Govt shoots itself in foot

There is something poignant, something fatalistic about the situation triggered by demonetisation. The people of India are supposed to bear the inconveniences it has caused, with or without smile.

Since they accept the objectives behind the measure, they must patiently await the good things that the measure is supposed to bring, now and in future.

In short, hope for the best from a bad situation they are currently facing – for how long they do not know.

In a country where millions of toilets are needed, telephone is taking precedence. India is home to 21 per cent of the world's unbanked adults.

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For the suffering people, demonetisation is like a ‘mahadasha,’ an adverse configuration of stars that must be borne with the hope that it ends soon and leaves a trail of something good.

Or, should we see demonetisation as part of the larger ‘amritamanthan’ heralded by Prime Minister Narendra Modi?

At its end, black money would vanish, terrorists would be pauperised and white money in cashless, digital form, will emerge from this churning?

If that happens, with no Shiva around, will people themselves have to take the poison? They already are

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But a huge leap into cashless economy is being attempted for millions of poor. The issue is not just tightening the belt – it is of finding one to be able to tighten it.

It is a fait accompli that neither the Supreme Court wants to alter nor the political opposition can, after disrupting parliament and going through the motions of a ‘bandh’ that was doomed to fail.

The only difference is that while the apex court, already in a running conflict with the government over judges’ appointment, expressed pious hope that the peoples’ suffering would be ameliorated through government’s relief, the opposition parties would hope that this does not happen and persisting public suffering could bring them some political dividends.

And good at political games, now that the opposition has floundered and fractured, the government has broadened its phalanx of supporters with three non-BJP chief ministers.

For the suffering people, demonetisation is like a ‘mahadasha,’ an adverse configuration of stars that must be borne with the hope that it ends soon and leaves a trail of something good.

Or, should we see demonetisation as part of the larger ‘amritamanthan’ heralded by Prime Minister Narendra Modi?

At its end, black money would vanish, terrorists would be pauperised and white money in cashless, digital form, will emerge from this churning? If that happens, with no Shiva around, will people themselves have to take the poison? They already are.

Stars and mythology apart, going by all objective accounts and analyses, the government has shot itself in the foot with a hastily planned and badly executed demonetisation on a scale that has impaired the economy that will take months to get normal.

Former Prime Minister Manmohan Singh has raised scary prospects of a steep 2 per cent GDP fall. Other experts foresee an adverse impact on the economy for at least two quarters.

Gains of this year’s abundant monsoon may be lost.

Manmohan Singh hit all the right notes in his speech. It was short, precise, prudent and unusually for him, eloquent and hard-hitting.

He termed the demonetisation scheme as “monumental management failure” and even went on to call it “a case of organised loot and legalised plunder.” He asked a simple question: “Name me a country where people have deposited their money in the banks, but they are not allowed to withdraw their money.”

Having no real answer to this, Arun Jaitley sought to belittle him. The government’s overall response, as is its wont, from Modi downwards, has been muscular and that doesn’t help the situation.

The suffering that the measure has caused has angered the people as much as it has inconvenienced them. Three weeks since the dramatic announcement, relief is still trickling in.

Besides the frenetic rush from one ATM another in cities, farmers still do not have the resources to purchase seeds, fertilizers and other farm inputs and to transport them.

Securing one’s own money and putting it to selective use has become a major preoccupation for people.

Jaitley is unlikely to admit it, but he would know well that his position as the Union Finance Minister preparing the annual budget next February.

Demonetisation has stirred the economic hornet’s nest enough to make his position most un-envious.

What form and to what extent this will impact the country’s politics would need to be keenly watched. The Uttar Pradesh and Punjab assembly polls pose the first challenge.

Both are deeply polarised. If UP is a political cauldron, Punjab has an anti-incumbency mood.

Demonetisation’s aftermath may dampen the Bharatiya Janata Party’s prospects of retaining power in Punjab along with senior ally Akali Dal, while attempt to repeat its grand success in the 2014 Lok Sabha polls in UP may not succeed. If the BJP fails on both these counts, will Modi and his party have played Shiva taking the poison coming out the demonetisation churning?

For now, flag-waving, slogan-shouting crowds have returned to the Prime Minister’s House and at Jantar Mantar after two-and-a-half years.

The political shade of those flags, the slogans and perhaps, the people among the crowds, assuming they are not professional protestors, are different.

It was anti-graft movement against Manmohan Singh Government then; the protest now is against Modi government’s measure that, ironically, is aimed at fighting that very demon.

Getting a hostile media for long, Congress Vice-President Rahul Gandhi, still confined to mild, symbolic things like standing in ATM queues, is finally getting his share of media attention.

Negative perceptions about him may not have changed. But the issues he raises have compelled the media to notice what he says. Public suffering caused by the demonetisation must be highlighted with Rahul as mascot for the sake of the TRPs.

Media’s own perceptions about demonetisation are prone to competition and guided by their promoters’ business interests, may or may not have changed.

Allegations abound that some TV channel reporters thrust the mikes at people’s mouths, but take them away if the comment is not as per the instructions from the bosses back in their offices.

Public memory is short. Indians have witnessed currency conversion from the old British-era ‘anna’ and ‘paisa’ and measurement from inches, feet and yards to metric system. Rupee was devalued in 1966 and again in 1991.

The 1978 demonetisation of one thousand rupee note concerned just Rs 1,680 million.

The present dimensions are multiple and the extent, gigantic. There was suffering on each occasion, but no jingoism.

It is this jingoism that is confusing issues and causing anger and despondency. The government wants the public to wait patiently.

But it cannot expect the public – and India watchers abroad – to ignore the fact that three weeks after the measure was imposed, some 90 per cent of the cash sucked out has not been replaced and this represents about 75 per cent of the total cash in circulation.

Empty shelves at retail stores are in part explained by lower demand and lower ability of traders to buy replacements, but also in large part by logistical constraints. Business chambers ominously report that firms have temporarily shut down production. Even if temporary, signs are ominous.

The adverse effect will be greatest on the informal sector, which means poor people and less developed regions will suffer more.

The trading and informal sectors have already taken a hit after the decision to scrap high-value notes. Empirical evidence suggests that demand has halved in many sectors.

However, more alarming is that production relations have been hit because of the cash crunch. Some three million truckers who play the Indian roads have reported a 40 per cent drop in rentals, which suggests that both demand and supply constraints are hitting the economy.

The government’s gladiatorial posturing has been alarmingly matched by some tendering unsolicited advice that it should push for the GST to boost the GDP growth numbers.

That would have been okay in normal times, but demonetisation has radically changed the situation. Mercifully, the government seems to stepping back. Pushing the GST at this juncture would be suicidal.

And now, to be honest, nobody can say precisely what this government wants to do with economy and what its priorities are.