‘Dhan ki Baat’
November 8, 2016 was just another day for the Chief Executives of banks in India when they were called for a meeting at 7 PM at RBI. Many of them thought that it was just another meeting called to discuss the eternal problem – bad loans. The meeting with a Deputy Governor meandered from the economy to loan-demand. One of the Chief Executives then asked if they could leave if there was nothing more to discuss; they were asked to wait. Suddenly they were told that the Prime Minister was on TV. They were startled to hear what he said: the Rs. 500 and 1000 notes were no longer legal tender!
P M Narendra Modi regularly addresses the nation over radio as his Man ki Baat. That evening, it was Dhan ki Baat (Talk about Money). In that address, telecast over T V at 8 P M, the Prime Minister announced that from midnight that night, the existing currency notes with denominations of Rs 1000 and Rs. 500 would cease to be legal tender; in their place notes with value of Rs. 2000 and new notes with value of Rs. 500 would be introduced. Thus, about 86.5% of the currency notes in circulation were withdrawn. Officially, this was called ‘Withdrawal of Specified Bank Notes’ (WSBN). The stated objectives were, curbing black money and corruption, stopping circulation of counterfeit currency notes, drying up of funds held by terrorists and Maoists and making India towards ‘less cash’ society, if not a cashless one.
As USA counted votes in its Presidential election, India started counting its notes!
All cash transactions are not the result of corruption; all corrupt transactions are in cash. It is said that ‘black money’ came into existence due to a tax-regime which put the highest slab of Income Tax at 97%. Some say this slab is an offshoot of Nehruvian socialism. Some say that it originated during socialist policies of Indira Gandhi. When a person has to shell out 97% of his earning as Income Tax, it acts as a disincentive for enterpreneurs. It led to people concealing their actual income to evade tax.
Reportedly, much before Narendra Modi took over as the Prime Minister in 2014, a Pune-based organization called Artha Kranti Pratisthan had, in 2013, suggested to him for demonetization of high value currency notes. It had also suggested abolition of Income Tax and 56 other taxes and replace these with a Banking Transaction Tax.
One offshoot of demonetization was that the fund-strapped Municipal Corporations and other Govt. bodies received huge amounts in demonetized currencies as arrears of their dues. Temples across the country received huge anonymous donations on old currency.
To highlight the difficulties faced by the common man, Rahul Gandhi stood in a queue at S B I, Parliament Street, New Delhi to exchange old currency notes. Many thought that to rob him of any political mileage out of this, Narendra Modi’s aged mother came in a wheel chair, to a bank to exchange some old notes.
Several Bank employees including those of Reserve Bank of India, have been charged with colluding with dishonest persons and making available to them huge amounts of cash in new currency.
Most transactions in India are in cash. Many shops in India display a sign: In God we trust – rest strictly in cash. Or, “Cash today; credit tomorrow.” This echoes Omar Khayyam’s advice, “Take the cash and let the Credit go.”
Top 10 Cashless Countries in the world:
Country % of cashless transactions
U K 89
U S A 80
South Korea 70
People needing medical emergencies or with forthcoming weddings are hit heard. This ‘surgical strike’ against black money did a lot of collateral damage. Small traders and businessmen who largely deal in cash, have seen their supply chain dry up and customers dwindling for want of liquidity.
Demonetization brought queues. When done right, a queue is the ultimately egalitarian thing. We do queues badly in India, with so many exemptions and workarounds. In societies of rank, queues are for the poor and powerless. Standing in a queue in India is considered ‘beneath dignity for big people in India. To be elite in India is to evade the queue, send someone else or pay a higher ‘çonvenience-fee’ to avoid the wait. Or it means barging in, right in front. So came touts, commissions etc. There is joke that an Englishman, even if alone, forms an orderly queue of one.
This time, in the wee hours of November10, the new national festival of queuing started in India. As people rushed en masse to exchange/deposit their old money and withdraw the new variety, the basic constraint of geometric space dictated that to access the bank counter or A T M, one had to do so in a single file. A columnist wrote how there is a good social mix in the lines at ourselves as a community. The demonetization might rally people, when they see each other massed together in a queue. People may enjoy seeing others having to wait – the PM’s message, “See, how I make powerful suffer with you.” certainly resonated. Many people are convinced that they had some discomfort for the national good. As another columnist hoped, after this, we shall continue to mind our ‘Ps and queues’.
To be continued....