Demonetisation has botched Modi’s – and BJP’s politics. Black money remains where it was. Instead, the ‘surgical strike’ has hit the poor man’s savings, denting the party’s poll prospects for years to come, argues SUSHIL KUMAR SINGH

RAJKUMARI, 65, works as a maid in Delhi, earning around Rs 2,000 every month. Her husband Rakesh is a rickshaw-puller, earning roughly Rs 300 a day, most of it drained out in his daily booze. Her son too is a parasite. On November 10, when Rajkumari reported to work, she seemed disturbed. On a little prodding, she started sobbing. She said she was constrained to bring out Rs 7,000 in Rs 500 notes, which she had secretly saved for treatment of her chronic arthritis.

She had spent a sleepless night after she heard that the higher denomination notes were useless unless replaced in banks. But if she did indeed go to the bank, her husband and son would get wind of it and take her savings from her. She wanted her employer to help her change the money.

There are crores of Rajkumaris in India, who save money for hard times, most often hidden from the family. But the fact that it was hidden from the family does not make it black money.

As the saving grows, it is converted into bigger currency notes making it easier for them to conceal it. For such people and families, Prime Minister Narendra Modi’s demonetisation decision wrought havoc on November 8. The decision, implemented within hours of its announcement was a bolt from the blue. By the time most people realised the gravity of the situation, money in their hands had already become “junk”.


At the grassroots level, this is the real story of the so-called ‘surgical strike on black money’. It actually turned out to be the biggest strike on poor people’s savings. One recalls that when the then Atal Behari Vajpayee had initiated a move to allow foreign insurance agencies to work in India, a top RSS leader, KR Malkani, wrote a scathing article in The Indian Express, opposing the move. He claimed that India has a tradition of small savings, a distinct part of Indian culture. We are among the best in terms of household savings. The multinational companies were actually eyeing our domestic savings, which the country has to resist unitedly.

In the chaos following demonetisation, Malkani’s words looked prophetic. The day after the late night decision, ATMs and banks were shut. Banks opened on the third day, only to witness unending serpentine queues. Those who were not in a position to brace themselves for the onslaught were left high and dry, especially those in transit. And it hit the poor and rich alike.

Anurag Mittal for example, took a train with his family to Vaishno Devi. Minutes after his train left New Delhi, Modi banned high denomination currencies. When the Mittal family reached Jammu, they found most of their money had turned into “raddi ka tukda” (junk). He had booked a room at the Vaishno Devi Shrine Board’s dharamshala, (pilgrims’ guest house) but even they wouldn’t accept high denomination currency. They don’t accept credit cards either.

Most hotels, restaurants and shop owners were refusing to accept Rs 500 notes. Even if some did accept, they valued it at Rs 200, at most Rs 300. There were hundreds of law-abiding people like BJP-sympathiser Mittal, for whom demonetisation became their worst nightmare.


Public outrage was not immediate. First people tried to cooperate. But, when it became unbearable, anguish burst out on the roads. Bereft of even small change to meet their basic expenses, people started venting ire against Modi from the third day onwards, as they could not withdraw the new currency from banks. They blocked highways and banks; ATMs were attacked. People were lathi-charged to restore order. Over 4,000 complaints of street fracas at banks were being received daily by Delhi police only.

The ATMs were dispensing only Rs 2,000, that too after people waited for five-or six hours. The Rs 2,000 note being dispensed by banks were useless, as nobody would give back change after deducting the price of things bought. Metro stations, petrol pumps, nobody had change. With no money in pocket and no essentials at home, mobs started looting grocery shops. And remember, these are poor villagers, who Modi says are blessing him every day for his move.

Devoid of business due to lack of currency, more than half of business establishments closed shops from the fifth day onwards. People were enraged because they had to wait for hours to withdraw only Rs 2,000. Large numbers of them were unable to withdraw from ATMs. A mere 40 per cent of the 2.4 lakh ATMs in the country were non-functional. Even those that worked were getting emptied within an hour or so because of the heavy rush. Each person was carrying three or four ATM cards - to get as much hard cash as possible at one go. As a result, queues at ATM booths moved at a snail’s pace, and the machines were soon empty.

The problem had been compounded by the fact that ATMs had not been calibrated for the new currency. The new Rs 2,000 is smaller and lighter than the now scrapped Rs 1,000 notes. Hence these could not be run through the existing slots. As much as 90 per cent of the money in an ATM booth consists of Rs 500 and Rs 1,000 notes. Therefore, ATMs were dispensing only Rs 100 currency notes. That was again both cumbersome and time consuming. The situation did not improve even after 10 days, when a few ATMs started dispensing Rs 500 notes.


November 2016 will go down in history as the month that started seeing people wage a war to lay their hands on their own hard-earned money. Instead of going to their work, people would be queueing up for currency - all day, all night. “Modi seems to have stolen our money from our pockets and banks,” said marketing executive Shivam Agrawal. At least 65 persons were reported to have died in currency crunch-related incidents.

Gradually the situation deteriorated so much that manufacturing came to a grind and so did sales. Shops downed their shutters quoting currency crunch as the reason. Contractors didn’t pay workers, so construction work came to a standstill. Farmers too were badly affected. Their paddy crop had been harvested and they had to sow wheat and potato crops. But the currency ban led to an unprecedented situation when there was no liquidity in the market. Paddy price plummeted from Rs 1,400 to Rs 700-900 a quintal (there are reports that 40 per cent of the paddy would not reach the market due to currency shortage).

Farmers were in a quandary: if they sell immediately, they will be losing about half of their hard earned money. If they hold on, they will be losing precious time for sowing wheat. A late sowing of wheat and potatoes would affect the yield, as the onset of cold would hamper germination.

Worst hit were daily wagers who could either earn their bread or get their own currency exchanged through day-long queues.

In metros too, shopping malls wore a deserted look. Restaurants were almost empty. A few of them closed shop putting up signs – ‘closed due to currency ban, will open once the situation improves’. The Delhi government received Rs 6.73 crore in revenue on November 8 from property registration. It dropped to Rs 3.89 crore the very next day. Same thing happened to vehicle registration and liquor sales. Both dropped by over 70 per cent.


The Indian economy is highly dependent on cash. Currency in circulation is 14 per cent of the GDP, whereas in most other large economies, it is less than five per cent of the GDP. More than 90 per cent of India’s workforce works without a job contract, and 45 per cent of India’s output is informal.

But, not all of them are tax evaders. Even for the formal sector, last-mile distribution for most supply chains involves cash. Online suppliers stopped ‘cash-on-delivery’ support, which is most favoured by Indians online purchasers.

Suddenly, all this came to a halt. These sectors would take a little longer time after the currency situation stabilises.

When the erstwhile Janata Party demonetised notes valued at Rs 5,000 and Rs 10,000, the amounts were worth about $640 and $1,280, respectively, at approximately Rs 7.8 a dollar. Today’s “high” value notes are worth $7.38 (Rs500) and $14.75 (Rs1,000), respectively. That is still a lot of money for those who are absolutely poor, but these amounts aren’t high value for what they can buy.”


According to an estimate, out of Rs 14 lakh crore black money in the country, Rupees nine lakh crore will return to circulation, while Rupees five lakh crore will be destroyed by its holders themselves. But RSS thinker Govindacharya differs. Quoting some eminent economists, he claims that the exercise will affect only three per cent of black money stashed in the country.

Govindacharya says 40 per cent of the country’s GDP was in black money in year 2000, and because of steady measures taken by successive governments it was reduced to only 20 per cent of GDP in 2015, which comes to approx Rs 30 lakh crore. That also means Rs 400 lakh crore worth money was converted to black money during the last 15 years.

Since the Reserve Bank of India claims that total value of Rs 1,000 and Rs 500 currency bills in the country in March 2016 was Rs 12 lakh crore -86 per cent of the total currency in circulation - which is just three per cent of total black money – Rs 400 lakh crore, he claims.

Most of the money being deposited in the banks is actually the average person’s home savings. Once the crisis is over, Indians, so fond of having cash at home, will again start saving the new currency.

That means the currency switch was not targeting black money. It did not affect at all the big industrialists who are known to be making black money through a network of shell companies and who are known to be taking the Mauritius route to bring in black money ( and making it white) and who are alleged to have stashed billions of dollars in Swiss bank accounts.

Govindacharya asks, “Did you see an industrialist in the queue to change his currency? Or a film star? Or a bureaucrat? It’s understood that the elite spends through plastic money but what about medium entrepreneurs or officials? Not even a low-rung politician? Do they too use plastic money to buy their milk, groceries and vegetables? The only people spotted in bank and ATM queues were the poorest of the poor.”


It seems politicians lost a big opportunity. Especially BJP leaders and union ministers. If you stand in queue during elections why can’t you stand in bank queue? It would have set a great example. They should have motivated people and calmed them down. Instead, they shouted at people at the very mention of hardships being faced by the people.

Power and renewable energy minister Piyush Goel said only those with black money have been criticising the government. Another minister, Ravi Shankar Prasad, said only terrorists and black marketeers are uncomfortable with the government’s move. Politically ambitious Arun Jaitely, now cleverly sidestepped and stonewalled by Modi, swallowed the bitter pill and was left with no option but to side with the measure and advised people to make payments through cheque.

That shows the extent to which our leaders are unaware of ground realities. Which vegetable vendor accepts a cheque? Which milkman will receive a wire payment? Which street food vendor has an e-wallet?

But, vaoila! It happened. E-wallets proliferated like amoeba. Paytm sale grew 12 fold in next 15 days. It may be recalled that Paytm had inserted a full-page advertisement in all newspapers on tyhe morning of November 9 with Modi’s picture - something Mukesh Ambani had done during launch of his 4G service Jio.

While returning from Japan, Modi warned people having black money that there is no guarantee that another such scheme won’t be announced after December 30.

But the very next day in Goa, he tried to comfort people by saying “Your troubles will be over by December 30. Give me only 50 days and I will create an India you always dreamt about.

Which of his statements is correct. If there is another such demonising scheme coming up? What’s the guarantee that common man won’t have to suffer again?

Whether it becomes an “India of our dreams” or not, one thing is clear - there is no dearth of loud-mouthing in Indian politics. We were still waiting for “achche din”, the dream that “India of Dreams” has been presented!


The Indian economy is mostly based on cash transaction and home savings are substantial

The common man is suffering day after day, standing in long queues & going back home without money

Most shops and even eateries are refusing to accept the Rs 500 notes, as they do not have change

The informal sector will take a massive hit and so will the growth rate, already visibly unsteady

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