Note-worthy step but bad execution

That Prime Minister Narendra Modi is not a quietist will accepted even by his detractors. Nor would many doubt that he means business, that he wants to be the harbinger of change, even as people would debate over the quality or desirability of change he wants to bring. Viewed in this context, demonetization can be called a sincere move to curb black money. Its execution, however, leaves a lot to be desired.

A weird polarization seems to be at work today. On the one hand are the Modi supporters—in the government, in the Bharatiya Janata Party, among opinion makers, public figures, even those slugging it out in the serpentine queues outside banks and ATMs—who are fervently backing demonetization. In fact, many of the millions inconvenienced are not grumbling; it looks like they are feeling the nationalist pride of adding their mite to the glorious project of nation building.

On the other hand, there is the entire Opposition, accusing the government of harassing the man on the street, playing havoc with the informal sector, and hurting the economy in general. The cynic may say that non-BJP leaders’ ire emanates from the asymmetry in information that has led to asymmetry in resources: the saffron party, because it is in power, managed its black money in an efficacious manner, while others are left to feel the brunt of the decision.

In such a milieu, it is difficult to get the real picture. How good is the move? Is it as revolutionary as it is made out to be? Or as bad as Modi detractors say it is? The BJP’s Rajya Sabha MP Subramanian Swamy, who is also a prominent economist, helps us understand the issue.

In an interview to The Times Of India (November 14), he said, “The only dimension in which I welcome this move is that it has actually caused grievous injury to terror financing. That is without doubt and he (Prime Minister) gets an A. On black money, I have said to the PM in my letters as well that you need a package. The package has to include both punitive measures as well as incentives to avoid black money. If you are going to combat black money by measures like this one, it should be accompanied with abolishing income tax and simplification of the indirect tax system because there are lot of duplications and unnecessary taxes for small amounts.”

Swamy has hit the nail on the head; the attack on the parallel economy has to be comprehensive and multifarious rather than simplistic and unidimensional. For the problem is complex. But, unfortunately, government action is anything but multipronged. It is also atrociously inefficient; the authorities concerned have been evidently laidback in their approach and response. As Swamy told Hong Kong’s South China Morning Post daily, “I am appalled by the lack of preparation… We have been in power for nearly two-and-a-half years. The Finance Ministry should have prepared for this from the very first day. It is easy to argue that the Ministry was not in the loop, but that is no excuse for not having a contingency plan.”

The result is that the underclass is worst hit. There are innumerable reports in the media describing the plight of the poor. One such is ‘Cashless in capital, labourers get pain & hunger as daily wage’ ( in The Times Of India (November 15). For those in the informal sector, the problems pertain to survival; for them, demonetization is much more than ‘slight inconvenience.’ But glib Modi-bhaktas are unwilling to recognize this reality.

The fact that a large number of Modi-bhaktas are on the right side of the digital divide may give the impression to all of them, and others, that everybody is happy despite some temporary hassles. It has all become an echo-chamber, not much unlike liberal establishment in the US which has convinced itself that Donald Trump would lose. In our country, too, such a situation prevailed in the last months of the Atal Bihari Vajpayee regime. The poll results of 2004, however, dispelled the seductive ‘feel-good factor.’

One major factor responsible for Vajpayee’s fall was that the middle class had felt alienated. There were UTI problems; there was almost no relief in income tax; so, despite his excellent record in employment generation (almost 1 crore jobs a year), he lost the general election, the India Shining campaign notwithstanding.

The Modi government should not forget that, apart from the salaried class, another major constituency, that of traders and shopkeepers, is badly hit. It can’t afford to be cavalier or blasé; it has to do something to win over this vast section.

As I mentioned earlier, Modi’s initiative is sincere, but he should ensure to make it comprehensive, less painful, and more effective.