The opaque manner in which the government has handled demonetisation has fatally damaged the framework of economic governance.
INDIA remains a nation in queues—at ATMs and banks across the country—as it lurches towards the 50-day deadline set by Prime Minister Narendra Modi when he promised a return to normalcy. The steady chatter that India has entered a “new normal” is at best a desperate attempt to rationalise the irrational; at worst, it represents a cynical attempt to push at gunpoint the vast, diverse and multi layered economy over the brim, into the utopian idea of a “cashless” world. Nothing has changed significantly since November 10, when the banks first opened after Modi announced demonetisation of the two central pillars of the Indian currency system—the 500and 1,000-rupee notes two days earlier. Workers have lost wages and jobs and agricultural activity remains in limbo, characterised by a calamitous drop in prices, as the economy moves into a period of severe demand decompression and extreme uncertainty of what the future holds.
Meanwhile, incessant reports of the hauls of huge quantities of money, especially in brand new 2,000rupee notes, by enforcement agencies from across the country, shows clearly that the war on black money had been lost even before the general moved his first pieces into the battlefield. Indeed, the utterly opaque manner in which demonetisation has been handled by the policy troika at the helm—the Prime Minister, Finance Minister Arun Jaitley and Reserve Bank of India (RBI) Governor Urjit Patel—has aggravated the crisis and fatally damaged the institutional framework of economic governance. The lack of transparency about the government’s plans, if any, and the paucity of credible and tangible information on the progress made in resolving the shortage of cash in the system have fuelled speculation that a nexus among business, bank officials (including those of the central bank) and politicians is thriving even as the nation has been put to the sword of demonetisation.
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