On 8 November 2016 at 8 pm, Prime Minister Narendra Modi, in an apparently live televised address to a shocked and surprised nation, announced that currency notes of Rs 500 and Rs 1000 denominations would cease to be legal tender from that midnight.
However, such notes could be exchanged on the basis of Aadhar cards, or deposited by their holders in their bank or post office accounts from 10 November to 30 December.
Referring to 'black money' as the wad of big currency notes hidden or stashed away under the bed or in godowns or in secret vaults, Modi said the object of this exercise was to root out corruption, terrorism and black money.
For the Prime Minister of the world's largest democracy to be making such an announcement himself, rather than the Finance Minister or the Governor of the Reserve Bank of India was indeed unexpected.
Some things need to be clarified at the very outset. This move has since come to be widely known and referred to as 'demonetisation', but it is not that.
'Demonetisation' is the act of stripping a currency unit (not notes) of its status as legal tender, whenever there is a change of national currency, as happened when member states of the European Monetary Union moved over to the euro, while the old national currencies were demonetised. Similar was the move from the Gold Standard to paper currency.
Moreover, black money is not what Modi portrayed in the popular imagery as a hidden, stacked away wad of high-denomination currency notes, i.e. a stock of money.
As Marxist economist Prabhat Patnaik immediately pointed out after the dramatic announcement, black money is rather a flow of money or income, emanating from illegal activities (such as arms trade or drugs trade), or income not disclosed in order to evade or avoid paying taxes.
In terms of business behaviour, those having black money are unlikely to hoard it in the form of money or notes, and may keep only a small part (6%) in this form for immediate cash transactions.
The predominantly major portion of black money would be thrown into circulation, either by keeping it in undisclosed bank or (usually) post office accounts (where, till recently, PAN card details were not required) or converted into valuable assets such as gold, silver or real estate.
Thus, the expected effect of high currency note-withdrawal on the flushing out of black money would be minimal, particularly because in India, such notes account for about 86% of the currency in circulation.
Common people like homemakers, salaried people, wage earners, small businessmen, artisans, shop-keepers, vendors and people in other services like such as doctors, lawyers and journalists have, until now, mostly conducted their everyday economic transactions using Rs 500 and Rs 1000 currency notes, particularly the former.
Many of them in the informal/unorganised sector or rural areas would be outside the network of ATMs, banks and post offices, even after the issuance of pass books for accounts under the Pradhan Mantri Jan Dhan Yojana.
Similarly, terrorism and corruption are hardly likely to be touched. They would mostly be operating through secret, undisclosed accounts, either in the country or abroad.
The 'demonetisation' praxis of 8 November has at least shown three things in terms of its declared objectives:
- Terrorism has not stopped, as the dastardly attack at Nagrota revealed.
- A new black market of converting old, withdrawn notes into new legitimate currency has emerged.
- Corruption has found new avenues and channels.
Effect on economy and society
So, what was the effect of 'demonetisation' on the economy and society after 8 November?
Three weeks that shook India and the world. In Agra the next day, foreign tourists flung notes, asking how currency could be declared invalid overnight.
With 9 November declared by Modi as closed for banks and ATMs to give them time to get ready, and with few ATMs opening on the 10th, all hell broke loose on the 10th all across the country - from Kashmir to Kanyakumari and from Gujarat to the North East.
Long serpentine queues were to be seen everywhere. The banks and ATMs soon ran out of cash. Small businesses, vegetable markets, small shopkeepers and vendors had to close operations in the first few days.
For migrant daily wagers, there was little work and endless waiting. Hospitals turned away patients. Weddings were put on hold. Homemakers were harassed.
In the rural areas, cooperative banks, considered the lifeline of farmers, sent out distress signals, without any relief.
In the Northeastern states, it was back to barter. There were as many as 105 flip-flops or changes in the procedures of withdrawal, exchange and deposit of notes, between 8 and 26 November, causing much uncertainty and suffering for the people.
Donations dried up at temples and dargahs.
The stock exchange crashed following Modi's announcement.
The value of the rupee fell in terms of the dollar.
The demon of 'demonetisation'
'Demonetisation', soon, was transformed into a demon which devoured women, infants and the elderly. More than 80 people died, unable to bear the stress, including a dozen who committed suicide.
The national press reported the happenings faithfully, but mostly chose not to criticise the government.
The Mumbai-based Economic & Political Weekly said: "Modi is clearly seeking to obtain political mileage from this move, even as this sudden decision has put large numbers of ordinary people, especially the poor to great inconvenience."
The international press reacted sharply. The New York Times ran the headline: 'Chaos as Millions in India Crowd Banks to Exchange Currency'.
The BBC complained: 'How India's currency ban is hurting the poor'.
The Daily Mail of the UK said: "Modi boasts of his 56-inch chest, but what kind of son lets his mother go through that? PM's 96-year-old mother queues up to change notes."
There have been praise and acclaim from corporate leaders, but many well known thinkers, politicians and economists were critical.
On the very first day, Mamata Banerjee said: "This is a draconian decision".
A few days later, Mayawati had this to say: "The country is like a concentration camp."
Gopal Krishna Gandhi, former Governor of West Bengal, while speaking on 'India versus India', keenly observed: "Our present preoccupation with the famine of currency makes me wonder whether we are to admire the great patience being shown by our people or lament the lack of protest among them."
In the Rajya Sabha, former Prime Minister Manmohan Singh, a noted economist, was scathingly sharp when he said "it is organised loot and legalised plunder ... It is a monumental mismanagement... It will lead to a slowdown in growth by 2%."
Nobel laureate economist Amartya Sen termed demonetisation as a "despotic act that has struck at the root of economy based on trust." He, however, said "he backs the intent of demonetisation, but faults the execution of the reform." According to him, "at one stroke the move declares all Indians - indeed all holders of Indian currency - as possibly crooks, unless they can establish they are not."
Journalist Iftikhar Gilani sounded ominous: "The US Federal Bank in 1929 took away 35% of the cash from circulation. Eventually leading to the Great Depression. Modi's decision has removed 86% of the currency in circulation... the crackdown is bound to have a spillover effect for India's formal economy."
Ratan Tata, who heads the house of the Tatas, asked the government to consider "special relief measures similar to those employed at times of national calamities" for the poor to tide over the "great hardship" caused by the "note ban implementation".
On the other hand, Mamata Banerjee and Arvind Kejriwal suggested the withdrawal of the demonetisation decision or to facilitate the conversion of old notes for new for the sake of the poor.
However, such suggestions to ameliorate the hardship of the poor are unlikely to be given a sympathetic hearing by the present dispensation in power, which is pursuing neo-liberal policies.
I would like to refer here to Michel Foucault, the doyen of sociologists of the 20th century. Foucault's concept of governmentality is relevant, by which he means how political regimes make subjectivity conditional on the subjects (citizens) being able to be ruled.
The regime will never do anything to liberate the masses from their economic control and political clutches. Foucault believes that a neo-liberal State will "never let a serious crisis go to waste". So it is likely to use the present crisis to strengthen its hold over the masses by overt and covert means and attempt to subvert the present state of democracy, economic stability and social cohesion.
It is seen from the above survey that the decision to withdraw the currency notes was indeed a draconian decision, taken arbitrarily and without notice to the public, causing untold misery and suffering.
The people's right to life, liberty and livelihood under Article 21 of the Constitution of India,was trampled upon, just as the citizen's right to property was infringed due to unwarranted restrictions on the operation of their own bank accounts.
As Amartya Sen rightly observed: "Only an authoritarian government can calmly cause such misery to the people - with millions of innocent people being deprived of their money and being subjected to suffering, inconvenience and indignity in trying to get their own money back."
Manmohan Singh asked, "In which countries ... people were barred from withdrawing their own cash ? "After 10 days of demonetisation, the Supreme Court saw the crisis.
The Calcutta High Court pulled up the Centre for "not applying its mind" and doing "no homework" and "changing procedures" every day.
While the innocent have suffered, tax-evaders and the corrupt have gotten away, resulting in discrimination and violation of Article 14 of the Constitution.
Since 8 November, the government weaved a false narrative of 'nationalism'. Whoever supported its move of 'demonetisation' was a nationalist, whoever criticised it was an anti-national.
The survey of events since the PM's 8 November address, shows that the act did not invoke any law or authority.
It was not discussed in Parliament, nor was an Ordinance passed.
It is now learnt that the Prime Minister informed his Cabinet only an hour before his address was broadcast purportedly "live".
It was only on 18 November that Modi briefed President Pranab Mukherjee about 'demonetisation' and its after-effects and the steps taken by the government. But it was too late in the day as many had died or committed suicide and millions were suffering.
According to Satyendra Murli, a reporter working with Doordarshan Samachar, as published by SabrangIndia.in on 24 November, Modi's 8 November address was not live, but recorded and edited.
It had been written many days before the RBI's proposal, (not decision), on the subject at 6 PM of 8 November and the briefing of the Cabinet by Modi at 7 pm. Modi's address was broadcast at 8:15 pm at night with a live band, to create the impression that the decision had been taken suddenly, and the public would believe that the matter had been kept fully secret, but it was certainly not so.
Whether the Government of India rules under Transaction of Business Rules, 1961 and the RBI Act, 1934, have been followed , is a moot question.
A mass psychology of fascism
From the circumstantial evidence available, it does not appear that the decision to withdraw high currency notes was taken suddenly. It is also not true that the governemnt was unprepared.
It seems the government was prepared. But its object was not to attack black money, corruption and terrorism.
This is a dress-rehearsal for foisting corporate-communal-fascism - to do away with the current Constitution and usher in Hindu Rashtra.
There are four or five threads of thought which need to be considered, not separately, but together if we are to arrive at the truth. There appear to be multiple motivations for this exercise of 'demonetisation'.
First, the agenda of a Hindu Rashtra seems to be have been at the background right from the foundation of the political configuration of Bharatiya Janata Party/Rashtriya Swayamsevak Sangh; particularly during and after the 2014 Parliamentary elections which brought the Modi government to power.
Ever since May 2014, forces of communalism have sought to be aggressive, with the tacit backing of the State. Cases in point: 'ghar wapsi', 'Love Jihad', Muzaffarnagar riots, cow and beef-ban politics, the killing of Akhlaque and intolerance as the nodal points of the aggressive bid to create a polarisation between the major religious groups and a frenzy of communal hysteria.
Second, to ruin political opponents, namely Mayawati and Mulayam Singh Yadav before Uttar Pradesh Assembly elections in early 2017 as money for elections would have been almost wholly in high-denomination notes.
Third, the persona of Narendra Modi appears to be facilitative of crony capitalism, with Mukesh Ambani and Gautam Adani being main beneficiaries of his munificence. Ambani projected the proximity and blessings of the country's Prime Minister in his recent advertisement campaign (1 September, 2016) for the inauguration of Jio 4G mobile services. Adani was promised a Rs 6,000-crore loan by State Bank of India on friendly trems for his Australian mining project.
The Government's reticence with regard to follow-up on the Panama papers and disclosure on Swiss accounts indicates a soft attitude towards recovering black money from abroad.
Regarding the conversion of black money owned by crony capitalists in India, three divergent issues need to be noticed:
First, the Pradhan Mantri Jan Dhan Yojana (PMJDY), started 28 August, 2014. Millions of such mostly zero-balance accounts were mysteriously continued by unaccounted Re 1 deposits about a year ago.
Now it is pay-time and the Jan Dhan accounts have suddenly surged, indicating that the Prime Minister's cronies are converting their big notes through the Jan Dhan window.
Deposits in Jan Dhan accounts surged more than 30 times by about Rs 21,000 crore in a mere 14 days (10-24 November).
Second, when Raghuram Rajan was governor of Reserve Bank of India, Mukesh Ambani's application for a payments banking licence was granted on 20 August, 2015 (along with 10 other applicants).
But his application for a full- fledged banking licence on a par with State Bank of India was rejected.
Around about that time, it was decided not to extend Rajan's term. Urjit Patel, a former employee and president of Finance (Reliance) came up and he took over as RBI Governor on 5 September, 2016.
The emerging nexus of Government-party-RBI-Crony capitalists seemed a convenient ploy for selective leakages of news of impending demonetisation to facilitate conversion of big notes before 'demonetisation'.
There have been several reports that the BJP deposited crores in banks in West Bengal and UP and purchased land just before Modi's announcement of 'demonetisation'.
'Demonetisation', therefore, is not a case of monumental mismanagement (termed by Manmohan Singh) or lack of preparedness (as Prabhat Patnaik said) or a decision no doubt having intent but full of faulty execution (as Amartya Sen thinks).
The decision of 'demonetisation' along with the narrative of a false nationalism was deliberate and much deliberated. Even the timing of the "live" announcement by Modi and showing it to be a live broadcast was to create the impression that the decision was sudden, which it was not.
The decision is part of the planning and design of the Hindutva forces to create a mass psychology of corporate-communal-fascism by subjecting the people to a reign of coercion, deprivation of fundamental Constitutional rights, distress, fear and fatalism.
The idea for Modi/RSS/Hindutva forces is to test the waters of mass/popular response and reaction to their fascist experiments, so as to determine the timing of fascist insurrection/ coup/takeover of the Indian State for a surge forward to the Hindu Rashtra.
Edited by Joyjeet Das
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