NaMo’s DeMo disaster and the 50 days

None of the experts think that the economy will reach normalcy before March 2017 as the most optimistic scenario whereas some fear it may go as long as October 2017

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“A wise man...proportions his belief to the evidence.” By David Hume (17-11“1776)

On November 13 in Goa, Prime Minister Narendra Modi asked for 50 days to normalise the disruptive situation created by his demonetisation project. And that was just the beginning of his political balderdash. His theatrical acts reached its crescendo when he said “Burn me alive if I am wrong”. As always, these verbal eruptions were accompanied by his trademark tears symbolic of his hypocrisy and gross underestimate of public intellect. His off- the- cuff time estimate to tide over the problem not only indicates the extent of unpreparedness but also his total lack of sensitivity to the sufferings of average Indians. In short it is a case of mammoth failure in economic governance.

During these fifty days, the BJP Government kept on shifting its primary rationale for its Tughlaqi move from recovering black money to making economy cashless to fighting counterfeit currency and terrorism. Each of this claim proved short-lived. Reliable unofficial estimates indicate close to 95 % recovery of currency notes of Rs.500 & Rs.1000 in circulation. Besides the recovery of stocked black money has not even crossed Rs.1000 crores mark. In fact a stock of black money was caught in our own Kalangute panchayat area where all the notes were the new Rs. 2,000 denomination! Close on the heels was the statement by Finance Minister that India can never be cashless. As regards counterfeit currency and curbing financing of terrorism, a slain terrorist was found carrying two new notes of Rs 2,000. And last but not the least, none of the experts think that the economy will reach normalcy before March 2017 as the most optimistic scenario whereas some fear it may go as long as October 2017. This may perhaps be an appropriate moment to remember boxer Mohammed Ali’s famous quote, “Everybody has a plan till it gets punched in the face”

To me the most despicable part of the demonetization saga was the way average poor & lower middle class Indian was made to suffer for no fault of his own and secondly the lack of concern on the part of the Indian Elite and political class (with few honourable exceptions). Close to 100 ordinary folks lost their life standing in the queue outside bank branch or ATMs while most of the well-connected elites and politicians got their new currency delivered at home. During these fifty days, no one spotted even a city corporator level politician in the queue nor any of our film, sport, mass media celebrities demonstrated their empathy with the material precarity of common man by standing in the queue even as token. This state of a fractured society and insensitive elite is epitomic to the state of French society before the revolution and its aftermath. It sends shivers down the spine for any democratic minded Indian. After all, “axe forgets but the tree remembers”.

During all this time, I have always wondered about the naiveté of small section of society. I call them the Modi Bhakt who almost believe that the God has made a divine disclosure to Modi of something relating Indian economy so if they stand in this “last queue” the final emancipation is guaranteed and all of us will live happily thereafter. And even if it is a repetition, I must quote here one establishment economist Dr. Montek Singh Ahluwalia who during the Karan Thapar show urged viewers to differentiate between the black money and black wealth. Black money is very much in circulation along with white (or tax paid) income. So it is this black money provides employment and income mainly to the poor and risk prone persons engaged in unorganized sector and living on the fringe of our society. Besides it also sneaks into the circulation of new notes as smoothly as yours and mine white (or tax paid) income. What can be recovered through such Demonetization project is the Black wealth that is piles of notes tucked behind bathroom walls and false ceilings; a Bollywood fantasy indeed. No one is foolish enough to stock his assets prone to automatic inflationary devaluation in this manner. Real estate and Gold are much better options.

Now the real issue is how do we address the issue of Black Business which is at the root of black money generation? This calls for a change in two of the major stakeholders’ ways of operation. It is true that our tax base in narrow just one percent of the population. However, it is not because of tax rate is high. In fact, in US the tax rate is 39% which is higher than that of in India (33%). Firstly, what is required is a robust tax compliance regime which calls for a Government with political will and accountability to electorate and tax payers. Second is the public morality and social ethos. Society must look at tax avoidance with zero tolerance and contempt reserved for a criminal. “Otherwise the populism of the "dumb mob" will be a socially costly detour from reality”, as stated by a famous political scientist.