Polarised debate 

The politically polarised debate over the demonetisation rocks the parliament. The ruling party with its political posturing and the opposition harping on the unending woes of common people have created virtually logjam in the parliament. But, the nation needs an informed debate over the issue.

The government wants us to believe that demonetisation is a bombshell on black money and counterfeit currency. The opposition refuses to accept even the modest benefits of demonetisation in cleaning up India’s monetary system. But, the reality lies somewhere in between. In fact, the demonetisation per se is not the problem. Several other countries including India had earlier done this.

The demonetisation certainly helps to control counterfeit currency and hoarding of illegal cash. To that extent, its utility for the economy cannot be lost in the political storm over the issue. The government fails to admit the disruptive potential of the move, while the opposition refuses to acknowledge the creative destruction role it plays in dealing with dual menace of illicit economy and currency.

The moot point missed in the dust and din generated over the issue is that the design and execution of demonetisation measure is to be found fault with rather than its utility. The hyperbole over the demonetisation has to be dismissed. But we cannot throw the baby with the bathwater to deny even the limited positive impact it would have on curbing the illegitimate economy.

The opposition has a genuine grievance over the timing and context of the decision to demonetise. The demonetisation was announced close on the heels of elections to key states. It comes against the backdrop of dismal record of the government in bringing back the Indian wealth stashed abroad in tax havens which was the emotional poll plank that propelled Modi to power in 2014. However, this is nothing new and the BJP cannot be singled out for making public policy hostage to political strategies. It’s the language of electoral democracy.

At the time of 1978 demonetisation, high value currency notes constituted only 0.6 per cent of the money in circulation. Despite demonetisation, the currency notes of higher denomination swelled to as high as 86 per cent today. The government has not banned the high value notes. It is only replacing the old ones with the new ones and even with those of much higher value. The nation needs an explicit clarification from the Prime Minister on the credible plan of his government to prevent repetition of what happened during the interregnum of 1978 and 2016.

It may be worth recalling the statement of I G Patel, the Governor of RBI, at the time of 1978 demonetisation. He said that such an exercise seldom produces striking results. Given this experience, the government should walk an extra mile to convince the country on the formidable and enduring impact of its demonetisation. The opposition should seek such pertinent clarifications from the government rather than try to appeal to the people disgusted with currency woes.