A black-day marking failure
The 8th of November, 2016 will forever be remembered as a dark day in India’s democratic history. It was on that day, the prime minister took a unilateral decision to invalidate 86% of India’s legal tender. The action, commonly referred to as demonetization, is now inarguably hailed as a colossal error in judgment that led to an unprecedented destruction of value and caused irreversible personal loss to millions of our country’s workers and entrepreneurs.
The Indian democracy rests on three independent and sturdy pillars – the legislature, the executive and the judiciary. If any one of these pillars fail, the other two are supposed to ensure that the constitution is upheld. When such checks and balances fail, it is tantamount to the failure of our democratic system. This is exactly what happened during demonetization.
The Legislature, arguably the first among equals, was callously bypassed by the prime minister, who also largely ignored the executive branch, save for his handful of advisors. Preceding the order was a sham of a decision making process, that ignored the advice of subject matter experts such as the finance secretary, chief economic advisor and even a former Governor of the RBI. There were no debates in parliament, a parliamentary standing committee or even just an assent received in the ‘yes men’ cabinet of union ministers. To top it all off, the most hallowed of institutions, The Reserve Bank of India, abdicated its responsibility to the people of India by clearing this scheme in a truncated board meeting without due deliberations and thinking through its implications to the economic system.
The goals of the exercise were allegedly simple - eliminate black money, end the existence of counterfeit currency and with it, the internal and external terrorism it facilitated. One year down the line it is now clear to all citizens that despite the hardship suffered by and sacrifices made by them in the hope that these goals would be achieved, not a single one has been attained.
The black economy and corruption is alive & well. No significant stock of black money has been unearthed. No enhanced security features have been incorporated in the new legal tender designed and printed by the Reserve Bank of India so as to prevent duplication of these tenders. Terrorist activities have continued unabated and several army camps have been attacked.
The goals achieved, unintended as they might have been, were a complete breakdown of commerce in the agrarian and informal economy, massive loss of worker productivity and a reverse migration back to rural india as daily wage earners in real estate and infrastructure were rendered jobless. A collapse in the price of agricultural commodities that were bought and sold in cash based marketplaces across the country, led to violent farmer protests in places like Madhya Pradesh, which was put down by indiscriminate police firing resulting in several deaths. The cash crunch also forced several thousand small and micro businesses that operate on an all cash value chain to shut shop permanently.
When faced with the apparent failure of his ill thought schemes, the prime minister changed the narrative to a new one saying that he was pushing cashless transactions in the economy. Several prized schemes notwithstanding, the level of cashless transactions have returned to normal levels existing prior to demonetization. In the month of September 2017, the Reserve Bank of India announced that nearly 99.6% of the cancelled tender was returned to it. This crushed the fond hopes of the Government that a large portion of such tender would not return to the banking system, allowing the Reserve Bank of India to extinguish its liability and remit this sum to the Government in form of dividends. Ironically, demonetization had the exact opposite effect. Due to the fact that the banks parked the excess money deposited with the Reserve Bank of India, the RBI had to pay large amounts as interest to banks. This resulted in a near 50% decline in the amount of dividend paid by the RBI to the Government.
In the absence of a mea culpa from the government that is instead choosing to celebrate November 8th as anti black money day, the question that bothers me is that who will deliver justice to the millions who lost their livelihoods and the scores who lost their lives? The final pillar left standing in the wake of the demonetization storm is the Judiciary.
Yes, it failed to adjudicate the matter within a reasonable period of time when the Government reneged on its promise of extinguished currency at the counters of RBI from January 1st 2017 to March 31st 2017. Yes, many public interest litigations were quashed in high courts around the country. However, the highest court in the land, the Supreme Court, has said that the issue of demonetisation is of public importance and has far-reaching consequence. It has instituted a Constitutional Bench to hear the petitions challenging the policy. This Bench has to address a batch of nine questions including but not limited to the question of whether the demonetization notification issued by the RBI on November 8th was in violation of the relevant provisions of the RBI Act, 1954, thus terming the entire action illegal.
Many have lamented that whatever the ruling of the Supreme Court might be, the damage done cannot be reversed and one cant very well punish the government for faulty economic and fiscal policy. I agree with this assessment to a degree but believe that even if the judgment of the Supreme Court does not result in a tangible outcome, it will hopefully serve notice to future governments not to repeat these mistakes.
At the end of the day, the real pillars that uphold our democracy are our citizens. Our rights and duties drawn from the Constitution and our power to exercise our franchise, provide us with the means to displace the executive and the legislative powers of those who abuse our trust. I know we have decidedly short memories but let us try to remember this day for as long as we can. After all, it isn’t everyday that the three pillars of our democracy fail and we are called upon to deliver justice and restore our faith in the constitution.