EDIT: YET ANOTHER FLIP-FLOP
Repeated reversals on note ban reflect poorly on the govt
Indian citizens are getting a lot of grief at the moment as the government cannot seem to figure out exactly how would it wants demonetisation to pan out. There have now been a mind-boggling 59 diktats, often contradictory, in the 40-odd days since demonetisation was first announced. That is roughly three new diktats every second day. Not surprisingly, the ensuing commotion, over and above the adverse economic impact of the actual decision to suddenly demonetise a heavily cash-dependent economy, has started to test people’s trust in the government and the banking system. The government would do well to pay attention to the trend and urgently get its act together.
The latest notification on Monday is another astounding example of the government’s continuing flip-flops that have placed increasingly onerous demands on the people. The Reserve Bank of India notification essentially stated that bank deposits of old notes in excess of ~5,000 could only be done just once between now and December 30. It further demanded that any such deposits “shall be afforded only after questioning the tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation”. It also mandated that this explanation be kept “on record to facilitate an audit trail at a later stage”. This flies in the face of the government repeatedly assuring the public that since the deadline for making deposits of old notes was December 30, they had ample time and should not rush to bank branches and add to the queues. The notification also treats every depositor as if he or she is a hoarder of black money.
While announcing demonetisation, Prime Minister Narendra Modi had said people can deposit these notes till December 30. “... You will have 50 days to deposit your notes and there is no need for panic”. Finance Minister Arun Jaitley, too, had reiterated, “We do believe that there is no need to rush in the initial days...”. But Monday’s notification and the narrative surrounding it was completely opposite. “Already more than five weeks have elapsed… It is expected that, by now, most of the people would have deposited such old notes… The banks have been advised to conduct due diligence regarding the reasons for not depositing these notes earlier,” said Mr Jaitley. Understandably, many people have felt outraged. What has further fuelled their resentment is the fact that the government has placed no such limitations on deposits of old notes in the hurriedly launched income declaration scheme called the Pradhan Mantri Garib Kalyan Yojana.
This reversal is not the first one. Since announcing the note ban, the government has gone back on its word over practically every aspect of the decision — be it related to the rules governing the exchange of old notes (changed five times, including people being inked) or the withdrawal limits (changed six times), or the usage of old notes (changed eight times). The same holds true to the wavering pronouncements about who will be investigated and who will be exempt. In fact, there is no clarity even on the data about currency in stock and the currency in circulation. Most telling, though, is the change in the reason why the note ban was done. Regardless of its obvious demerits and its not-so-obvious advantages, demonetisation can still be handled better going forward.