THE Modi “surgical strike” on black money and corruption has turned out to be a fiasco coupled with a scam on an industrial scale. 36 days after the withdrawal of the 500 and 1,000 rupee notes, ie, 86 percent of the currency in circulation, ordinary people are struggling to get meager amounts of cash from their own bank accounts or ATMs.  Long queues and endless wait outside banks and ATMs continue.  There is no cash available for those who need it the most – the casual labourer, the vegetable vendor, the domestic worker and the whole workforce involved in the informal economy.

At the same time, large amounts of new notes are being found in the hands of businessmen, hawala operators, politicians and corrupt bureaucrats.  The last two weeks have seen income tax raids which have uncovered huge amounts of unaccounted money and that too in brand new 2,000 rupee notes.  From a single businessman in Chennai, Rs 34 crore currency, in the form of Rs 2,000 notes,  was seized.  From another vehicle in Vellore, Rs 24 crores in Rs 2,000 new notes was discovered.  In Bengaluru, Rs 4.7 crore in new Rs 2000 notes was confiscated from two PWD engineers.  Amounts above a crore of rupee in new notes have been seized in many other states like Rajasthan, Delhi, Assam, Maharashtra and Punjab. 

According to one estimate, around Rs 160 crore of new notes were seized from all over the country upto December 12 and this is only the tip of the iceberg. 

What we are witnessing is a money laundering operation on a grand scale.  Instead of curbing black money, what Modi’s demonetisation has achieved is to get large amounts of black money converted into white money.  It has opened new avenues of corruption in the financial system.  Corrupt bank officials are conniving with money launderers to make the exchange of notes a large-scale scam.  The government has been clueless on how to check this money laundering through the banks using various devices.  It is the case of the rich laughing their way to the banks, while the poor are being deprived off their hard earned money and wages.

The other aspect of the fiasco was the estimation that around 20 percent of the withdrawn notes is black money. This amounts to Rs 3 lakh crores that would not be deposited in the banks. But this has proved to be a totally wrong assumption.  A total of Rs 15.44 lakh crore worth of notes was withdrawn on November 8.  As on December 10, Rs 12.4 lakh crore worth of old notes have been deposited.  The rest of the notes are expected to be accounted for and deposited by December 30.  The revenue secretary, Hasmukh Adhia, has stated that all the old notes will be deposited. 

So the initial claim of the government that at least Rs 3 lakh crore worth of black money would be nullified has proved to be false.  With that goes the bonanza the government expected from the Reserve Bank of India in the form of a special dividend to the government of Rs 3 lakh crores. 

After withdrawing the 15.4 lakh crore currency notes in circulation, till December 10, only Rs 5 lakh crore of new currency has been pumped into the system.  This is less than a third of the total value of currency withdrawn. After the debacle resulting from the note withdrawal, Narendra Modi began talking about ushering in a cashless economy. In a mockery of the urban and rural poor and the vast masses involved in the informal economy, Modi and the BJP are propagating a digital cash transaction system. The “cashless economy” slogan is being pushed to cover up the fact that the government has miserably failed to produce adequate amounts of new currency notes. The “cashless” drive is thus a bid to divert attention from the currency disaster facing the country.

The result of the “cash war” on the people is visible for all to see.  80 percent of the micro, small and medium enterprises (MSME), which accounts for a large amount of labour force, are badly affected.  There is a reverse migration from many centres of such industries, whether it be Surat, Ludhiana, Ichalkaranji, Faridabad or Tiruppur. 

There has been a drastic fall in the workdays under the MNREGA.  The number of households getting work in November is down by 23 percent, compared to the previous month of October.  Those not getting work increased to 23.4 lakhs – twice the number in October. 

More than a hundred people have died either while standing in never-ending queues or in more tragic incidents like suicides by students who could not pay the fees to sit in college exams. 

The demonetisation of 500 and 1,000 rupee notes have helped the black money hoarders to  launder their money; it has deprived millions of their livelihood and jobs; the huge deposits of money in the banks will help them to  clean-up their balance sheets and write off the unpaid loans of the corporate and big capitalists. It has created havoc with the economy and there is going to be a fall in production in both industry and agriculture, decline in demand for consumer goods and dampening of the services sector.

An RSS ideologue has called demonetisation a “financial Pokhran” referring to the nuclear bomb tests.  He is right in one sense – the demonetisation is a nuclear bomb dropped on the people.  It has caused havoc and mayhem in the lives of ordinary people.

(December 14, 2016)