We are three weeks into Prime Minister Narendra Modi's ill-planned drive of demonetising of ₹500 and ₹1000 notes, and 10 inescapable truths have emerged.
- Black money elimination will be effective and meaningful only when there is elimination of black money in politics, gold, hawala, real estate and benami property.
- Strong tax reform, criminalising tax evasion, stronger tax administration, capacity-building of taxation institutions and special independent economic courts were low-hanging structural changes that remain untouched.
- Demonetisation can play a role in curbing black money but it is a step of coercion. It could have been the last policy step, if at all.
- The implementation of demonetisation has been abominable, uncoordinated and unprofessional.
- Daily amendments (11 notifications in 18 days with hundreds of directives) to the government policy on demonetisation percolate with great difficulty across the country causing much uncertainty and duress.
- Demonetisation has dealt a serious blow to the trust of the common citizen on banking institutions and government.
- A new demonetization economy has emerged that is converting unaccounted money to legitimate money, extracting its commission from the rich and pound of flesh from the poor.
- Lakhs of jobs have been lost. Farmers and the agricultural economy are paralysed. Labourers, daily wage earners, traders and businessmen have borne the brunt tremendously. GDP growth could see a downturn of about 2%.
- The ₹500 and ₹1000 notes comprised 86.4% of value of currency in circulation; they now constitute 7% and 17.4% of the currency in circulation respectively. In a single shot, a serious blow has been dealt to India's cash economy and much of the informal sector.
- 18 billion notes have been made illegal and all the printing presses of India can print only 2 billion a month. This will lead to a minimum negative disruption of nine months.
The intent, implementation and execution of this policy measure have been questionable, and the timing before state elections has been rather serendipitous. Reports of BJP leaders purchasing land and making large cash deposits in the bank before the move reek of information being received beforehand. There is anger at the fact that common citizens are being forced to jump through hoops for a pitiable ₹2.5 lakh in marriage expenditure, while the ostentatious ₹500 crore Janardhana Reddy wedding goes per plan.
AAP has readjusted its governance around demonetisation but has also led the protest against the move based on principled policy critique combined with street mobilisation and national outreach.
It's abominable that private corporate entities such as Big Bazaar are receiving the limited stock of new cash rather than financially excluded states like Bihar, Uttar Pradesh and Jharkhand. And finally, the Sahara-Birla papers from 2012 have put several Chief Ministers and political leaders, including the current Prime Minister Narendra Modi, under the scanner for accepting black money political contributions.
Policy-wise, experts across India and the world, including respected academics and bureaucrats such as the former RBI deputy governor, former finance secretary, former CBDT chairperson, Harvard professors, leading economists and monetary policy experts have panned the move of demonetisation and have been shocked by the lack of planning, focus and thought given to its execution. It may have some positive externalities for a while, but the cost of the shock to the people in the short run and the economy in the long run will be tremendous and disproportionate.
However, demonetisation is here to stay. Politically, PM Narendra Modi has invested too much in this move and it will now be judged as one of his flagship programs. It may also be extremely hard to implement a rollback without causing further damage to the economy.
In this context, the role of the opposition will be interesting to watch. It is my argument that AAP has played the role of the ideal opposition. Here's how.
AAP has readjusted its governance around demonetisation but has also led the protest against the move based on principled policy critique combined with street mobilisation and national outreach. The Delhi government was one of the first states to allow payment of taxes, fares and tariffs related to any arm of government like VAT department, electricity, water and so on, in the old notes to ease the time frame in which the Government of India will hopefully correct the issues in demonetisation implementation.
Despite innovating state programs to adjust with demonetisation, AAP will remain a vocal and strong critic of Prime Minister Modi's demonetisation in policy and politics.
The Revenue Department of the Delhi Government has already conducted 67 camps to bolster financial inclusion and registered thousands of people to new bank accounts. Calamities/accidents across the city in the days following demonetisation, such as electrical fires in jhuggis and in the Tibetan Market, have been met with immediate disbursal of compensation, which is necessary in a time of limited access to cash for these citizens. Multiple departments facing the public, like the DTC (Delhi Transport Corporation), have allowed payments in old 500/1000 notes. Delhi Jal Board has become the first water utility board to incorporate mobile wallets for payment of water bills. Other departments will study the results of this pilot and incorporate mobile wallets based on the result. Many such ideas and implementation changes are being explored by the government.
At the same time, AAP volunteers, who make the Bernie Sanders campaign look haggard and lacking in enthusiasm, have formed a nation-wide task force to ease tensions at banks and ATMs, provide water and tea where people are queuing up, teach roadside sellers and stall owners the usage of mobile wallets and digital payments and have conducted positive dialogues on demonetisation at public venues.
AAP and the Delhi government, both, have also vocally opposed any Bharat bandh, which will further hit the economy despite some parties finding political profit in such strikes. Our ideas and views don't tilt at the windmills. However, it has been interesting to notice how vocal the BJP has become in its mockery and denouncement of Parliamentary walkouts and Bharat bandhs, when it was one of the pioneers of these tactics during the Manmohan Singh years.
The balance in counter-views, adherence to core values, evidence-based opposition and large-scale mobilisation are exactly the traits that India needs and deserves...
Arvind Kejriwal has led the Aam Aadmi Party and the Delhi Government admirably and performed his dual duty as Delhi Chief Minister and conscientious opposition. He has ensured that the Delhi Government reimagined policies and schemes to minimise citizen grievances due to demonetisation. His humane readjustment of our party's political organisation to assist citizens to bolster digital payments, financial inclusion or even providing water at overflowing ATMs, flow from our ideal of minimising citizen pain. However, this won't silence our principled opposition to demonetisation— its intent, rollout or its implementation. AAP will continue to be the voice for the voiceless, and those who are ignored in self-aggrandizing polls on mobile applications.
This is why despite innovating state programs to adjust with demonetisation, AAP will remain a vocal and strong critic of Prime Minister Modi's demonetisation in policy and politics. Our opposition may sound tone-deaf or louder than you want on your social media at times but it isn't. The balance in counter-views, adherence to core values, evidence-based opposition and large-scale mobilisation are exactly the traits that India needs and deserves in its national opposition. And Arvind Kejriwal and his army of common Indians are delivering it.