The Indian Demonetization Debacle!

On the 8th of November 2016, at roughly around 9p.m ,the Prime Minister of India Mr. Narenda Modi came live on tv for an unscheduled emergency broadcast. In what has since shattered the normalcy of the common man of India, he delivered the ‘Masterstroke’; the Rs.500 and Rs.1000 notes were demonetized starting from that midnight.

In one fell swoop, Narendra Modi had vanquished black money and it was a victory for the nation and the common man. But, was it? A week since the demonetization, the Indian population is struggling from a nationwide self-imposed poverty and risque barter/credit system due to the cancellation of the notes and lack of new replacing currency instead. Let’s dig a bit into it, shall we?

Essentially by canceling the legal tender value of 500 and 1000 rupee notes, it was said that it practically reduced stashed loads of black money into worthless papers in a jiffy.“Surgical strike”, “shock and awe”, “Big bang reform” are  few of the laudatory phrases used to describe this by the ever shimmering media. The most face-palm fact here is the assumption, in which black money was assumed as “a hoard of cash” buried underground , or in attics or underwater as depicted in many masala movies! And, even funnier is that the same government’s spokesperson MP Meenakshi Lekhi had opposed and slammed the then UPA government’s decision to withdraw all currency notes issued prior to 2005 and termed the measure “anti-poor”. “The aam aurats and the aadmis, those who are illiterate and have no access to banking facilities will be the ones to be hit by such diversionary measures,” she said.

I really can’t figure out , how many aam aadmis and aurats have computer and banking literacy in these 2 years and are swiping across Paytm their grocery bills!

Now let’s come to the real situation at hand. The hard working common man who has no say in the run of the country and on whom the government bestowed with so much love and care this ‘blessing’, should leave his or her means of breadwinning and go stand in a queue trying to get Rs.4000 for survival, sorted out for about 1 or 2 weeks whereas the so called people in charge of this entire “anti-black money masterstroke” couldn’t plan six months in advance and prepare for this transition?  So to deal with such issues without any prior key references/strategy/roll out options or any backup, and then spitball the following events of a 1 billion strong nation, as it happens was this “Masterstroke”? So basically screw the people , “let-me-do-this-and-get-into-history-books-one-way-or-the-other” mentality is okay as long as we accept it’s a bigger picture of black-money halting?

In a democratic nation, a government of the people, by the people and for the people, doesn’t act on a two penny thought of suddenly lifting the country out of the gutters and thrusting it into the superpower echelons of time. The last time someone attempted something like that, caused the World War II. And his name was Hitler !

 

Now the reasons why I call BS on this supposed anti-black money move?

  1. Several exact details pertaining to the decision to demonetize the notes had been published on 1 April 2016 in a Gujarati newspaper called ‘Akila’, including for instance, that there would be around 2 months’ time to exchange banned notes, and that new notes in the ₹2000 denomination would be issued. This paper is owned by one of the PM’s friends Kirit Ganatra and is published from Saurashtra in Gujarat. So much for an unscheduled emergency surprise broadcast eh?
  2. If at all this was a surprise and people wouldn’t know about this until the last moment, then the government could have taken as many months as they want to fine-tune the entire process and ensure the population isn’t affected and it still would be a surprise, but a good , thought out well-planned surprise. Meh..
  3. Most truly rich people don’t keep their wealth in the form of cash but in the form of real estate, gold, deposits in foreign bank accounts and other Benami investments. They will be largely unhurt and it is the poor who will be hurt the most by this. Exactly “anti-poor” as they claimed back in 2014!
  4. Last year (May 26 , 2015) RBI increased the slab for LRS “Liberalized remittance scheme” up to US$ 2,50,000 which means an individual from India can transfer up to two crore rupee to their overseas account in a financial year .
    Before Modi came into the power the LRS limit was just US$ 75,000. He was elected as prime minister on 26 May 2014, RBI Increased the LRS slab to US$ 125,000 the very next month Modi came into power i.e Jun 03, 2014 and also they increased the slab to 250,000 USD second time on May 26, 2015.
  5. The new magenta Rs. 2,000 notes have all been printed at a facility in India but, barring the design, the security features remain the same as the old Rs. 500 and Rs. 1,000 notes, a senior government official told ‘The Hindu’.“Since the decision to introduce the new notes was taken only six months ago, there was no time to alter the security features. Only the design has been changed but the security features remain the same as the old notes,” said the official. Did someone say about GPS chips, satellite calls, and overall counterfeit-proof theories? This one’s for you.

Now  what sucks most, is not the demonetization. Not the hardships of standing in queue. Not even the fact that we are near beggars for the coming few weeks(dependant on the splurge rate individually). What bites one’s ass, is all the fanatics and blind bhakts of BJP that have made it their mission to abuse, condescend, insult and vulgarly put down in social networking sites, the people who do not see eye to eye on the same. “Saare jahaan se accha, Hindusthan hamaara” doesn’t really mean shit, where every iota of intolerance , racism, ignorance, moral policing and bigotry are being exhibited left and right on all instances. Yes, the probability of 1 billion people having a unanimous opinion would be 0.00000000000002% , but does it have to come to enforcing one’s beliefs down another’s throat? If it comes to that, I’m happy to announce, we have taken our first step to being the next North Korea.

In conclusion, if it deals with black money as claimed, well and good; albeit a risky , troublesome  and chaotic, bordering-on-the-anarchical move! If not, then I hope every Indian citizen opens his eyes to the masters puppeteering their hopes and aspirations and playing them for own selfish motives. In the end, how would we feel if our entire life has been devalued in our quest of narrow-mindedness?

Cheers.

EDIT : This post is only to calmly present the facts that I believe, and not to degrade a bhakt or whoever you are. Kindly do not approach with a one-sided, repetitive, bland “Modi is great and I’m a thankless dog” comment. Do put here all your genuine feedbacks or clarifications though and I would be happy to rectify my viewpoint based on further facts.

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4 thoughts on “The Indian Demonetization Debacle!

  1. Hey Ivin. Great work with the arguments and as usual your prose is succinct and easy to read, while remaining stern on the details. I have been reluctant to comment on this issue, for or against it, even though I have been personally in support of this move. As far as I have read up on this insanely complicated issue, which it is, there are some things that still stand out to me as being misunderstood or misinterpreted on both sides. Firstly, the goal with this move is not, I think, as many people claim, to eliminate all black money in the country in one sweeping move. The people FOR this move have been using this in their arguments and the people against the move, like yourself, have seen flaws in this. The problem I think is not enough information being available to educate both sides. Might lessen the tension I feel. The fact I am referring to is that the Government is playing the long game here. Yes, they were rightfully expecting a sudden influx of cash from small time tax evaders who fear losing their assets. And yes, they were also expecting a certain portion of them to circumvent this in creative ways. However, the misconception seems to be that many people think the Govt, thinks or claims that most of the black money is hoarded in cash, and you made it one of the arguments against this move saying that its not the case. This move is not to eliminate the large black economy, but to hamper one of its primary operating methods. Yes, people hold assets in land and overseas. But you are wrong in assuming that is the most hefty section of the black economy. There is a huge part of the criminal and black economy which is held and moved around for deals sustaining their operations as cash in large denominations. This is not an assumption. This is a well studied and known fact. You can look to any of the assets seized in large scale criminal operation busts in any country, to see huge amounts of money being held in large denomination notes. In a country like India, for domestic criminal enterprises and more importantly terrorism operations, holding easily movable cash assets is of primary concern. No smuggling operation, human trafficking ring or terrorist outfit will hold their assets in gold or land property. That would be counter productive to their business model and what they need. Lashkar – E – Toiba, for example, draws its primary operating income from cash donations. Now, by removing the high denomination notes which are used the most in this scheme of things, and introducing new controlled higher denominations, the Govt will be able to throw a major hurdle in the working of these organisations. And with the new notes in circulation, the Govt will be able to better track the movement of money in this underground economy, not through spy chips embedded in the notes, but by more ordinary methods which they have been using till now. The point is this entire move, is about a two fold goal. One is the sudden influx of cash which is inevitable as the smaller fish turn in their assets, and then the beginning of long term tracking of black money and impeding of criminal and terror outfit operations. I don’t think this step will stand in isolation to do anything, but there will be complementary strategies put in place and smaller steps to work this plan. People, on either side of the argument, seem to be focusing on stereotypes of the black economy to make their cases. Like I said, I personally see long term benefits from this move. You were right in saying there are larger agendas here. But I think most of them are too technical and have to do with economic models in our nation that we as lay people will have trouble grasping. I don’t trust the easy to understand party lines on both sides from politicians or their supporters. But I do trust the experts who advise the PM on this plan. One thing Modi seems to have done well is delegate responsibility to capable people in most fields at the Union level. Right now, this is a matter of inconvenience to most of us common folk, but based on what I have been able to learn I am in favour of this step. I don’t proclaim in blind faith that it is flawless or well executed. I do though think the long term national and security benefits outweigh the temporary crisis we are in. Phew. That was longer than I expected. Great job on voicing the arguments anyways, Ivin. 🙂 Like I said, I am very aware of how little I know of economics to take unrelenting stances. These are just my thoughts on this issue. Thank you for the forum to voice it.

    • Wow.. that’s one hell of a comment and feedback.. thanks bro. Let me clarify few of the points you have mentioned and maybe add a few more..
      My main concerns here are not the fact that this entire process is against blackmoney, since am just a middle class guy and it really isn’t something that would affect me or my family monetary wise. However my issue is that this so called man who ‘sacrificed’ his home and family for the nation , doesn’t have the basic sane logic of printing the replacing currency beforehand so that once the shitstorm started, the common man could have gone on with his life as it is. It’s been more than a week and still every single person is affected.
      Like you have told yes, it would definitely hamper those people who have hoarded money and which was used to fund their illegal activities. But you would also know that there are more than a dozen ways to money laundering and this isn’t significantly going to deter any of them to the point they just give up. As for the middle class people who is supporting this, it’s either people who are really in control of their emotions and thoughts with clarity inspite of hardships, like you for instance.. But the other section, the bhakts, the insolent, trolling, fanatic middle class exhibits classic symptoms of “vegan fallacy” syndrome. If it’s bad , it’s supposed to be good kinda allegory associated with food and health if u get it.
      So in short, yes I applaud the intention but I am truthfully belligerent of the immature uneducated thought process that went behind this whole “shock and awe” operation. Example? The same currency exchange that happened in 2005 under Manmohan Singh.. No man came to any hardships as life went on, with new currency simultaneously replacing older versions and being taken back by banks.
      P.S – I am really unable to understand the long term benefits of this move if that’s one aspect of it. Because the higher denomination note , would make things easier won’t it? I apologize if I sound stupid, but I really don’t get that part. Thanks a ton for your views.. 🙂

      • Hey Ivin, been looking forward to your response. Thanks for the prompt analysis. Now, I have been reading up on it since I wrote that first comment and I have to say, there seems to be no real way to underscore this move as good or bad, based on expert opinions, domestic and international. It seems to be a case where there are enough and more points in favour of both sides, and only the personal choice of which light to see this in matters. Instead of me going on with broken bits of information, shall I link you to an article which I found balanced? It has both the pros and cons listed from several expert perspectives. I see the case for the negative effects quite clearly in it, but it mentions enough of the positive side also, making it, like I said, a matter of personal stance. One thing though that I have grown to dislike on my facebook feed is the ‘this is the best’ or ‘this is the worst’ points of view. I find that the truth often lies in the middle ground. But we as a nation like our drama. To see everything in the blackest or whitest of shades is inherent in us. Sigh. Anyways I urge you read the article patiently, if you could, and keep aside your anger at the situation for a while. The middle ground of factual evidence seems to indicate a more boring, less evil reality when you take into consideration both the pros and the cons and the predictions which fall on either side.

        http://knowledge.wharton.upenn.edu/article/demonetization-india-will-pay-price/

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