Why supporters of demonetisation are anti-poor

(This essay was first published in UC News)

We shall begin with a mention of those who lost their lives due to demonetisation. As Athenian politician Pericles said in his famous funeral oration, it is both just and proper that they should have the honour of the first mention on an occasion like the present.

It was only a few days back that we mourned the first anniversary of demonetisation (though we must not be unmindful that some celebrated it). As has been the case everyday in the past one year, even to this day debates on whether it was a success or a failure happen continuously in India and abroad. There are enough literature available supporting and opposing both arguments.

This writer is of the opinion that any factual analysis could only be done if and when all data related to demonetisation is available in the public domain. The Reserve bank of India, the custodian of currency policy in the country, doesn’t have enough data with it to evaluate the result of demonetisation. To do a cost-benefit analysis, you need accurate data and the fact that the RBI doesn’t have such data with it is in itself a matter of absolute shame.

However in general parlance of the Hindutva right wing, the main support base of Narendra Modi and the BJP, any critic of the policy of demonetisation is an anti-national. They have the right to hold any opinion and hence one mustn’t waste time in countering that argument. But it must be said in unequivocal terms that any supporter of demonetisation is certainly anti-poor.

We shall see why such an argument is worth debating.

Informal sector - The poor, casual labourers make the majority of the informal sector and demonetisation has hurt that sector very badly. It is the sector that supports 80-90% of Indian workers and it accounts to an estimated 40-50% of the GDP. Though it is desirable to reduce the size and scope of the informal sector, the disruptive way in which demonetisation sought to curtail the informal sector is tyrannical. The lives of those many roadside vendors, construction workers, marginal farmers, cobblers etc. were put in jeopardy by a mindless money policy of the government. The supporters of demonetisation, including many experts, dismiss this harm to the informal sector as mere collateral damage. The notion that someone has to bear the brunt of demonetisation and the formalisation of the economy and let that be the poor of this country is vicious and inhumane.

SMEs - Demonetisation adversely affected the small and medium enterprises sector. With the decrease in demand of consumer durables due to demonetisation, credit to small and micro units fell to 7.7% in the November 2016 itself. So not only was expansion of the business out of question, but even their existence was in danger. As most of the business in this sector is owned by the poorer sections of the society, their livelihood took a serious hit due to demonetisation.

Cashless economy woes - Though PM Modi didn’t mention cashless even once in his 8 November address to the nation, one of the avowed intentions of demonetisation, we were told later, was to move the country to a cashless economy by encouraging digital transactions. What makes a cashless economy an indispensable goal in the fight against black money is the myth that any money transaction without a digital trail is inherently suspicious. The poor, particularly in the informal sector, makes their transaction with paper cash and that doesn’t make those transactions illegal or suspicious. In fact the move towards digital transactions has seriously afflicted the poor’s transactional ability due to low telecom penetration and poor connectivity across India, particularly in the rural area. Without efficient infrastructure in the telecom sector, no government must unilaterally impose digital transactions on a society.

Agricultural prices fell - When money was sucked out of the system during demonetisation, prices of agricultural products came crashing down. As there was lesser demand for the vegetables and fruits there was excess supply and this led to reduction in prices, which badly affected the marginal farmers. As the rainfall was good, the farmers were able to make good harvest, but demonetisation made sure that there would be less demand for the products and hence huge loss for the farmers.

Job loss - A study conducted by Centre for Monitoring Indian Economy (CMIE) has found out that demonetisation may have resulted in the loss of roughly 1.5 million jobs. Particularly in the unorganised sector job loss has been severe. Many small and medium enterprises were shut down due to cash crunch. The slump in the real estate sector due to demonetisation has further accelerated job loss in the sector. Even before the introduction of demonetisation the record of Modi government in job creation was rather dismal. The poor in the informal, unorganised sector has thus been severely burdened by demonetisation.

The government’s apathy for the poor who lost their jobs due to demonetisation was clearly displayed by Minister Ravi Shankar Prasad when he said recently that only those who couldn’t enhance their skills lost jobs.

Did government’s lower oil price bonanza help the poor?

One of the main arguments put forward by the government and the supporters of demonetisation is that once all the black money is back into the system, the government will put that money in schemes that would be beneficial to the poor of the country.

But here the question that needs to be asked is what the government has done for the poor of the country with the money it has saved from the crude oil price bonanza it has received owing to the crude oil price crash in the global market. Can we expect a government that hasn’t utilised huge savings from cheaper oil imports to benefit the poor to use the windfall from demonetisation to their benefit?

In whatever way you may look at it, demonetisation has caused enormous misery to the poor of this country. It is them who have lost lives standing in serpentine queues and it is certainly them who have lost jobs and livelihood. So if you’re supporting demonetisation, you are supporting the suffering of the poor of the country, or in simple terms, you are anti-poor.

Protest against fuel price loot must come from the citizens

Any government that is hell-bent on looting its own citizens deserves nothing but ridicule. Petrol and diesel price hike that happens every day, is a prime example of such an open loot. When administered price mechanism was removed by the UPA government, a policy which the present government follows with greater alacrity, it was said that fuel price will change according to the global crude oil prices. That is, fuel price in India will increase when global crude oil price increase and vice versa.

However today, when global crude oil prices are crashing and are at one of the lowest points in its history, fuel prices in India are increasing day by day. When the government allowed India’s state-run oil marketing companies to revise fuel prices on a daily basis, called dynamic daily pricing model, it was allowing itself to loot the public in stealth. The elevation of Petroleum Minister Dharmendra Pradhan to Cabinet rank by PM Modi was a recognition for his successful implementation of this policy of open loot.

On 1 March 2014, two months before Modi government came to power, global crude oil price was $108.6 per barrel and price of petrol in Delhi was Rs. 73.16 per litre. While on 11 September 2017, global crude oil price was $54.2 per barrel and the price of petrol in Delhi was Rs. 70.30 per litre.  (Though we consider Delhi’s fuel price for comparison, it must be noted that in Delhi, fuel prices are less in comparison to a state like say, Maharashtra as the VAT imposed by Delhi state government is must lesser than that imposed by Maharashtra state government.) 

Exchange rate is also a factor that must be considered when we compare crude oil price per barrel and petrol price per litre. But there has been rather insignificant change in dollar exchange rates between the two periods - the rupee was trading at 61.76 against the US dollar on March 1, 2014; it was 63.90 on September 11, 2017.

The major factor that explains the divergence between global crude oil prices and fuel prices in India is central excise duty. Excise duty on petrol was Rs. 9.48 per litre in April 2014, which has risen to Rs. 21.48 per litre today. While the excise duty on diesel was Rs. 3.65 per litre in April 2014, it has now been increased to Rs. 17.33 per litre by Modi government. 

While we consider the share of taxes in the retail price of petrol and diesel in India, we can find that it is 55.5% and 47.3% respectively, of which the major share is central taxes, particularly excise duty.

If we compare fuel prices in India with that of other emerging nations like Pakistan, Nepal, Sri Lanka etc., we can find that they are much lesser than that in India. Our government imposes more taxes on the petroleum products and loots its own citizens like no other major nation in the world.

These facts essentially show that what our government does to us is nothing but open extortion. (Disclaimer: Though I invoke the term ‘extortion’, I am by no way alluding to the leader of BJP who was once charged with extortion.)

Money generated from taxes on petroleum products are used for development purposes is an argument that governments use often. But no government in the history has given statistics that show how this has been achieved. Like Krishi Kalyan cess imposed on us has not assuaged farmer distress, taxes generated from petroleum products cannot be expected to fuel welfare schemes. Particularly from a government that has consistently dragged its feet from spending more on welfare schemes like MNREGA and National Health Mission.

When a national level agitation against this fuel price loot is not forthcoming from the opposition parties, the onus for such a protest rests essentially on the citizens of India. Opposition to his open loot by the government is brimming in social media and many online groups are planning agitations on the ground as well. We must all take part in such protests and put pressure on the government to alleviate our burden by reducing the taxes it impose on petroleum products.

Don’t expect resignations, BJP doesn’t believe in accountability

During the days of Lalit Modi row, BJP’s prominent leader Rajnath Singh, the Home Minister of India, had famously said, “this is NDA, not UPA, our ministers won’t resign”. 

And if we roll back some years and reach the UPA’s time, we could recollect that one of the prime responsibilities of BJP leader Ravi Shanker Prasad then was to ask for the resignations of UPA ministers whenever some controversies arose in their names. And some minsters did resign, due to intense agitations from the opposition parties and continuous guard from the media.

Cut to the present day and you have Ministers like Mr. Singh who openly say, which should be nothing but party policy, that whatever be the allegations against any minister, no one will resign under any circumstances. 

Allegations of corruption charged by the opposition is one thing, which could be rejected as baseless accusation, but dereliction of duty, as in the case of Haryana CM Manohar Lal Khattar in the Dera Sacha Sauda fiasco, is a matter of serious concern, where accountability has to be fixed on the political leadership.

As was the case with the Gorakhpur tragedy (on which we will come back later), political leadership made scapegoats out of the officialdom in Haryana and absolved themselves from any blame. When the total administrative failure is so obvious for any discerning eye, when the High Court itself has come down on the government and the CM in particular, any democratically elected CM would generally be forced to resign. But that is for ordinary political parties, not for BJP, which is, in their own claim, “party with a difference.”

High Court has given a rap on the knuckles of Haryana CM Khattar and Indian PM Modi. When it came down heavily on the CM for his inability to prevent the riots, the High Court also reprimanded the PM Modi and asked whether he is the PM of BJP or that of India. However in this case one must understand that PM Modi is helpless and he can’t ask for the resignation of Mr. Khattar, for he hadn’t resigned during the Gujarat riots of 2002. When that is the case, on what moral ground would PM Modi ask for Khattar’s resignation? 

Gorakhpur tragedy is a far worse case. 70 children dying in a week, most deaths because of the unavailability of oxygen in a hospital due to non-payment of bills by the government, is a tragedy that would have warranted the resignation of the head of the government in any functioning democracy, but not in Yogi Adityanath’s Uttar Pradesh. 

Instead of serious introspection, the UP government at first came up with the bizarre argument that the deaths were not due to unavailability of oxygen, even when it took actions against head of the medical college, Rajiv Mishra, and also on Dr Kafeel Ahmad Khan, head of the Paediatrics ward, for not making enough oxygen available.

If the deaths of innocent children in Gorakhpur were really due to encephalitis, as the UP government claimed, then why did it take action against the aforementioned doctors? 

So it is clear that the deaths were due to lack of oxygen availability in the hospital. And the reason for the unavailability was that the government didn’t the pay the bills for the oxygen. That makes it clear that the UP government is directly responsible for the tragedy, but still no resignation of CM Adityanath or Health Minister Siddharth Nath Singh. 

Speaking about accountability and resignation on moral grounds, one mustn’t forget to mention Railway minister Suresh Prabhu. Under his watch 8 major rail accidents have happened till now. After two rail accidents last week, Mr. Prabhu offered to resign on moral grounds, while PM Modi rejected his offer.

While the BJP wants to judge other parties on the basis of lofty moral grounds, it rarely applies the same standards to itself. In its alacrity to impose bigoted Sangh ideology in India using their political power, BJP has abandoned its commitment to the people of India.

Fleece the middle class, caress the corporate defaulter

Few weeks ago SBI was back in the news for all the wrong reasons. A circular that appeared on its website was the reason for all the chaos. In the said circular, SBI had announced that it will charge Rs.25 for every ATM transaction. Due to public outrage, later SBI clarified that the circular was not about savings bank account holders, but only about State Bank Buddy customers, who will be charged Rs. 25 for every ATM transaction.

Though SBI clarified later that the circular was the result of an inadvertent mistake on their part, it is quite difficult to believe it. In all probability it was done only to test the waters to see how customers would react to it. If the reaction was subdued, they would have continued with charging Rs 25 per ATM transaction, but as the reaction was rather fierce, they stepped back from the proposal.

After demonetisation the challenges that banks face are manifold. Even before the disruptive policy of demonetisation added extra pressure on the banks, they were reeling under their non-performing assets (NPAs), which mainly include bad loans of large corporate houses. Credit growth has gone down to 5.4% by 31 March 2017, which is the lowest rate in the past 60 years. This is in contrast to what advocates of note ban had predicted. Their argument was that, with note ban, banks would be flush with money and hence they will offer lower interest rates, which would catapult credit growth to magnificent levels. But that didn’t happen and because of the shock that note ban gave to the economy at large, productive activities slowed, which further reduced demand for credit.

In addition to the debilitating pressure of the NPAs, banks are also faced with the prospect of spending a lot of money as interest payments to its customers. With the note ban, most customers have put all their money in their bank accounts. Banks will have to give interest to all such customers, at a time when there are few takers for bank loans, with which banks would have gained loan interest.

Foreign credit rating agencies as well as international monetary agencies are putting a lot of pressure on the government to act and reduce NPAs of public sector banks, which they claim is affecting investor confidence in the economy of the country. Crony capitalists, who are the main defaulters of bank loans, are adding to the pressure on the government to waive off their loans. A clear pattern can be seen among the comments of the bureaucrats as well, whereby they support reducing the NPAs of the bank by waiving off loans of corporate defaulters. At the same time, they are adamant against waiving off farmers loans in the various states of the country.

In a bid to reduce their working pressure, banks like SBI are increasing all service charges that would affect the ordinary customers badly. Getting back money from corporate defaulters, thereby reducing the NPAs is not easy, particularly when the crony capitalists have great support and backing from the political class. So the only way out for the banks to reduce their financial burden is by fleecing the middle class with exorbitant increase in the service charges. 

RBI has failed to protect the customers from the rapacity of the banks. Also, there hasn’t been any significant protest from any quarters when the banks increase their service charges. The opposition parties have completely failed in organising any mass movements. In the absence of such protests, banks and the central government think that they can get away with anything. The social media has been the only saving grace as far as the objections to the fleecing practices of the banks are concerned. 

It is high time for the middle class to come together and form pressure groups to prevent the banks from making it the scapegoat for saving big corporate defaulters.  

Understand the divisive agenda behind the development facade

Some political commentators expressed great surprise at the elevation of Yogi Adityanath as the Chief Minister of Uttar Pradesh. The Yogi is known as a political rabble-rouser and as a polarising figure in Indian political scene. The poster boy of Hindutva politics, Yogi Adityanath is often considered as the leading divisive politician in the country. BJP’s selection of such a person as the head of the government in the most populous state in India raised many eyebrows, even among some of the staunchest supporters of Narendra Modi’s party.

However it must be said that anyone who is aware of the Hindutva project envisaged by the Sangh will not be surprised by the selection of Adityanath. With former Sangh pracharak Narendra Modi at the helm in the centre and with a handsome electoral win in UP for the Sangh ideology, this is the most favourable time to put Hindutva to the centre stage. This writer has written earlier about Sangh’s two-pronged strategy of gaining electoral wins. They use development facade, engineered mainly by Modi, to gain the votes of the young, aspirational class while using the Hindutva card, carried on effectively my Adityanath and his ilk, to garner the votes of those who are easily manoeuvred by communal and casteist agenda. 

The most important advantage of such a strategy is that BJP can easily avoid appealing to the minorities, who are anyways absent in BJP’s core ideology that focuses solely on Hindutva prominence or crude majoritarianism. That BJP didn’t field even a single minority candidate in the UP elections speaks volumes about this electoral strategy. When they have swept the polls with such blatant majoritarianism, it is certainly a signal that the majority people of UP wanted a Hindutva icon as their CM. So in that regard it must be accepted that the BJP has shown that they are honest to the people of UP by bringing Yogi Adityanath as the CM.

With the elevation of Yogi Adityanath as the leader of the government in UP, the fringe elements of the Hindutva brigade has ceased to exist, as the fringe has now become the new mainstream. The apologists of the BJP government at the centre, including many leading journalists, actors and businessmen, who had meticulously defended the divisive comments made by the rogue elements in the party, will now have their task cut out. If the re-emergence of cow vigilantism, with increased vigour and amplified brutality, is a sign of things to come, then we are certainly looking at a bleak future. While the fringe is creating mayhem with their vigilantism, the mainstream is virtually supporting them with their increased call of bringing in vegetarianism as the uniform food habit of the nation. The covert support that the state provides to vigilante thugs is not helping the matter either. The whole project of cow vigilantism is aimed at imposing the Brahmanical view of Hinduism to the entire nation, including the Dalits, the Muslims and other minorities.

In the face of such large-scale thuggery, the silence of the media is deafening. The shameful opportunism of the media makes them crawl in front of political power. However when the history of our present times will be written, what will come for serious criticism will be the silence of the aspirational class, who are inherently liberal, but are shockingly averse to raising their voice against the attack on the constitutional values and on the concerted efforts towards destroying our social fabric. 

The facade of economic development that the present regime has erected has blinded them to the methodical erosion of all the values that this great country had kept close to its heart since independence. The liberal ethos of our nation, which helped us to focus on scientific advancement and the resultant systematic, albeit slow, upliftment of the poor, is under grave danger. We have started our hazardous journey down the slippery slope of communalism and religious bigotry. Unless we act with great alacrity, we are in danger of becoming a Hindu Pakistan, where chaos is the rule, order, an exception.

Daylight robbery of the middle class

After demonetisation banks were in the forefront of bringing back calm in the lives of the people affected by the surprise decision by Government of India. Kept out of the loop of the decision making on demonetisation, banks did all they could to bring back normalcy to the financial system of the country. Though remonetisation isn't complete, banks and bank employees were largely appreciated by the common man for their efforts. However many decisions that were taken by the bank after the demonetisation chaos subsided were purely anti-people.

In the essay Banks' daylight robbery of the middle class, this writer argues how banks' decision to put penalty on all those who can't keep minimum balance in their accounts is nothing but daylight robbery of the middle class.

No demonetisation windfall, will the government accept its failure now?

Demonetisation was introduced as a path breaking policy decision on 8 November 2016. What should have been announced by the RBI governor through a press release or a press meet was announced by the Prime Minister of India in a televised live address to the nation. Though Prime Minister Modi’s penchant for high drama is well known, a policy decision that resulted in 86% of Indian currency going out of circulation within a few hours from the announcement of the decision may well have warranted a direct message from the PM.

Since the announcement of demonetisation, the supporters of the decision were unanimous in their assumption that the government will receive a windfall gain from the decision, which it would be able to pass on the people of India. Other than big infrastructure investment, the windfall gain of the government was assumed to be used to spur demand and growth and to give tax breaks to genuine tax payers of the country. It was also believed that government will announce schemes to write off debts of farmers or will put Rs.15,000 in every Jan Dhan account. However Budget 2017 has put to rest all such assumptions of windfall gain for the government and subsequent benefits for the common man.

Even after two income disclosure schemes in this financial year, the net tax revenue of the government grew only by 17%, which is exactly the rate it grew by in the previous financial year 2015-16. The taxes on domestic petrol have increased by 152% from June 2014 to November 2016. The major share of increase in net tax collection could be accounted to this enormous increase. So it becomes clear that demonetisation had no significant influence in the growth of net tax revenue of the government.

In order to adhere to the fiscal deficit target of 3.2% of GDP, the total expenditure of the government is projected to fall from 13.4% of GDP in 2016-17 to 12.7% of GDP in 2017-18. If there was a windfall gain for the government after demonetisation, why should the government restrict itself in revenue expenditure?

Other than curbing and bringing back black money, demonetisation was also declared to be a step taken for containing terrorism and neutralising fake currencies. Even after 8 November, we are not seeing any reduction in the number of terrorist attacks. Reports state that fake currencies, even of the newly introduced 500 rupee and 2000 rupee notes, are available in the country now. The constant shifting of the demonetisation goal posts by the government has now resulted in a new target - cashless economy.

Initially, marketing demonetisation as war against black money had seen most citizens of the country blindly supporting the decision. The government was able to project those against demonetisation as worshippers of black money. But as demonetisation chaos spread to the streets, people started to understand what a stupid economic decision it was. We can see now that in the election campaign trail in UP, Punjab, Goa and Uttarakhand, no BJP leader is speaking about demonetisation. Any mention of demonetisation, the leaders believe, will put the common man against the party.

From the silence of RBI about the amount of money that has come back to the system after demonetisation, we can safely assume that almost all of 15.44 lakh crore of demonetised money has come back. So where is the windfall gain for the government? Are we to believe that all the difficulties we faced since demonetisation were the result of the stupidity of a group of men in the government? It is high time we hold the government responsible for such irrationality.