[This is a comprehensive, well-formatted report by Lokayat that provides a clear understanding of demonetization and its attendant injustices. The URL for the full report is below, we include the introduction here]
Those who take the meat from the table
Those for whom the contribution is destined
Those who eat their fill speak to the hungry
Of wonderful times to come.
Those who lead the country into the abyss
Call ruling too difficult
For ordinary men.
– Bertolt Brecht
In a televised address at 8 pm on November 8, 2016, Prime Minister Narendra Modi announced that currency notes of Rs 500 and Rs 1,000 denominations would no longer be legal tender from midnight that night. He stated that people holding Rs 500 and Rs 1,000 notes could deposit them in their bank and post office accounts till December 30, 2016. He further announced that new notes of Rs 500 and Rs 2,000 will soon be introduced. The Prime Minister stated that this step was being taken to curb counterfeiting and funding of terrorism with fake notes, and most importantly, to crack down on black money in the country.
The total currency in circulation in the country is around Rs 17.9 lakh crore. Most of this is in Rs 500 and Rs 1,000 notes, these accounting for 86% of the currency in circulation. Therefore, till the government replaces the abolished currency with new currency notes, for the present, 14% of the currency has to serve the task of the whole. The total value of the Rs 500 and Rs 1,000 notes in circulation is around Rs 15.44 lakh crore, and these were printed over a span of 15 years.1 To prevent the economy from collapsing, the government has to quickly replace them. Even though the Prime Minister claimed that the step was being planned for more than nine months, the monumental inefficiency of the Modi Government becomes evident from the fact that it made no advance preparations for quick replacement of the old notes with new notes. According to a news report that quoted former Finance Minister P. Chidambaram and also a former Reserve Bank of India (RBI) Deputy Governor, even if the government prints note for note, given the capacity of the four currency note printing presses in the country, it is going to take at least six to seven months for these printing presses to print new. Demonetisation: Yet Another Fraud on the People notes to replace all the scrapped notes. Once printed, the notes must reach granular India—5,93,731 inhabited villages, 4,041 towns, 3,894 census towns and 1,456 urban patches. The printing of such a huge quantity of notes requires large quantities of paper and ink, which are largely imported. Such an elementary step as importing the required quantity of ink and paper was also not done in advance—ink is already in short supply and the government recently floated a tender for importing it.
The sudden move without adequate preparation for its consequences has led to chaos across the country. With 86% of the currency sucked out of the system, even though nearly two months have passed since the demonetisation announcement, there is still very inadequate cash with the banks. People were first forced to queue up outside banks for hours to exchange/deposit their old notes. After that, they now have to stand outside banks almost daily in long queues to withdraw their money, because even after standing in line for hours, at the most people are able to withdraw only Rs 2,000–4,000 at a time. The worst hit are the daily wage workers, as they are forced to forgo a day’s wages in order to stand in the queues. Dozens of people have actually died waiting in these queues.
Adding to the woes of the people are non?functioning ATMs. Initially, the problem was that the ATMs were not calibrated to distribute the new Rs 2,000 and Rs 500 notes. It was only by early December that nearly 90% of the ATMs got recalibrated. But even after that, the problem of standing outside ATMs in long queues has not reduced, as there is not enough cash, and so either one can withdraw only small amounts at a time, or the ATMs run dry just 2–3 hours after being refilled. The situation is worse in the rural areas, where the banking network is not so widespread and one bank branch caters to several villages. Banks often have no cash for 2–3 days, and even when they get cash, it is so insufficient that people often have to go home empty?handed after standing in line for hours.
The government’s ineptitude is also revealed in its decision to first introduce the Rs 2,000 note rather than the Rs 500 note. It shows how much our policy makers are cut off from the people. After standing in queues for 3–4 hours, people get most of their withdrawals in Rs 2,000 notes. This does not ease their financial difficulties one bit, as the shortage of lower value currency notes has made it virtually impossible for them to use it to buy essential items like milk and vegetables, as shops have no change to pay back. Lokayat and Janata Trust . BJP–RSS activists have put up banners all over the country, asking people to patiently wait in the long queues as a sacrifice for the country, as Modi’s demonetisation policy will soon end black money and give the economy a big boost, leading to a fall in housing and food prices. Many people too think that this step will indeed end terrorism and curb black money, and so the troubles being faced by them are worth it.
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