime Minister. On the other hand, those who do daily marketing for food stuff, as the money they earn or possess does not allow them to purchase for more than a day at a time, went without food, as the undeclared economic emergency shattered the markets catering to their needs. Thus, the massive majority of Indians suffered silently and did not object, in a hope that the so-called black money would be unearthed to their benefit.

Hence Mr. Modi must inform them – the suffering people – the details of the benefits from the demonetization.

A specific website on achievement from demonetization should immediately be launched. It should be daily updated with the details of unearthing of “black money” and all the actions taken thereon.

The website should also inform and update on how location and elimination of “black money” cause reduction or elimination of the “black activities” run with the same.

And, it should be a certainty, if Mr. Modi is honest in his endeavor.

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