On November 8, 2016, when 86.4 per cent of the currency in circulation was abruptly cancelled, it led to the astonishment of the people who had some amount with them. The economy was in turmoil as so much of the currency came to a halt. Job loss, closure of work spaces, declining incomes and a two-and-a-half per cent drop in GDP disrupted the biorhythm of the common people.
There have never been any discussions on the claims like seizure of black money, poaching of counterfeit notes and eradication of terrorism, which the Central Government had once said was the intentions behind the ban on banknotes. Neither a social audit.
For three decades, legislation has been enacted to bring all the formal development sectors of the country into the hands of monopolies. However, It was the informal sectors that included agriculture, employing 50 million people which stood out. The note ban caused a similar depression to anaesthesia in latter area. Naturally, the vast majority of those who worked became migrant workers without being evicted. The central government brought in legislation that would allow monopolies in the agricultural sector and foreign capital in the small business sector to fill this gap.
Reading all this together, one can see that economic reforms are not naive and are well-planned and are anti-popular scripts.
The boast was that with the ban on banknotes, public purse shall attain Rs. 4 lakh crore worth black money. But the currency that did not return was a mere Rs.10,730 crore. And instead, the cost of newly printed notes by the Reserve Bank was Rs 13,000 crore! Moreover, while the Reserve Bank provided a surplus fund of 65,876 crore to the Central Government in 2015-16, the said amount was reduced to 30,659 crore in 2016-17.
The adage during the demonetization period was to forget about temporary hardships for long-term gains. But only a handful of creamier sections in the urban region have survived the ravage of banknotes and moved digitally. However, large-scale fraud is taking place in internet transactions such as Google, as no Reserve Bank control is possible. The news of the leak of information on 32 lakh ATM cards has caused great suspicion among the people.
The fact is that the failure to protect privacy and the inadequacy of cyber security laws in such transactions drive many reluctant to engage. The ratio between cash and GDP can be seen to be increasing. The reason for this is the motivation to keep cash with oneself in the backdrop of fall in investment interest rates.
If the ban on notes had suddenly submersed the wallet into poverty, the Covid-driven lock down had systematized the recession and reduced their purchasing power. When the country's economic growth is said to be 24 per cent negative, it indicates the loss of income of millions of people in the informal sector. As people lack money in hands, least movement was possible at the micro level of the economy. However, simultaneously there was an increase of 14 percent on the income of 100 billionaires in India. The Covid packages of the Central Government were all about protecting only the rich.
The commercial sector came to a standstill as the demand of the banking departments decreased and the income of the people halted. The economy can only be stimulated gradually by bringing cash to the lowest strata and creating a gradual revival in trade, commerce and employment as their purchasing power increases. For that, the employment guarantee scheme and wage rates need to be expanded. It would be a great relief if the proposal to pay Rs 7500 families who are not subject to income tax, for six consecutive months is implemented.
Similarly, the implementation of the scheme of free distribution of food grains stored in godowns will create a lot of confidence in the public. This is the only scientific remedy to survive the miserable state of the economy that has emerged with Covid, sharpened by the ban on notes.
But the fact is that the repeated declaration of benefits to corporate by the central government instead of knowingly treating the disease will not only fail to solve the problem, but will put the country in dire straits.
(This article published in Madhyamam Daily is translated by Sibahathulla Sakib)