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December 12, 2017

Demonitsation causes immense hardship to the common man


Newsroom24x7 Staff

A former bureaucrats who has held important positions in Government of India has joined the discussion on the present economic mess in India by pointing  to gaping gaps and drawbacks in the hasty decision by the Modi government to discontinue the use of ₹1000 and ₹500 notes.

The bureaucrat, a former Secretary Rural Development points out: “Anyone who has implemented the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) knows how poor the coverage of commercial bank branches in India is, how inadequate regional rural banks and cooperative banks are, and how ineffective post offices are for purposes of money disbursement.”

As RD Secretary, he goes on to say that he was shocked to discover this truth even in the case of a developed State like Tamil Nadu,. The situation is appalling in the case of the backward States. There is a discussion on this in Veerappa Moily Committee’s Report on Administrative Reforms.

Reiterating that all of us would like to see black money curtailed, if not eradicated, the bureaucrat further states:  ‘I initially supported the demonetization move assuming that Rs.1000 and Rs.500 denominations would constitute only about 20-25% of the currency in circulation. But when I learnt to my great shock that they constituted 87% of the currency in circulation, and that the economy is now supposed to run on the remaining 13% of the currency, it became apparent that this move had not been thought through properly.’

Another pointer, The size of the new Rs.2000 note could have been made the same as the Rs.1000 note so that it could be dispensed through ATMs straight away. Ditto for the new Rs.500 notes. Even this has not been thought through. This means that the limited supply of Rs.100 notes will have to be apportioned between bank branches and ATMs, mostly the former and most ATMs will not be functional for quite some time to come.

It is being emphasised that manufacturing new currency holder trays and recalibrating the 2 lakh ATM machines all over the country may take a month or even more  So people will have to queue up in front of bank branches to withdraw money, and the very purpose of establishing ATMs is defeated.

It is also common sense that the logistics of the situation will dictate that bank branches and ATMs in urban areas will be serviced first, and rural areas later, and the remote hilly, forested or desert areas last.

The rich and upper classes, through their contacts, will corner the new notes first and the middle classes and the urban and rural poor will be serviced last.

With 87% shortfall in currency and with ATMs in a mess, this is not a case of ‘making sacrifices for a few days’.

While asserting that there is no politics in pointing out human suffering, the bureaucrat says: “This will cause dislocation of the economy for a few months to come and plenty of inconvenience to the common public, more particularly, the rural and urban poor and the people dwelling in remote hilly, forested or desert districts and experience their pain. The initial gains from the rhetoric of the ‘war on black money’ will be more than offset by the erosion of popularity due to the hardship caused to the common man.”

The RBI Governor Urjit Patel has come under attack. His resignation has been sought on the ground that he should have briefed the Cabinet properly about the various ramifications of the move and RBI’s state of preparedness.

These pointers by the former RD Secretary are floating on social media.

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