Wednesday, November 23, 2016

India's demonetisation strikes the poor

India is a confused nation. Suspended precariously between the developed west and the “under-developed” global south, the country swings drastically and sometimes with great peril to itself.

It wants to be modern, after all modernity is the development paradigm that all the ‘other’ countries must have. The west, India’s aspirational model, has over the years through colonisation and post-colonisation drilled into the psyche of the global south that modernity is the way to go. Modernity ignores the traditional society after all being traditional is the antithesis of modernity. No doubt, the biggest casualty of modernity is the demise of the traditional society - a society that is not necessarily bad but just different.

Narendra Modi secured the mandate to be the Prime Minister of India two years ago holding tightly on to the banner of development. During his election campaign he promised to bring back black money parked in offshore accounts, boasting that it would add fifteen lakhs rupees to every household. A promise he could not keep, a promise that the Congress led opposition and his critics used often to mock him. So Modi came up with a Plan B to crackdown on black money.

On November 8, 2016, at 20:45, Modi announced on national television that the 500 (£6) and 1000 rupee (£12) denominated banknotes would no longer be valid from midnight and new 2000 and 500 rupee banknote will shortly be introduced in circulation, to the 1 billion population of the largest democracy in the world. The reaction was nothing but shocking.

The literate, technological savvy and socially connected elite and upper middle class took to their opinion platforms and most hailed it as a ‘masterstroke’, ‘surgical strike against black money’ and applauded Modi for being a “great statesman”. The lower middle class and the poor that account for over 50% of the population (World Banks report 2016) remained in shock not really understanding what it meant. Some still are.

Try explaining to the labourer why the 500 rupees she got for her week’s work at the site will no longer get her any rice and dal (lentils) at the local kirana (provision) shop; or to the farmer whose 1000 rupee banknotes will no longer be able to buy him any seeds; or to the maid who every month, puts aside a 500 rupee banknote in the seams of her old saree so that her abusive husband cannot grab all her earnings for his alcohol addiction, that her banknotes will no longer fund her daughter’s college next year. Or explain to the retired old man why withdrawing his savings from the bank for his daughter’s wedding would be an impossible task and a cause of his death; or the helpless mother who could no longer feed her children with the money she had and so hangs herself unable to bear to see their hungry faces.

Finance minister Arun Jaitley finds it hard to believe that the poor in India would even have a 1000 rupee banknote. They do and its call their life’s earning. For many it takes months and perhaps years to save that. I remember how my maid would every six-eight months bring in a few hundred bucks she had saved and take a bigger denomination – a 500 or a 1000. This she believed would go into her saving box for a life’s mission. Life’s missions for the poor and the lower income groups in India are simple – a child’s education or marriage, a brick & mortar home, a hospital treatment long due or just enough for essentials on a rainy day.

In March 2016, the Reserve Bank of India report estimated that the 500 & 1000 rupee banknotes amounted to 86% of the total currency in circulation. Withdrawing them and introducing a higher denomination banknote would no doubt be a herculean task with catastrophic consequences. But the government announced demonitisation with little consideration to either the cash based economy or the infrastructure. India’s banking infrastructure failed miserably when ATMs were unable to dispense new notes and then not having enough currency for withdrawals. Banks required documentation and set an upper limit of withdrawals to 4000 rupees (£54) a day then reduced to 2000 rupees (£24) indicating that huge disparity in the demand and supply. This threw the economy in complete chaos and it will last for weeks to come.

Also many don’t hold bank accounts forget plastic money. They save through community saving programmes that are primarily cash based or bury the money in a hole in their homes (in some cases quite literally). But development of the poor is indicated by having a bank account, once again feeding into the psyche of capitalism. Perhaps many of them chose not to have a bank account but just because we want them to be modern on our terms we will now arm twist them into opening one? It’s not a question of evaluating the merits of bank accounts but rather the question of choice. Just like the long queues at banks or ATMs, the twitterati compares to standing for tickets to concert or cricket matches. It’s not the same, simply because in the latter you have a choice not to do it. However, in this demonetisation drive, this very choice is taken away.

This is the India we often forget exists in our desire for modernity. India is largely a traditional society, a large population that earns an honest bread after a hard day’s labour. And it is this section of society that has not just being “inconvenienced” but victimised unjustifiably in this quest to score a political brownie point.

Small businesses are suffering and the death toll is rising by the day. Look at just some of those who lost their lives in this meaningless desire by the government to improve its political image. These are not some global businessmen that siphon off their profits to offshore accounts or child traffickers that made their fortune by trading in vulnerable kids. These are not even politicians who have amassed their fortune through questionable means or the underworld who made a bounty through illegal operations. These are honest, hard-working individuals who could not bear the shock of realising their life’s saving were now worthless tender or who could not get access to their white hard earned money in time to pay for crucial events.

It’s not that the political elite do not realise how badly their plans backfired, they do. Modi changed his tune from the hard taskmaster on black money to this brave soldier who has risked his life and limb to take on the bad guys singlehandedly for the greater good of the country. Are we to feel sympathy for the man who now never has to stand in a bank queue to exchange his currency to put food on his table yet largely ignore the plight of the millions that do?

It’s time the politicians acknowledge who the real martyrs (though involuntary and unsuspecting) have been in this currency war. It’s time to admit the mistake and show those who lost their lives some respect. And perhaps give their families some quick monetary compensation, in new currency notes.

(First published in The Beaver, LSE)

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