There was a Bollywood film in 1978 called Kasme Vaade starring Amitabh Bachchan and Rakhi which I remember watching with my boarding school friends. But this is not so much about the film it’s more about one of the songs of the film “Kal kya hoga kisko pata, abhi zindagi ka le lo maza”, which was a rage among kids who were about to enter their teens. I had long forgotten this song till I heard our former Prime Minister Manmohan Singh speak last week in the Parliament and the song just came like a bolt from blue.
I don’t recall as when our former Prime Minister who is also a leading international economist spoke in Parliament but when he spoke we all listened. He made four key points during that speech which merits comment. He agreed with the demonetisation drive introduced by Prime Minister Modi as he couldn’t have said anything on contrary which would have meant disagreement on the issue of cleansing the scourge of black money from the system. But frankly speaking it didn’t say much.
While agreeing with the objective he described the demonetisation as a monumental mismanagement which could be understood by the way it was implemented as the whole exercise has so far been less than smooth and you cannot expect the major opposition leader to gloss over govt’s lapses in the planning and execution of remonetising the economy after scrapping the old high value currency in a single stroke.
The third key point in the former Prime Minister’s speech was very important as this is where Singh’s statement in the Rajya Sabha began unravelling the intricacies and cobwebs of demonetisation. He minced no words and made a frontal assault on Modi Govt by describing the current demonetisation drive as organised loot and legalised plunder. Now how otherwise you can explain the serpentine lines outside the lakhs of ATM and bank branches in the country jostling and fighting to get their legally hard earned money.
We don’t see those archetype hoarders of illegitimate or black money in the more popular lingo, standing in queues as it’s open secret that most of those big fishes with deep pockets had a prior info about this major policy decision of Modi govt and they already had parked their ill-gotten fortune in some other popular asset forms like gold and real estate. It’s also common knowledge that banks, petrol pumps, hospitals and jewellers in most of the places saw this demonetisation drive as once in a life time opportunity to make their millions and in that sense it is an organised loot and legalised plunder.
And finally, the former finance minister who also subsequently became the Prime Minister of India scoffed at the suggestion of Modi Govt that these setbacks are temporary as the long-term gains to the Indian economy would more than compensate the difficulty and turmoil faced by an ordinary citizen. Modi further said that he knew that people are facing inconvenience on account of shortages of cash but they need to bear it for another 50 days as things would dramatically improve after that. He needed to remind not only the fellow parliamentarians but the entire country that he was wasn’t just an ordinary politician but also an economist of international repute when he contemptuously made that famous quote of legendary economist John Maynard Keynes, “In the long run we are all dead.
Manmohan Singh was not haughtily disdainful or pointlessly silly when he made that comment as he didn’t quote Keynes out of context. He reminded the disruptive Prime Minister Modi by making that famous statement, “In the long run we are all dead”, and he tried to articulate the principle by which most of the governments lived all these decades. Being an ace economist Manmohan Singh knows a thing or two better than anybody that the current demonetisation is a death nail for the economy as it is almost impossible to turn the predominant cash-rich economy into a cashless economy overnight.
Even by conservative estimates the GDP will be hit by roughly 2 to 3 percent resulting in a massive hit of more than 4 lakh crore of rupees. The demonetisation has hit Indian economy across the sector resulting in losses of elephantine proportion in terms of business and man-hour losses. A large section of immigrant workforce depends on their daily wage payment and the demonetisation will have a disastrous effect on them. More than seventy people have perished since November 8 announcement and the current chaos is not helping either as people are fast losing their faith in the currency and banking system which will have a debilitating effect on the general well-being of country’s economy.
According to reliable sources the rating agencies have downgraded India’s rating in the light of the recent move by the NDA govt on making the economy cashless. By scrapping the high denomination notes of Rs 500 and Rs 1000 in order to check the flow of black money, has led to a cash deficit situation and banks are struggling to replace the demonetised currency. The move could dent the consumption growth in Asia’s third-largest market which otherwise got a fillip after the bountiful monsoon. In the short term the black money present in the system would have also increased the consumption but now it will suddenly come to a halt.
The flow of hard currency has suddenly stopped which has also affected the manufacturing sector and the general economic activities have come down. According to Surajit Mazumdar, economist and professor at Jawaharlal Nehru University warned that this will have a negative impact on the economy. Mr. Mazumdar said that areas such as informal credit sector will be immediately affected and once they are hit the ill effects remain for a longer period. For example if a producer or a manufacturer is not able to sell his product then he is unable to repay his debts which affects in settling his credit which hits him hard in the long run.
Modi has taken a gamble by making an effort to make the economy cashless and his leadership, his government’s and his party’s future is at stake by taking an unprecedented step which no other Prime Minister had dared to take in the past. Assembly elections are about to take place in Punjab, Goa and Uttar Pradesh and it will be interesting to see as how voters react to Modi’s historical but daring step, will they repose their confidence in Modi by voting for BJP to endorse his step of fixing the black money hoarders who got away with their misdeeds with impunity and that too for long. There is another possibility that they will like to reconsider their option after experiencing the disruption in economy which made their day to day life miserable. Instead of “In the end we are all dead” Manmohan Singh may have crooned.
Que sera, sera
whatever will be, will be
the future’s not ours to see
Que sera, sera
what will be, will be……
DISCLAIMER : Views expressed above are the author’s own.