On 8th November 2016, at 8 p.m. India’s Prime Minister Narendra Modi, came on a national broadcast and withdrew the sovereign guarantee to 500 and 1000 Rupee Currency notes.
We recently passed six years of this decision. Many called this decision a ‘master-stroke’ that would propel India forward.
The stated objectives of the move were
- To eliminate black money in the country.
- To end corruption happening due to these high value currency notes.
- To end terrorism by destroying currency available with terror organizations.
Later many other goals were added and the goal posts shifted several times.
The question is, did this move really help India?
Empirical evidence now available seems to give the move a thumbs down.
But what if the real motives were something else?
What if the real motive was to
- Increase poverty in the country?
- Increase dependence of the people on the government for survival?
- Destroy jobs via destruction of the economy?
If these were the real objectives then one can say that the demonetization was a roaring success. Demonetization’s quantitative impact has been calculated at a 1.5% decline in GDP. That figure itself is a 2.25 Lakh Crore loss to the economy. It brought the economy to a complete standstill for more than 6 months as replacement of currency took its own time. As the economic cycle was broken, small and medium enterprises that give employment to more than 75% of workforce were forced into closure. As a result our imports rose in the subsequent years as the big corporate don’t want to create goods and services created by medium and small to medium enterprises. And as jobs were lost, people were pushed into poverty. Wages fell as they do in a contracting economy because the supply of jobless people increased and people were willing to work at lower salary, same salary without increments or take cuts in their emoluments.
As people fell into poverty, they started to depend on government schemes. MNREGA, the scheme cursed by Modi witnessed increase in demand from all states.
As incomes fell, governments income also fell.
Unfortunately, Government later introduced GST and brought more items under the tax net. This saw further erosion of buying capacities and increase in poverty. Thus more dependence on the government. Third big hit was when a brutal lock down was imposed on the country due to Corona Virus. That was perhaps the last nail in the coffin.
Data available says GDP fell and went 25% negative.
Government of India is running a free ration program since then in which it itself claims to provide free ration to 80 Crore (or 60%) of Indians. World wide reports point to a death count of 50,00,000+ in India and 80% of people pushed into poverty worldwide live in India (as per international reports).
The free ration program will continue till December 2022.
Thus if you look at the second set of goals, demonetization helped Narendra Modi Government to gain full control over the citizens and made them dependent on itself. Thus they were successful in appearing as benevolent gods that took care of its citizens. This is leading to citizens feeling obligated to the government and Narendra Modi in particular and helping him win elections to stay in power.
Thus as far as Narendra Modi and BJP is concerned, Demonetization has been a roaring success, a master stroke undoubtedly.
