In a recent interview, Nobel Prize-winning economist, Amartya Sen severely criticised the policy of demonetisation brought in by the Central Government.
‘Note ban’, as demonetisation is colloquially described as, has resulted in widespread despair for the people. All over India, Moe than 110 people have already died due to being unable to take the strain of standing in queues in front of banks and ATM for hours together to exchange, withdraw or deposit bank notes.
He said that this policy has caused many people, especially the poor, to lose their livelihood too, which was dependent on being able to get paid in cash.
The Harvard University economist remarked that the promulgation of this policy was a sucker punch to the federal structure of the Indian polity; no opposition party or state government was consulted by the Centre before taking this decision. In fact, the decision was so one-sided that even most of its own members’ views were not taken into account.
Amartya Sen was quite sharp in his criticism. He said that it was not a question of whether the decision taken was a mistake, but rather of how big a mistake it was.
The narrative for the reason for taking the step has covered a lot of territory, from fighting black money to fighting fake currency to stopping the flow of money to terrorists to finally, ushering in a cashless economy, proving, according to the economist, that the Centre has accepted the fact that this step would never enable it win the fight against black money.
On the question of the Centre having said time and again that the decision was taken by the Reserve Bank of India (RBI), Sen made it clear that he does not believe so; in fact, he is of the opinion that these days, the central bank is incapable of taking any independent decision.
Regarding the question of whether the independence of the RBI has been hurt by governor Urjit Patel’s toeing the line of the Centre, as is being said everywhere, the Nobel laureate said that had it been during the reigns of former governors like Manmohan Singh, Raghuram Rajan or IG Patel, the Centre would at least have been compelled to listen to their opinions.
The loss that the people of the country have suffered due to demonetisation cannot be measured just in terms of the negative growth of GDP, according to Amartya Sen. After the flow of cash becomes normal, the GDP would slowly inch towards normalcy, but what would not are the lives of the people affected. From the losses to families due to the deaths (often, of the only earning members’) from standing long hours in bank queues to losses to marginal farmers and small businesses to the loss of job opportunities for women (which is already low in this country) due to a lack of cash – there would be no going back to normal for these people.
Then why are many people still convinced of the benefits of demonetisation? According to the academic, maybe there is still a belief amongst the people that the issues of black money, fake currency, corruption and bribe-taking would be solved; but, when they would come out of their spells, five crucial Assembly elections would have been over (with the issue of demonetisation not being given enough importance while casting votes).
During the course of the interview, Amartya Sen constantly dwelt on the fact the decision to remove 86% of the currency in circulation in order to eliminate the six to seven per cent of black money circulating in the economy, even if it was the real reason, was a massive blunder. Even it was for any other reason – for removing fake currency or for improving digital participation in the economy – the policy of demonetisation doesn’t stand the test.
Rather, the constant fluctuations in reasoning by the Centre and the RBI in order to justify demonetisation has the dangerous potential of making the people of the country lose faith in the banking system of the country.
So when the spell cast on the people by the web of fallacies evaporates, how would the Centre justify its policy? To answer the question, Amartya Sen brought in the example of the French emperor Napoleon’s monumental mistake of invading Russia. The justification would have to be something like, had Napoleon, after returning to France following the decisive defeat, said that he had gone to Russia not for anything else, but just to see the snow-capped mountains! (by implication, indulging in an exercise of playing with the lives of people)
Of course, it needs no saying who is being implied to in the name of Napoleon, in this case.