A monumental folly
This is with reference to the editorial, “The final word” (August 31). Narendra Modi government's demonetisation move that involved overnight withdrawal of 86 per cent of the total currency in circulation was not just an exercise in futility but also an economic mismanagement of the highest order.
The return of 99.3 per cent of demonetised currency notes to the banking system simply meant the defeat of the whole move — weeding out black money and replenishing the economy with its equivalence. Initially, it was held that around ~3 trillion would not return to the banking system and this windfall gain could be spent on bolstering welfare schemes. But the gain was miniscule, ~107.20 billion, which was less than the cost of printing new notes — ~128.77 billion.
The Bharatiya Janata Party had hailed the move as shock therapy required to root out corruption and ran a successful campaign to make the masses take its word at face value. People stood in long queues before ATMs and banks and bore the hardship under the assumption that it would cleanse the country of corruption. The Reserve Bank of India’s annual report for 2017-18 conclusively and explicitly established that the general population was taken for a ride.
Modi publicly inveighed against Professor Amartya Sen for seeing no virtue in demonetisation by drawing a parallel between “Harvard” and “hard work”. Former prime minister Manmohan Singh’s prediction of 1.5 per cent loss of GDP due to the illadvised move came true. Yet the government is refusing to admit the negative impact on growth rate and rather explaining the collateral damage of shutdown of small and medium industrial units and other enterprises and job losses with various excuses.
The government maintains that demonetisation was in the country’s larger good. But the country should not mean more than the crony capitalists who benefited. It cites election victories as a vindication of the hare-brained move. We are left to explain the government's monumental folly in economic terms on the ground that it brought about intangible behavioural changes. But then it cannot be said that post-demonetisation, there are no counterfeit notes.
G David Milton Maruthancode