DEMONETISATON - A DECEITFUL PRETEXT

It has been envisaged that Demonetization is the first step in nation’s perennial fight against Black money, Fake currency, and terrorism. It can be seen in ruling party’s rhetoric tirades eulogizing demonetization while assuaging the nation (outside parliament) in an imperious manner. If we talk about Intentions and Implementation – both of these are highly subjective terms without any full proof backing. And even it is too early to judge the both. Time will be the judge.

But in this blog let me be strictly factual and tactful about the demonetization. I don't want to be sanguine when government remains reticent and situation remains in quagmire due to pandemonium over demonetization.

Demonetization, as such, is seem to be a robust step in itself against Black money as it rendered denomination of Rs. 500 and 100, in which most cash is claimed to be hoarded, as no longer legal tender. But the fact of the matter is that the reports from Income Tax raid shows that percentage of illegal wealth hoarded as cash is only 5-6 percent. Gone are the days when people used to hoard money in pillows, bed, walls etc. As the value of cash in hand depreciate there is huge proclivity among the people to invest their illegally earned money into real estate, bullion, hawala and benami transaction , gold and jewellery etc. And a huge amount is stacked abroad in offshore deposits and swiss accounts. And all these activity hamstrung the administration from acting against the unaccounted wealth. So, fact is that even if demonetization comes out to be 100 percent successful, there will be a plethora of illegal black wealth that remains untouched.

Now, it comes to counterfeit currency. Again the fact of the matter is that the amount of fake currency in economy is only meager 0.02 percent of the total currency in circulation. It is according to the report given by Finance Minister in parliament. I refuted this idea as it is looking as the highest level of illogicality to declare 86 percent of currency illegal only to bring back 0.02 percent fake currency. Another disappointment is what RBI has divulged. They told that RBI was not able to add extra security features in new notes due to hurry. And they themselves accepted to print defective notes of Rs. 500 denomination. Now, this shows their level of preparedness. And there is no clear way forward to curb future generation of fake currency as well.

It was also said that Demonetization has dissuaded terrorism or naxalites activities - which is quite true and evident from the respite in criminal activities across the nation. Government claimed that paucity of currency is refraining the criminal delinquents. But even if terror funding was hit, then how did Nagrota attack happen on 29 November in which 7 army personnel dead and 26 injured. Again the fact of matter is that as soon as currency becomes available, the current truce will be broken. This is because “quality of counter terrorism, not currency crackdown, will prevent terrorism". And there is no direct proof on this earth that cashless society put terrorism on back foot. For example – Nigeria, where 80 percent transaction is cashless but it is one of the most conflict hit countries of the world. So, it is not at all reasonable to declare, ostensibly, a financial emergency on pretext of curbing terrorism, when government itself failed to build a robust mechanism to counter terrorism. To coerce terrorism there is a need of police reform, fast justice delivery, technologically advanced investigative agency, reconciliation between different branches of intelligence etc.

Demonetization, hence, is only an ill conceived, terribly prepared and horribly implemented experiment that, if go wrong, can destroy the current normal. It should have been the last resort when all the doors are shut down to tackle the shadow economy and when there is a case of external aggression, war or other natural emergency.