Demonetisation Imbroglio: Chronic Inadequacy Of Scale

Demonetisation Imbroglio:  Chronic Inadequacy Of Scale

School blazers in stout serge, were, at least in India’s socialist heyday, usually given out to young senior school boys in hill schools, always a size too large.

That way, the expensive garment could last the hard-wearing for two years, instead of being outgrown in one.

If only our doughty government planners - political, bureaucratic, and expert, knew how to plan for tomorrow’s needs likewise.

In this, it is the Americans who have a feel for scale, followed, by the Chinese.

But reviewing the commentary on our inadequate little currency note presses at Nashik, Devas, Mysuru, and Salboni, is downright embarrassing.

Thank God we are not presently at war with anyone, because the state of our ammunition reserves, for any and all of our shooting devices, is also just as precarious!

Not that our military equipment, for land, sea and air, neglected, and mostly unreplenished for thirty years, is in better form.

But fortunately, it is only the war against counterfeiting, black money and the cash economy, unleashed last month, that occupies most of our mind-space at present.

That this demonetisation has caused hardship for many ordinary citizens, urban and rural, and unprecedented turmoil in their affairs, in what is, after all, a peacetime situation, is undeniable.

The ongoing narrative only persists in highlighting the glaring capacity and logistic inadequacies. The government argues that secrecy precluded adequate preparation, but this is certainly not the whole story.  

But, ordinary people, if not the privileged set, put upon as they are, still largely agree that there could be a silver lining to the chaotic mess it has engendered. To them, it is worthwhile pain for a cleansing of the corrupt system.

Underlying this objective however, is the certainty that the government’s capacity constraints will be challenged, in terms of catching money launderers, and penetrating the arguments and explanations of black money depositors, who insists they are not. 

How many policemen, IT inspectors, ED officials, and judges, are there, to take on this mammoth cops and robbers game?

Capacity constraints are indeed everywhere, and will only get worse, unless the Government of India (GoI), changes course on our chronic and mean under-provisioning in all things.

The demonetisation per se, if followed up by a number of measures to go digital, and incentivise a cashless economy, the latter being done already,  but including, and crucially, the abolition of direct taxes; could be revolutionary in its benefits, both for the public, and the economy.

It is futuristic in concept, because this time, the notes cancelled, unlike in 1978, are in every hand, and not just those of the rich. Also, the official economy itself is at $2.3 trillion, and not at a mere $180 million.

It is Prime Minister Narendra Modi’s visionary dare, and could lead the world by the sheer scale of it, for once - as Microsoft’s Bill Gates was quick to realise.

Executed properly, and seen through, though it may seem improbable at this juncture, despite the recent induction of Nandan Nilekani of Aadhar card and Infosys fame; it will skip quite a few steps in our ponderous development cycle. 

This, to the long term benefit of our gargantuan population of 1.3 billion.

But meanwhile, the currency presses, are floundering, mis-printing and breaking down, from their three-shift operation.

They are furiously cutting corners on important things like currency thread and drying time. Their personnel are probably in a state of panic, pressurised by their superiors in the Ministry of Finance (MoF), and the Reserve Bank of India (RBI).

Their personnel, still dependent on imported everything, 70 years since independence -machinery, paper, ink, security thread, are also used to a stately pace of work, and not this kind of frantic non-stop operation, seven days a week.

And, despite this, a month down the road, from the demonetisation announcement of November 8^th, it is clear they will take at least another six to replenish the notes that have been trashed.

But would this have happened if we had mints and currency presses that were big enough to replenish the Rs. 15 lakh crores or so, in a week flat? And if we had  the appropriately massive stocks of currency paper, ink, security thread, design expertise and ink masters; all available from indigenous sources, close at hand.

At the delivery end, the PSU banks used to being insouciant with customers, don’t seem to know what has hit them.

It isn’t only the unfit, standing in line, who are dropping dead. Quite a few startled and stressed bank officials, have also martyred themselves to the cause.

PSU banks, non-performing asset(NPAs) ridden, with all shades of colluding bank officers, hundreds of branches, lakhs of account holders, plus the private Indian banks, also with vast numbers of accounts, are handing out tokens, and disbursing to as many as they can.

That many of these bankers have been caught handing out large sums from the back door, to crooked customers after banking hours, is just another set of challenges for the government to confront. Fortunately, they are not all getting away with it!

For the straight and narrow however, these PSU and private Indian banks, get daily feeds of currency notes worth Rs. 6 lakhs, or less, per branch, even now.

They can’t even hand out the declared Rs. 24,000/- per week to account holders, and ration out Rs. 10,000/- instead, to the first 60 that have taken tokens at 8.30 am, and come by when the cash arrives at 10.30 am.

The foreign banks, with fewer account holders, and branches, are able to disburse Rs. 24,000 per account held, per week, but either in Rs. 2,000 notes, or in stinking, torn, marked, hundred rupee bills, recalled from the condemned bins of the RBI. The Rs. 500 new note is mostly unavailable, except in some branches of the State Bank of India (SBI). Smaller denomination new notes, the Rs. 50, Rs. 20 and Rs. 10, bundled out at first, have now stopped coming through.

And so, this demonetisation roll-out can be seen as a microcosm of the state of affairs in this country. One that is unable, as yet, to meet the needs of its population because of its chronic lack of scale. And indeed to meet its aspirations, due to the backlog of smallness and socialism inspired, povertarian neglect.

So now, if good intentions are not to pave our collective path to Hell, this narrow planning mindset, above all, must be changed.

We need to think in huge over capacity terms, and make ready for a population of 2 billion, in all that we conceive of. We should pitch to provide infrastructure for a GDP of $ 15 trillion, and this not in  purchase power parity (PPP), terms either.

After all, just amalgamating the black economy with the white today, easily done if direct taxes are removed in favour of a universal banking transaction tax, will give us a GDP of anywhere between $ 3 trillion to $4.6 trillion instantly.

And this is not counting the flow of clandestine money that will return to our shores, should this move be undertaken.

Pain undertaken to catch and punish the corrupt  is  laudable, but it can be dwarfed by a reform that abolishes black money itself, and makes the bank the best possible place to hoard cash, both productively, and freely.

For: Nationalist Online English

(1,221 words)

December 9^th, 2016

Gautam Mukherjee