(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.
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.
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