“The backbone of surprise is fusing speed with secrecy” -. Clausewitz, ‘On War’

“who wishes to fight must first count the cost” ― Sun Tzu, ‘The Art of War

Demonetization (DEMON) is a war. A war on terror money, on fake money, on black money. The dictum, “Surprise is the key to victory in war” –  is even more applicable to the DEMON war. Just a whiff of action, and whoosh! The targeted money will metamorphose into untargeted assets. Because the perpetrators of targeted money are very smart and resourceful.

Secrecy is the essence of surprise. No one should know of DEMON. But that not being possible, only a few should know of it. And therein lies the downside of DEMON. Replacement currency notes cannot be printed in advance and kept ready to be circulated the moment DEMON is announced: that will be a sure-shot clue to the perpetrators that DEMON was imminent.

In the present DEMON, the PM spoke to the nation at 08 pm on 08 Nov’ 16 declaring that the 500 and 1000 rupee notes will cease to be legal tenders effective 12 pm that night: that is, just four hours from the time the announcement was made.

The secrecy and surprise were total. Even the top bankers of the country – with more than 30 years in the sector – did not have an inkling of DEMON till they heard the PM on TV. Even so, the bankers handled the challenge immensely well: by 14 Nov, in just six days, they collected deposits of rupees four lakh crore, and of about five lakh crore by 18 Nov. SBI alone handled 11 crore transactions collecting deposits of 1.04 crore by 14 Nov, and 1.34 crore by 18 Nov.

Admirable though the bankers performance was, that did little to alleviate the misery of the poor and the middle class people. Long queues outside the banks to exchange outdated currency-notes to legal notes and to draw money in legal notes, people dying – 57 of them till date – in queues, ATM out of money, hospital admissions denied, medical shops out of medicines, marriages postponed, farmers unable to sell crops and buy inputs for the next sowing, daily wagers not paid . . . The plight of 87.6 crore people, 67.63% of population, in rural areas, in 593,731 villages was worse. Worst still is that the poor’s woes are not going to be resolved soon.

Illegitimacy of 500 and 1000 rupee notes sucked out 86% value of the currency in circulation. Hitting hard the poor who are dependent on cash market.  Twenty-two (22) bn pieces of 500 and 1000 rupee notes have to be replaced. Since only 20 million pieces-a-day of 2000 rupee notes can be printed, about 150 days are needed to replace the 1000 rupee notes in value. Similar period is needed to fully replace the 500 rupee notes. The period could be longer because the lower denomination, 100 rupee and less, notes have a life of about one year and so most of the 90 bn pieces of notes in circulation have to be replaced too.

The poor’s misery will last several months.  And though for the present they have taken the misery in their stride believing that DEMON was in nation’s interest, misery lasting months could turn them against the party in govt, BJP. The opposition will do its best to see that happens.

demon

Govt has a pool of talented and knowledgeable economist and political and social scientists. So it was well aware of the political risk of DEMON; well aware that its prospects in elections in seven states (UP, Punjab, Uttarakhand, Himachal Pradesh, Goa, Gujarat, and Manipur) in the next few months were at risk. Still, it accepted the political risk in the interest of the nation. We can only applaud the govt’s bold leadership.

Almost everyone agrees that DEMON was a desired action and would by and large attain its objectives: eg, in Kashmir, pelting of stones on security forces and attack on their camps, and violence, has already abated because the promoters of these do not have money to pay to the stone pelters and perpetrators of violence.

img_9326

Opposition has condemned the govt for lack of preparation. The only possible preparation  was to print the replacement notes in advance. But that would have compromised DEMON’s secrecy and doomed it to failure ab initio. No one has said what the govt could and should have done.

Still, the opposition’s condemnation of govt and agitation against it serves a useful purpose: it prevents the govt becoming complacent, keeps it continually on its toes to tweak the policy and to work on strategies to reduce people’s misery the soonest.

But the demand of Kejri, Mamta and a few others to withdraw the “draconian measure” is nothing but the wish to see evil in divine; to see Ravana in Rama.

 

Advertisements

One thought on “DEMONETIZATION

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s