DEMONetization – “Good Times” amidst “surgical” economic destruction

In a previous blog, I had raised my doubts about the true objectives of the sudden and unexpected demonetization initiative by the Government of India. The Government has been veering off course from its initial agenda of targeting black money hoarders and now it is riding on the agenda of cashless economy and this was one of the hidden motives I had mentioned in my blog. Now this is extremely ironical especially because India is a predominantly currency based economy as the majority of the country’s population resides in her rural areas. When questioned about the veil of secrecy behind the initiative, the response given was that it was a surgical strike against black money hoarders. But an initiative of this enormity may have taken months if not years of planning and it is common knowledge that the corporate elite controls the government machinery of almost all countries in the world, so this would never have come through without their knowledge and approval. The corporate elite of the country and their slaves in the government and political establishments are the biggest hoarders of black money so they must have rowed their boats to safety a long time back. I believe finding these elusive creatures is quite easy. Take the list of the top 100 people who provide funding to political parties during general elections and elections in each state and those are the true scamsters. This is why political parties will give an arm and a leg to not reveal the names of the biggest contributors towards their party coffers. Take this group of people out of the scenario and there would be less than a % of people who would be hoarding black money on a significant scale. So it is quite evident that this was not a bugle call to square up against the black money menace. All of this is commonsense and that is why the alarm bell went off in my brain as soon as it became apparent that cash was being taken out of the system. I kept telling my dad this will all unravel with time.

The government is claiming that demonetization will bring in benefits in the longer span of time, but in an economy comprised of more than 50% agriculture, increasing unemployment and inflation and a huge part of the population living below the poverty line, any benefits should be provided immediately simply because there are no guarantees even on the longevity of people’s lifespan. So what are the visible effects of demonetization?

1. No one saw the demon coming. One fine day, people found out that the higher currency notes have all been declared as invalid and the onus was put on them to get these notes they had in their possession into the banks within a specified period of time. It immediately triggered panic and long, winding queues materialized before each and every bank in no time. The problem with this was, people living in cities have no time to spend in such queues and people in rural areas will not understand a dime about any of this. Adding to the woes was the fact that all ATMs got closed quickly because enough new valid currency notes were not issued to replace the invalid ones, so people had to stand in 3 queues in the banks, first to hand over invalid notes, next to withdraw money and the last one to send money to their beloved and near ones. In the country’s tropical weather conditions, this was nothing less than arduous and excruciating, especially for the older people who are staying on their own.

2. The impact of the cash crunch on the people in the rural areas has not become evident primarily because mainstream media which has been playing mistress to the government is keeping the truth locked up in its vaults. But a report saying that people have resorted to barter system reveals their plight in entirety.

3. Online transactions were working without any glitch or disruption during the entire time which led me to suspect that there is lot more going on behind the scene. People in the corporate world who are already knee deep into online transactions have now been pushed neck deep. No cash to shop? No cash to pay bills? No cash to pay in buses? E-commerce websites and e-wallets solve all these artificially created inconveniences for people and are the biggest beneficiaries here.

But the effects that are yet to become completely visible are the worrisome ones.

1. Reports have come in about tomatoes being sold at 50 paise per kilo in places where they are cultivated. But I bought tomatoes a day back at Rs. 20 for a kilo. There are retail stores that are buying agricultural products directly from the farmers. They must be making a windfall out of this. Not only must they be selling on their own, the cheap prices at which they are buying must be allowing them to buy larger quantities and become dealers for other retailers and small to medium traders.

2. Pushing people more into online transactions actually has the effect of making them spend more and that is being reflected in the way online retailers are advertising themselves more aggressively on all media platforms. There is an increasing trend of people taking loans to celebrate festivals and that propensity gets extended to online shopping for the entire family on credit simply because societal customs have to be followed which is just showing off in reality. E-commerce websites are making a windfall out of this.

3. Cash deposits into bank accounts beyond a certain value will now attract more taxes and hefty fines which clearly means that the system does not want ordinary people to have money with them. Estimates say about 1.25 lakh people from the working class form the crux of the tax payers with zero benefits in return primarily because of increasing population and rampant corruption. Pay taxes right from the toothbrush to the houses to the income, zero social security in return, then have money for health insurance, family expenses, children’s education, repay loan EMIs and top all of this by finding more money to save. All of this has to come out from people’s salaries which increase once in 3-4 years in a country of high inflation where prices of even essential commodities can go up anytime. Every single penny is being squeezed out of the working class.

4. There is an ulterior motive behind making live currency notes invalid out of the blue. Banks were all dried up of cash, bad loans had spiraled out of control and their financial statements had become sordid. So where is all the money? Most of it has either been funneled out of the country as black money or is stuck with the corporate borrowers who only borrow but never pay back because of the clout they exercise over the system. Banks have no way to squeeze borrowed money out of them and to add to their woes, they have to relegate existing loans to the status of bad loans and keep lending more money to the same defaulters. A case in point here is the story of Vijay Mallya and his now defunct Kingfisher airlines. Banks kept pumping more money into the business in spite of seeing mounting operating losses year on year. So where is the rest of the money? With ordinary working class people. How to get the money out of them? Make their money invalid and tell them to return it to the banks. Now that the bank coffers are full, bad loans will be wiped off and banks will be able to lend more money to fuel corporate ambitions.

All of these are clear indicators that the corporate elite in alliance with the political class is taking complete control of the society, subjugating people slowly but surely and creating a societal divide based on haves and have-nots. This can be best personified by a 127 floor residential complex right in the middle of a slum area in the most thriving metro city in India. Owned by one of the most powerful businessmen in the country, the stark contrast between that building and its surrounding area is a clear example that prosperity in the country is meant only for the elite ones. Add to this the fact that the government is pushing for a cashless economy when the entire world knows 90% of the country’s transactions run on hard currency and clearly indicates that the government machinery does not even care about the hardships people have to face. Using the media to infuse patriotic overtones into people’s psyche to garner their support is another lame game the government is playing and it has worked to an extent as well. First was the so called surgical attack on terrorism across the border which was inflated and presented before the country by the media to stoke patriotism and on its heels came the so called surgical attack on black money and people lamely connected it to patriotism which was clearly the objective of the government. I am not surprised by any of this. This is a country where people exchange their voting cards for blankets and sell their votes for liquor. People choose to stay poor, illiterate and ignorant and the system does its bit to keep them that way so that voting is done based on money, liquor and caste rather than growth and development of the country. Autocracy or dictatorship from here will not be enough to surprise me.

 

Demonetization – surgical strike on black money or on a bigger target under the hood?

The act of demonetization and the so called surgical strike on black money launched by the Indian government has taken the country by surprise and storm in equal measure. No doubt the black money hoarders have been affected and the joke going around is that the hardest hit are the Indian wives who have the habit of hiding money from their husbands. They are now forced to bring out all those 500 and 1000 Rupee notes they had stashed away much to the chagrin of their husbands who now have to endure long queues before banks to get the currency notes replaced.

But key questions about the timing, implementation and most importantly, the objective remains to be answered. The government hasn’t been able to fulfill any of it’s poll promises for turning around the country’s economy. Inflation is still high, unemployment is growing and the GDP that government claims is not reflected on the ground reality. The Make in India initiative which was launched with much fanfare hasn’t really taken off. Foreign investors are largely staying away because of bureaucratic red tape. Discontent among people towards the government has been growing and the PM has been increasingly getting ridiculed for not being able to do anything to bring back black money from foreign bank accounts, something which he had vociferously promised during election rallies. Add to it, the ruling party has got trounced in some key state elections and even their grip on states they have been ruling for several years is under threat. Elections for the state of UP is coming up and UP is a key state for swinging votes in the general elections. Something substantial had to be there to talk about in election rallies and they have managed to connect recovery of black money with patriotism. This looks more like a surgical strike on people’s psyche with an eye to swing votes in future elections.

It is a known fact that 99% of the wealth in the world is owned by 1% of the world’s population. The top business and corporate houses are the biggest hoarders of black money. Most of the people who belong to above the well to do category invariably has one or more foreign bank accounts, mostly either in Switzerland, Cayman islands or any of those places and owning such a bank account has become a status symbol of sorts. Black money is getting rolled out of India into these bank accounts each and every day in connivance with some banks in India. Surgical strikes on these accounts as the PM had promised would fetch nothing. 99% of the black money would have got invested in foreign countries in every possible options and some of it may even be returning to the country in the guise of foreign investment. If the government is truly serious about their war on black money, they should have first shut down the banks that are aiding the flow of black money abroad and bottled up all the black money in the country but that has not happened and probably will never happen.

Any sort of action to curb the menace of black money is welcome but it should not be implemented at the inconvenience of the general population. Demonetization of 500 and 1000 Rupee notes has hit people squarely on their faces. People are running everywhere to get these notes out of their hands. For all these days, ATMs were spewing out these notes and when they are made worthless one fine day, the system is bound to go into meltdown especially in a country like India where situations can get chaotic at the drop of a hat. The long queues that start forming outside banks from early morning are excruciating, especially for the older people. Add to it, the new currency notes that have been issued does not fit the existing ATM machines. They have to be re-calibrated and that is going to take at least a few more weeks. A clear strategy has to be backed up by a precise implementation plan but neither seems to be present here.

The larger question is, is this just an offensive against black money or is there more to it? The planning might have started months in advance. It is a known fact that all budget and finance related decisions are taken with the benefits for the corporate world in mind and it is the corporate world that actually holds sway in the corridors of power. After all, it is the corporate world that funds election campaigns. So it is commonsense that any action on black money would have been told to them well in advance and they would have got enough time to cover up their tracks. So the eventual target is small to medium sized hoarders. But there is more happening that is on people’s faces but we probably haven’t seen it yet. There has been no restriction on online bank account operations and on the use of debit cards. Consumers are being herded away from small time traders into supermarkets, shopping malls and online shopping. Compound the situation by choking the flow of currency notes for about a month and it will be the death knell for small and medium sized retailers and road side hawkers. Why else was the currency notes changed without re-calibrating the ATM machines in advance? This might sound like a conspiracy but ground reality is pointing out to the fact that corporate houses are taking over the markets under the guise of weeding out black money. So how will people in rural areas deal with this? That is why bank accounts have been created for these people under some schemes. Those people must have all got debit cards. Is the country being moved to a “haves” and “have nots” based society? There is another aspect to it as well. Government can now monitor monetary movement in each and every bank account closely. Ordinary people who have got nothing to do with black money are going to get penalized heavily for even reasonably high transaction amounts.

People who are crying hoarse about patriotism aren’t obviously able to see through to the larger scheme of things. Blinding people out under the guise of patriotism is an easy way to slip in specific agenda with specific interests and objectives. Case in point is how 9/11 was so meticulously organised, how the disaster was engineered and how it was played again and again in the minds of people as a patriotic tune to garner public support and launch attacks on Afghanistan and Iraq. Who has benefited out of all the bloodshed? Obviously the corporate and specifically the weapons manufacturing industry. If the President of the US cannot bring in regulations on gun ownership in his own country, it clearly states how powerful the weapons manufacturing lobby is and implies that it is even more powerful that the elected representative of the people. This is nothing called democracy, capitalists have enslaved people under the guise of democracy. People forget easily that all people oriented programs are created after the interests of key stakeholders are addressed in advance and everything that gets played out in the public is only with the objective of garnering votes and people’s welfare and improved governance is never on the agenda. The world is being changed, for the good or bad is something only the road ahead will tell.