In a discussion with Mythili Bhusnurmath, Consulting Editor of ET ow discuss, Shaktikanta Das, Economic Affairs Secretary explains why the demonetisation exercise is good for the economy and the country and the people have to overlook short-term inconveniences.
Mr Das, in hindsight would you agree that the government perhaps did not anticipate the kind of distress and dislocation that the demonetisation has caused and may be, it could have been handled better. It is a good idea but botched somehow in execution?
When the announcement was made by the Prime Minister on the November 8 evening, he said that initially there will be some inconvenience. Therefore we were aware that there will be inconveniences and there was a plan of action to deal with this situation. Over the last eight-nine days, the situation has improved every day. Today the crowds in the counters of banks in the ATM counters, the queues are shorter and things have improved. We knew about the problems. There had to be lot of secrecy around the whole decision and therefore, many works which we would have liked to do earlier we could not do. For example, the ATM recalibration could not have started because that would have raised questions and people would have suspected that something was happening.
But was the recalibration required at all? The new Rs 2000 note could have been designed in such a way that the same ATMs could have handled them. In terms of execution, may be some aspects of its finer aspects were overlooked perhaps?
The size of the note was reduced so that more number of notes could be printed at the same time. A big sheet of paper which is taken off in the printing machine can contain as many notes as the length and breadth of the sheet would allow. We calculated if you reduce the size of the notes, in the same amount of time, we would be able to print many more notes.
There is a roadmap for the recalibration process also. Every day, a large number of ATMs are getting recalibrated and they are being stuffed with the new denomination 2000 notes. We are transforming the entire. It is a part of the transform India agenda and we are changing the entire game plan, fighting against corruption, fighting against black money, fighting against fake currency, trying to move from a cash-based economy into a digital economy. So when you are trying to achieve such big objectives you are undertaking such a massive transformation in a country of 2.5 billion population there will be inconveniences here and there. Things are improving and I can assure that it will improve every day.
There has been a huge amount flip flop — amount of money to be withdrawn, ink on your fingers which the Election Commission is unhappy with — which is not associated with the Modi government. That is number one. Number two you spoke about the fight against corruption and black money?
I forget the question let me first answer that…now election commission incidentally has not objected at all. Election Commission was consulted right from the time we considered this suggestion. Initially we thought about it but we thought we should not do it why introduce an additional workload for our bank staff at the branch. But a few days into the process, we found that roughly 70% of the people standing in the queue were repeat visitors and there were reports that there are organised groups which are putting these people in the queue. So genuine customers were not able to reach the counter, That’s why the decision was taken to introduce indelible ink. We consulted the election commission all that the Election Commission has said is that there are by-elections coming up in a few states, so keep in mind the fact that the indelible ink during the election is put on the left hand forefinger. So we have said that it should therefore be put in the right hand forefinger.
Dealing with black money
You spoke about the fight against corruption and black money. This is only a partial answer because you are addressing only the stock of black money and that too the black money which was kept in cash — a very miniscule portion of the total black money. How about political funding? Why has that not been addressed?
The government has been taking several measures over the last two-two and a half years to fight the problem of unaccounted money, tax evasion, corruption etc. The government has renegotiated the tax treaties with Mauritius and with Cyprus. The ideal scheme was introduced recently. Before that, we had the new law and implementation of the unaccounted for foreign assets and income. We had this understanding with the Swiss Authorities whereby we started getting information on the so called HSBC accounts. Then the Benami Transactions Act was enacted. So there were a series of measures.
Also this is not the last measure to fight the problem of black money or corruption. As and when more measures are required, the government will take it. Almost every bank today is receiving a larger number of applications for issue of credit cards, debit cards, for having e-wallet facilities, to get new cheque books. We are moving towards digital transaction, towards transactions through the banking channel and towards a more accountable and transparent economy.
All these measures will contribute to the overall growth of India. These inconveniences are small compared to the medium and long term gain which the country will get.