By KC Reddy
Common sense and anecdotal evidence suggest that the no progress of a society , race or country is possible without appropriate “Change “ but at the same time it is inherent in human nature to resist any “Change,” as people are more concerned about what they lose in such change than what they gain out of such change . “Change is hard at first, messy in the middle and gorgeous in the end “.
Even in the Indian context, any change in existing way of doing things, was vehemently resisted initially – simple things like changing the measurements from traditional system to metric system onto bank nationalization and economic reforms. Though people initially resisted the change into metric system but over the years, they have realized how the change helped in streamlining economic activity and made life more comfortable and meaningful. Same is the case with bank nationalization – the bank nationalization in 1971 by the then Congress Government was bitterly opposed by the bankers and other vested interested groups .Even a legal expert (V.G.Ramachandran) criticized the twenty fifth amendment of the Constitution of India which permitted the acquisition of private property by the government for public use on the payment of compensation which would be determined by the Parliament and not by courts, as smacking of totalitarianism and hurry to achieve socialism instantly overnight .But nobody can deny the enormous benefits that the Indian masses, particularly the people working in unorganized sectors and the rural areas reaped over years due to bank nationalization, in terms of easy access to credit , financial empowerment etc ,which in turn contributed to the overall well being in human development .
Irrespective of race, religion and intellectual capacity, every Indian admits either openly or in their heart of hearts that black money is the long festering menace and needs to be dealt firmly to build a strong economy. This is obvious from the fact that out of the 2 billion population, hardly 3 million people file their income tax returns and around 2 million people actually pay income tax. A number of people like self employed workers , small businessmen ,persons working in unorganized sectors ,farmers etc should have come in the tax net but somehow they do not pay income tax .
The Prime Minister’s announcement of demonetization of Rs 500 and 1000 notes last Tuesday evening, aimed at further tightening of tough measures against black money, in fact, created more discontentment than it should have created good will among the Indian masses. Unable to express their anguish publicly over the decision, the real black money dealers/hoarders were busy in converting their black money into gold or into white money by paying hefty commissions. Taking advantage of public inconvenience arising out of lack of adequate infrastructure to ensure smooth flow of money during the exchange period of old notes by new notes ,they highlighted sporadic cases of attempted suicides , marriage postponements and disruption in the business activities and termed the whole process as “ financial emergency.” It may not surprise anybody if they indulge in rumors aimed at disrupting the supplies of essential commodities like salt , onions, cereals etc .
The intended benefits of demonetization move, are long term in nature and would contribute to the economy in future, Unfortunately , in the short term it created serious panic and chaos due to cash limits in exchange of old notes by the new ones, inadequate cash in the banks resulting in long queues before the banks , cashless ATMs ,total absence of 500 and 1000 rupee notes . All these developments also created a brand of money racketeers and middle men who collected the old notes at a premium and distributed through ordinary citizens accounts to evade income tax. During the last three days in Agra alone , the 5.5 lakhs of “Jan Dhan” accounts which were hitherto lying either idle or dead, suddenly got fattened with 170 crores as the middle men transacted significant amounts into these accounts at the agreed rate of commission to the account holders.
The present chaos is probably the outcome of the prime minister taking substantial political risk without proper risk assessment of the black money curbing issue. The risk assessment would have taken into account the existing strengths and vulnerabilities of the government in respect of demonetization move and its likely impact on various sections of society and enabled government to devise appropriate mitigating measures in advance to deal with the situations arising out of the decision . Such risk assessment would have also discerned the behavior of people, such as buyers ,sellers ,investors ,producers, entrepreneurs ,politicians and businessmen ,more importantly their behavior in their individual capacities as voters .Obviously in the present context , it seems no such professional risk assessment was conducted prior to the implementation of the decision . Seeing all these developments, one wonders whether the govt demonetization decision of 500 and 1000 rupee notes would be able to succeed in their fight against black money .Yes ,it will succeed in case the common man is made to realize that it is a temporary inconvenience and the long term benefits will certainly overweigh the short term inconveniences and there is no gain without pain . But if they fail to do so , the black money will come back into circulation though in a slightly modified form .Some immediate steps are necessary to ease the current situation:
The supply and replenishment of 500,100, 50,10 rupee denominations to various banks in all corners of India, need to be taken on a top priority basis –replacing the normal channels of transportation of currency notes by special air planes and helicopters so that delays in the supply of currency notes can be minimized .
In order to cope with the additional work in the banks, retired bank employees may be engaged on contract basis to work in the banks during this period. Some arrangements like supply of water etc to pacify the tempers of the waiting population in long queues before the banks, would be necessary.
The positive aspects and the long term benefits arising out of the demonetization move should be highlighted both in print and visual media.
Till normalcy in the banking activities is restored, proper vigil should be maintained to counter any rumours on the availability and supply of essential commodities and monitor the availability and supply of essential commodities.
(Mr K C Reddy ,IPS (retd) is former Chief Security Advisor ,United Nations)