Points made at a recent Symposium at Chennai hosted by The Centenarian Trust
Stated Objectives: Extinguishing Fake Notes, Corruption, Black money
- Notification of demonetisation DEA, GoI: a) Removing fake currency in circulation that are being used for financing subversive activities such as drug trafficking and terrorism, also causes adverse effect to the economy; b) Invalidating high denomination bank notes used for storage of unaccounted wealth.
- Statement by PM on 8th November night. He added elimination of corruption.
- 86% of the cash was taken out of circulation raising several critical legal issues-excessive delegation, lack of legislation, ultra vires of the constitution, validity of RBI’s ‘recommendation’ and test of reasonableness. Issue before Supreme Court.
Hidden Objectives: Bail out Banks and protect big defaulters
- Bail out the bad-debt/NPA infested (Rs. 6 to 7 lakh crores) banks by forcibly sucking out lakh of crores of white money from the common people across the board.
- Saving money-bags who are big defaulters from repaying their massive debts and instead giving them access to ‘low value, high volume credit’.
- Mukesh Ambani statement: (i) All the unproductive money brought into productive use enhancing credit flow which is the fuel of economic growth and (ii) Now we will have low value, high volume instead of high value and low volume credit.
Stealthy Objective: Thrusting ‘digital economy’ with very poor infrastructure
- Central Government-Prime Minister downwards, all departments, RBI and commercial banks are marketing ‘cashless business’.
- High-level Committee of Chief Ministers and Central Ministers to implement digital\cashless payment systems through AADHAAR-card based transactions.
- PMO has directed linking of all savings bank accounts with customers' AADHAAR numbers to enable digital transactions by 30 crore people without phone. This is defiance of the Supreme Court Order of 11 August 2015.
- Finance Minister (December 8)”: “RBI has been releasing currency as per schedule. The aim of demonetisation has been to move towards digital transactions.” Repeated statements by PM who flaunted a smart phone at Kanpur public meeting saying: “Bank is now in your hands.” This can hardly reach 25/30% of population.
- NITI Ayog Rs. 340 crore lottery scheme to promote digital business. Its CEO talking of mindset change by making people mendicants begging for their own money!
Deliberate chaos to carry out hidden and stealthy agenda
- Bizarre manner the entire operation has been carried out. ₹500 note was declared invalid as high value, introducing ₹2000 note. RBI initially wanted to bring ₹5000 notes to cater to the super-rich and black money hoarders!
- ₹2000 notes made available the very first day while RBI did not even start printing ₹500 notes. ₹2000 notes sent to cash-chests of banks across the country well ahead of the ‘demonetisation’ announcement with instructions not to open the bundles and make account entry. Many of these notes surfaced outside the banking system!
- ATMs were shut down in the guise of recalibration and most of ₹100 notes supplied were soiled and hence rejected by the counting machines.
- Contradictions between GoI and RBI, conflicting spate of RBI directives (52 so far) to Banks, one reversing the other. (Reverse Bank of India)
- Demonetisation done in a hurry through an executive order that has no authority to place restrictions on drawing of own money from the banks.
- These cannot be considered ‘implementation failures’ but deliberate attempt to spread panic among the public forcing them to stand in serpentine queues and surrender their cash to the state as fast as possible.
Expropriation not Demonetisation
- Central government has coerced the RBI to renege from its “promise to pay the bearer the sum of 1000 and 500 Rupees.” RBI is extinguishing liability and enriching itself. These violate Article 300A (right to property) and Articles 14, 19, 20 and 21 (fundamental rights) of the Constitution. Serious breach of trust. This is expropriation, not demonetisation.
- Expropriation is taking-over of items or goods by the government by refusing to honour the property rights of those holding such items or goods. This need not be an absolute. Even a high degree of restriction/interference with property rights can be expropriatory. Therefore, the government and RBI’s decision to (a) withdraw legal tender status, and (b) impose severe restrictions on withdrawals from one’s own account is definitely an act of expropriation.
- Through this ‘act of expropriation’ government has in effect confiscated the wages of the poorer/low-income segment of the population; stolen much of the income of the farmer and imposed a phenomenal burden of loss of purchasing power. The income/working capital of the daily wage worker, the wholesaler and retailer of goods, the farmer and the service providers have been taken away.
- It is too early to say whether demonetisation has eliminated black money. But it has certainly created a ‘black-market’ in money which is being raided with all fanfare.
- As far as corruption is concerned the colour of the currency makes no difference. Neither is it a one-time activity to be put an end to through such one-time measure. The roots are much deeper, none of which are being addressed by this government including electoral corruption which is the grandmother of all corruption.
- Currency is the centrepiece of a modern economy, the trust and credibility reposed in it being one of the most precious of national assets. That is why fiscal and monetary powers are separated and the autonomy of the Central Bank is sacrosanct. This is analogous to the constitutional separation of powers between the executive, the legislature and the judiciary.
- Government, by superseding the RBI and taking direct charge of the currency has demolished this and has shattered public trust in the Central Banker and India’s banking system. This could have long-term deleterious effect.
Summing-up: Demonetisation is Forced Dialysis
- Government of the day has substantially achieved the hidden and stealthy objectives but not the stated ones. In the process while big/corporate business is booming, people’s economy has taken a plunge.
- All that ‘demonetisation’ has done is to put a reasonably healthy and functioning economy through forcible dialysis taking out 86% of its blood and purifying it through 'Digital' machines.
- A patient put on dialysis is on 'borrowed time'. Informal sector, farming and MSMEs are already feeling the enervating loss of blood! Economy may be heading towards massive job-loss, hyper-inflation or stagflation. RED signs are flashing!
By M.G.Devasahayam IAS (Retd)