Demonetization in India

Demonetisation, in simple words, a process of stripping a currency unit of its status as a legal tender, as per recent economic statistics, has turned out to be a regressive step. As most of the observers seem to agree, it was a failure in relative to the costs it imposed on the country and its people. The whataboutery of the government as to what this regressive step might manage to achieve in the future remains a distinct possibility, something that could have been achieved by other practical means at a far lesser cost to the poor, albeit without costing the loss of lives.

The primary reason behind the politics of demonetisation hasn’t unfolded but the rising discontent amongst the public is slowly seeing an organised outlet. If we observe the same in retrospect, bode to support the vehement act of demonetisation, it doesn’t sync well for the economy, neither socially nor politically. It doesn’t denote that the people failed to identify their interest, had that been the case then the process of demonetisation wouldn’t have escaped unscathed. But in retrospect, the political support for demonetisation is reflective of a deep economic pessimism in India viz. convincing ourselves that we have not much to lose by the ill-thought-out mobilization(s) of this kind. The confidence imposed by the public in the government as a consequence of their desperate attempt to outdo the ills of the preceding governments. Had it been a more dynamic economy, people would have taken the cons into account.

The government as perceived from its political tactics’ is aggressively invested in narrating the saga of its own success, whether bonafide or vehement. In pursuance of which it is preventing itself from learning of its own mistakes and the mistakes committed by its predecessor(s). Something which is again reflective of the present economic slowdown. Tethering all the promises and hype to the ground i.e. busting of the myth per se. Every country’s economic slowdown is a resultant effect of many contributing factors, India being no different- institutional logjams, the rising transportation cost(s), export growth slowdown, adjustment to GST etc. But demonetisation has had a major impact, big enough to directly affect all these resulting factors, thereby inflicting disruption in the economy. Another effect which hasn’t been measured is the indirect psychological effect it has had on the economy and the mindset of people. The underestimation of the power of the invisible hands of the market.

Demonetisation was brought into the political fiasco under the garb of a moral crusade rather than a well thought out exercise with sophisticated and practical implications. An act which cannot be perceived even by the senses of a 5-year-old. The more government remains invested in the narrative saga of its success, the more this economy will remain vulnerable to voodoo interventions. Despite the narratives of the fallible successes and blaming of the preceding government for a cow mandate, India is failing to bring in private investment despite global interest in its market. The same is effected by a variety of reasons viz. bad debts, discontent in the governance, red-tapism, excess capacity etc. Although, deliberating on the same is nothing more than psychological analysis since citing facts here would be nothing but a contradiction to the narrative saga of the present government. But surely none can negate when the demons of demonetisation might return to haunt the black money crusade. 

The lack of focused intellectual and political outrage at what is at best a very modest economic performance should be worrying. It is of a piece with the government’s constant success in trapping us in an air of unreality. It also means that the political pressure to deepen the politics out of irrelevant disputes will continue. The invisible “technical reasons” behind the slowdown will have to be masked by the “invisible hands of the market” which only the present government understands. After all, Newton and Einstein were a result of Ram Rajya.

Here have some “achhe din” for all your troubles.

by boringbug

7 responses to “Demonetization in India”

  1. Could you explain this a bit for me? Living on the other side of the world, the media hasn’t really covered this here. My last day in India was actually the day the demonitization happened. I can see that it was a huge inconvenience for many. (I was lucky, I was on a plane bound for home within a day of its happening). But how have there been long term effects? When I left it looked like what needed to be done was to trade in your old notes and be done with it. That sounded like an immense inconvenience – lots of line ups and waiting. But how did this turn in to a longer term issue? I know there must be something I am missing.

    Liked by 1 person

    1. Hello Todd. Thank you for your interest.
      It might take a long post to explain the situation with facts and figures. I might update this in a detailed blog post for your convenience. Probably by 19 November, 2017 (morning: IST).
      But till then keeping the details limited, the demonetisation costed 1.5 million people their jobs, 140 lives were lost, the entire economy growth slumped to 5.7%, job growth ended up in negative and the government got confused. People had to stand in queues for days & nights, and in some cities for months, while people could only exchange Rs.2,500/- on a given day.
      There was absolute turbulence, yet people kept their cool and patiently obeyed the central government’s instructions. The currency notes that were printed to supplement the banned notes couldn’t fit in the ATM’s. Hence the ATM’s of the entire country had to be re-calibrated which in itself is humongous task and the government wasn’t prepared for it.
      In short, it was because of the people of India and their patience that thing’s didn’t get completely out of hand.


    2. Wow – OK, I am beginning to understand. And now that I think of it, that first day I had to take an Uber from the airport back to the hotel and didn’t undertand that there was also a Rs.150 charge on top of the fare. This wouldn’t have been a problem had I actually had any cash of any value but I didn’t figure it out until the driver picked me up. He took me to the hotel and told me I didn’t have to pay the fee. I felt terrible but there was nothing that could be done. So effectively his fare was eaten by that mistake. How many millions of small things like this happened in just that day? So yeah, now that I think of that on a larger scale along with the Rs.2500/day maximum I can see that this could drag on for a long time.

      I didn’t know that about the ATMs either. Last I heard as I was leaving (literally, I was gone within a day of that) the ATMs were going to be back in a day or two. So that sounds ugly. Now, as a tourist, I can see how that would be a huge problem. I lived by the ATMs. So now, without cash, I would survive (credit cards at restaurants and hotels) but simple things like taking an auto to the airport now becomes difficult to impossible. And sure, those restaurants are getting their money from my credit card, my hotel is, but the taxi drivers, small businesspeople, little restaurants whom I would normally go to now are deprived of my money. Everyone loses.

      Thanks for explaining a bit. That helps a lot!

      Liked by 1 person


      Here. I tried to consolidate the facts and figures for your ease of reference. Hope it’ll help you understand more of what transpired in India.

      Liked by 1 person

    4. Wow – nicely done. It was very helpful in my understanding. What a mess they’ve made!

      Liked by 1 person

    5. Thank you. I hope I was able to shed some further light on the issue.

      Liked by 1 person

    6. You totally did!

      Liked by 1 person

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