Intent needs planning

Columnist  | Pavan K Varma

Opinion, Columnists

The size of the new Rs 2,000 note could easily have been made compatible with ATM machines so as to avoid the need to recalibrate them.

TMC members holding earthen pots and dishes at protest against demonetisation during the winter session at Parliament house in New Delhi. (Photo: PTI)

The overnight demonetisation of Rs 500 and Rs 1,000 notes announced on November 8, raises the fundamental issue of the link between intent and implementation. Is the laudable intent behind an action sufficient reason to excuse shoddy implementation? Or, does the inadequacy of the implementation devalue the intent itself?

This dialectic between concept and action is at the core of the current upheaval following the demonetisation decision. Many political parties supported the intent. Nitish Kumar was one of the first leaders who spoke up openly in support of the government’s intent to escalate the fight against black money, the link between black money and terrorism, and the menace of counterfeit currency. Indeed, given the corrosive pervasiveness of black money in our economy, no right thinking person can question the need for the government to take steps to eradicate it. But, he was also among the first to question the preparedness of the government to implement the scheme.

There is no contradiction in this stand. If the demonetisation in one stroke reduces roughly 86 per cent of all currency in circulation to mere paper, the legitimate expectation is that the government would have anticipated in full detail the consequences of such an action, and taken all measures to smoothen the process of transition. Rigorous and meticulous planning, including the ability to look at every micro detail, would not be asking for too much given the administrative resources of the government. But, it appears, that the government was so overwhelmed by the dramatic intent of its action that it largely ignored the detailed planning process that should have preceded such a move.

Not surprisingly, the transitional dislocation of the economy, including tremendous hardships for the ordinary citizen who may have cash but not black money, has been huge. The government’s answer is that this is short-term pain for long-term gain. Most Indians would be prepared for this. But, in spite of their willingness to give the benefit of doubt to the government, if the impression grows that the short term pain may not be short, or could have been less through better planning and anticipation, then resentment is bound to grow.

Certain obvious facts must have been known to the government before the Prime Minister — no less — made the dramatic announcement at 8 pm on November 8. Forty-seven per cent, or roughly half the total population, are not linked to the banking network. Around 300 million people lack identification papers. Rural India is a 98 per cent cash economy. Cash transactions amount to almost 80 per cent of total transactions in the country. Some 16 lakh crores would require to be infused into the economy in a matter of days, and so banks and ATM vending machines had to be, in great measure, ready for this consequence.

Given the magnitude of the task at hand, I don’t think the government had done its homework properly. The size of the new Rs 2,000 note could easily have been made compatible with ATM machines so as to avoid the need to recalibrate them. Although there is no “right” time to take action against black money, some thought could have been given to the timing. The announcement was made at the height of the harvest season and the sowing of the new crop, where transactions happen almost entirely in cash. It was also the peak of the marriage season. According to some estimates, about 1.5 crore marriages are to take place in the next few days, and harried families are spending days standing in queues outside banks and ATMs while a BJP leader effortlessly celebrated the marriage of his daughter by reportedly spending a mind-boggling Rs 500 crore!

It is also clear that the parallel economy will not go away only with demonetisation of notes. Figures vary, but by most accounts, only 6 per cent or less of black money is parked in cash. The rest is in benami properties, gold and bullion, or abroad. How is the government planning to tackle these forms of black money? The promise to bring back money from abroad has not amounted to much. Gold prices are soaring, so it is very clear that, even as the demonetisation process is on, people are investing ill-gotten cash in the yellow metal.

Mr Kumar’s call to attack benami properties must get a credible response from the government. There is a need also to go to the root causes for the generation of black money, of which the most important is electoral reform that severs the umbilical cord between unaccounted wealth and political funding.

Furthermore, the demonetisation exercise should not ultimately amount to innocent people, mostly middle class householders, farmers, daily wage earners, and small shopkeepers and entrepreneurs being penalised while the big fish escape. Already one is hearing about an entire infrastructure of touts and operators finding new ways to convert their unaccounted Rs 500 and Rs 1,000 into white by misusing Jan Dhan accounts, and the legitimate savings of ordinary people. There are also reports — as yet unverified — of some select few having got to know about the demonetisation move in advance so as to give them enough time to dispose off their black money. If these reports turn about to be true they will cast a very serious aspersion on the very intent of the government.

The real imperative now is for the government to do its best to alleviate the visible hardships of the ordinary citizen who may have cash but not black money. Some constructive suggestions have been made in this regard, both in the debate in Parliament and by state governments. The government needs to look at these suggestions constructively and stop this ridiculous business of labelling anyone who does not blindly endorse their actions as being in cahoots with black money hoarders. The jury is still out on how long the transitional hardships will continue, and what will be the degree and length of economic dislocation. But the one essential lesson to be learnt from this whole exercise is that even good intent needs proper planning and implementation. This is a lesson the government must accept with humility, not disdain.

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