Home 2017 Note Ban – A Vote Spinner

Note Ban – A Vote Spinner

written by Ali Baba June 9, 2017

This one was truly a googly, if ever a cricketing metaphor was appropriate to economics. While the impact on India’s economy is yet to be fully realised, there is no doubt that the political dividend has been handsome. What AAP’s resounding victory in Delhi brought home to politicians of all hues, was that India was really Against Corruption. Even the champion of Development was swept away by it.

When the note ban was announced suddenly and with short notice, it had the appearance of a surgical strike. But the media searched in vain to find a rationale for such a drastic move. The relevant officials in Reserve Bank, Niti Aayog, and the economic and finance ministries hemmed and hawed as they tried to conceal the fact that they were clueless and were kept in the dark. It certainly required courage of a different kind, and that was part of the rationale, to exhibit extraordinary courage. It took some days before estimates of its impact on the GDP started to be made, the figures varied but the numbers were all negative. Only the queues outside banks and ATMs seemed to grow, as people waited to exchange their now illegal tender for lower denominations. But they were not complaining about this unexpected inconvenience, they did not agree with the experts who considered it to be a self-inflicted wound. If this inconvenience was going to rid the country of the disease of kala dhan, they were willing to do their bit, like the soldier at the border. It galvanised the population, almost as if the nation was facing an existential threat. Except that it seemed more like we were targeting the tiny neighbor on the east while the real aggressor was on the west.

It galvanised the population, almost as if the nation was facing an existential threat. Except that it seemed more like we were targeting the tiny neighbor on the east while the real aggressor was on the west.

The only people who were crying were the politicians, some of them more shrilly than the others. Since the people were not complaining, then on whose behalf were they protesting? Probably, on their own behalf. Here was a clue to the rationale. With elections approaching in several major states, and a number of municipalities, the smaller regional parties were caught with their pants down. The major parties seemed strangely unconcerned, knowing that their own cash was either in dollars or swiss francs. Even the film industry that is notoriously funded by black money, came out in support of the note ban. They had stashed their mehnat ki kamai in properties in London and New York or other safe havens. If you remember, in the 70s and 80s, film stars were regularly subjected to income-tax raids, but one does not hear of such raids now. Have they suddenly become tax compliant? or do they choose to keep their wealth off-shore, like the Apples and Googles of the world.

Even the film industry that is notoriously funded by black money, came out in support of the note ban. They had stashed their mehnat ki kamai in properties in London and New York or other safe havens.

At first, we were told that this was indeed the surgical strike on kala dhan that had been promised during the election campaign, and which the UPA was too weak to carry out. The small temporary pain would be more than compensated by the gain of lakhs of crores of rupees that the culprits would be too scared to deposit in banks and make public. These lakhs of crores would go to fund social welfare programs for the poor. But as daily figures on cash deposited in banks began to show that nearly all the notes were being returned, suddenly such further data was withheld from the public. It was becoming increasingly difficult to maintain the façade of a social welfare bonanza argument. Then the note ban was projected as the first fearless step to make India Digital and Nandan was brought on board. But he too could not possibly subscribe to the notion that Digital India could be born overnight, as if the midnight of 8th-9th November 2016 was comparable to the midnight of 14th-15th August 1947. So the corollary of disruption was added, a favorite buzz word for most tech start-ups. Only it sounded as if the Indian economy was an electrical appliance, and a little whack would get the current flowing again.

Only it sounded as if the Indian economy was an electrical appliance, and a little whack would get the current flowing again.

In the meanwhile, the parliament lay paralysed for weeks by the Opposition since that was the only thing they could all agree on. They demanded that the PM make a statement in parliament. But instead the PM chose to take his case to people. Perhaps he had realised that his arguments would not stand the scrutiny of parliament, they were more appropriate for a fawning election rally. As the results of the elections post-demonetisation show, he was right.

He has managed to project an image of a clean, selfless and hard-working man of the masses, who has managed to out-smart the Harvard intellectuals. This is the latest in a series of roles he has sought to play: the Nehruvian statesman at his inauguration, the Gandhian of Swatchh Bharat, the Vajpayee of Lahore diplomacy, the Indira of surgical strike, and now the Manmohan of economic reforms. None of these roles has had any real impact. Perhaps, he can take a break now and be himself. But that may bring back haunting memories for some.

The real fight against kala dhan is yet to begin. Some of the modern day Robert Clives who have looted India are sitting pretty on their ill-gotten wealth in England.

So what good has demonetisation achieved really for the economy. The kindest thing one can say is that it is too early to know. One is tempted to use another sports analogy. It is like the boxer who having pummeled his punching bag, declares himself the winner. The real fight against kala dhan is yet to begin. Some of the modern day Robert Clives who have looted India are sitting pretty on their ill-gotten wealth in England. Others, who are still in this country, have their undisclosed wealth hiding in Swiss banks and other tax havens as the Panama papers have revealed. For a start, the present government could do what they had accused the previous government of not doing. Make public the names of those with accounts in Swiss banks and investigate the off-shore shell companies with Indian directors, listed in the Mossack Fonseca documents.

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