Hurling The Hex by Koyesha Mukherjee
The debate on monetisation is vitiated by delusional hopes of the impact it might have on the black economy. Tall claims are being made about the ability of demonetisation to “flush out black money”, “crush the shadow economy”, or achieve “an all-out assault on the parallel economy”, to quote just a few expressions used by the government and its admirers. Thinking of it as a decisive strike on the black economy is a fallacy. The world’s largest democracy has literally become cashless ever since that fateful announcement to take away 86 per cent of the currency from the hands that toil for India. In his inimitable style, Prime Minister Narendra Modi has repeatedly emphasised the need of “start-up India and stand-up India”. Today both are happening in good measure; people are starting up early morning in search of currency notes and they are also standing up in long queues.
Demonetisation has affected every aspect of our lives, from the way we buy groceries to how we plan our holidays. The time people waste in long queues, the liquidity crisis in the informal economy, the worker layoffs, and of course many tragic deaths. Some reports already suggest that economic activity in rural markets has slowed down. One of the reasons why demonetisation is causing so much havoc is that banks are out of their depths in the first place, especially in rural areas as banks are finding it difficult to keep up with wage payments, pensions and scholarships. The whammy could not have come at a worse time. Being the peak wedding season, those who do not want to scrimp on costs in the time of a cash crunch, wedding planners who have tied up with banks is an option. So while the cash crisis may have thrown many a family into a tizzy, affected vendors are also changing the way they do business to stay in the game. As the country drives towards a cashless environment, the initial awe and confusion have given way to a flurry of concerns. To incentivise the move towards a cashless economy, the government has come up with a rash of discounts and freebies on digital transactions.
Apart from all the individual suffering, our economy is being eviscerated. Farmers are unable to sell perishable produce, to buy grains for the new harvest or to pay labourers. Transporters are unable to transport goods across distances. Commerce has shut down in many places, with small businesses going bust. Eyes wide open, India has blindly opted a bumpy route all in the hope that the elusive black money holder will be ensnared. Indeed, it seems we are a country that is heading back to the future, as we race to become a cashless economy waiting patiently in serpentine queues collecting as doles rationed cash which is rightfully our own. This artifice is the cast of a horrific spell.
“Demonetisation in a booming economy is like shooting at the tyres of a racing car,”- Jean Drèze