Relief From Neither Corruption Nor Note Ban Disaster
Prime Minister Modi’s New Year’s Eve speech was significant for side-stepping all the issues raised by the Note Ban. Soon after his 8 November Note Ban announcement plunged the country into chaos and distress, the PM had appealed to the people of the country to “bear the pain for just 50 days.” If the troubles continued after December 30, he had said, he was “willing to face any punishment at any crossroads in the country.”
In his 31 December speech, however, the PM made no mention of the 50-day deadline. He was silent on how far the self-proclaimed objectives of the Note Ban had been achieved. Exactly what percentage of the demonetized notes had proved to be ‘black money’ or ‘counterfeit money’ and destroyed? How many black money holders identified and punished? How come corruption seems to be flourishing just as much as ever, with new notes making their way in lakhs into the hands of the corrupt? How come, contrary to the PM’s claims, terror strikes continued unabated even after the Note Ban?
Above all, the PM remained silent on exactly how long the cash shortage would last, and when exactly withdrawal limits from banks would be lifted. He failed even to acknowledge the enormous economic slowdown, wholesale destruction of jobs and devastation of agriculture caused by demonetization – let alone announce any sort of relief and compensation measures for this Note Ban disaster. Instead he announced several sops better suited to a routine Budget speech rather than specifically address the demonetization-induced crisis of livelihood and survival. Instead of waiving farm loans in view of the acute agricultural crisis, the PM merely announced the pitifully inadequate measure that farmers would not have to pay interests for 60 days on loans taken for the Rabi crop from District Cooperative Central Banks and Primary Societies.
The PM also tried to pass off old and existing schemes as fresh ones. For instance, he announced a scheme of Maternity Entitlements of Rs 6000 for pregnant women. He avoided mentioning that the National Food Security Act 2013 had already mandated universalization of the maternity entitlements of Rs 6000 – but the Modi Government since 2014 had failed to allocate the budgetary provisions for it!
The provision for farmers to get RuPay cards or other debit cards against Kisan Credit Cards has also existed since 2012; in fact, journalists have pointed out that a government reply in the Lok Sabha said that 56.60 lakh RuPay cards were issued against KCCs in 2013-14.
The PM announced the doubling of loans given through the MUDRA Yojana, prioritizing Dalits, Tribals, Backward Classes and women. A fact-check shows however that only a small percentage of MUDRA loans are in fact ‘new loans’ given to first-time and hitherto excluded borrowers.
Most importantly, none of the measures announced by the PM are of sufficient magnitude and significance to justify the enormous hardship and economic crisis thrust on India’s people and economy by demonetization. So these announcements could just as well have been routinely made in a Budget speech, even if demonetization had never been done.
With demonetization having dismally failed to achieve the objectives initially claimed for it, the PM is instead seeking to shift the discourse to the supposed benefits of a “cashless” or “less cash” economy. In doing so, his 31 December speech the misleading and absurd claims that “cash” implied corruption and that India’s economy therefore needed to be “cleaned” of “excess cash.” Facts show that cash has no correlation with corruption, and “less cash” likewise has no correlation either with less corruption or with more development and modernization. Sweden and Nigeria have a similarly low proportion of cash in their economies – but Sweden is one of the least corrupt countries of the world while Nigeria is one of most corrupt countries. Japan has a considerably greater proportion (20.7%) of cash in its economy than India (11.8%) – and yet it is the world’s third largest economy and ranks 18th on the corruption index while India ranks 76th.
The PM’s speech made another equally false suggestion – that most of the demonetized notes had been circulating in the corrupt “parallel economy” and had now been brought to the “mainstream.” The PM is thus implying that the informal sector is the “parallel” black economy. In fact, the informal sector is the “mainstream” in India, employing 80% of India’s workforce, including the small and medium industries, small retail, and service sector and accounting for 45% of India’s GDP. By devastating the informal sector, demonetization has struck a crippling blow at the very spine of India’s economy and the lifeline of people’s survival and livelihood.
The PM in his speech implied that the “excess of cash” had been fuelling inflation. This is patently ridiculous. The reduced inflation witnessed after demonetization is due partly to the artificial fall in demand due to the forced shrinking of spending power. Some fall in food prices, likewise, is due to the demonetization-induced distress sale of crops. Meanwhile the New Year has arrived with yet another hike in petrol and diesel prices which is bound to push up prices of essential commodities.
The PM declared that never before had banks “received such a large amount of money, in such a short time.” In other words, bad debts worth Rs 11 lakh crore will not be recovered from rich corporate defaulters. But banks have been recapitalized by forced deposits of the hard-earned savings of the poor, which the latter are prevented from withdrawing according to their needs but which banks can use to extend more loans to the defaulters!
The PM made some banal noises about transparency in political funding – but avoided announcing the much-needed concrete measures to clean up political funding!
The PM is seeking to avoid being held accountable for the failure to deliver on his tall claims for demonetization, or for the massive human and economic costs of demonetization. But the country will certainly hold him singularly responsible for the Note Ban disaster that has crippled people’s livelihood and the country’s economy while sparing and even benefiting the corrupt and super-rich.