As per mythology, one demon king, Bhasmasur had undertaken tapas to attract the attention of Shiva. His tapas was so powerful that earth and heaven were shaken and pleased with his devotion, Parameshwar appeared before him. Bhasmasur asked for a boon from Shiva, that he should have the power to destroy anything he lays his hands up on. Having promised, Parmeshwar had no option but to grant it. This demon king wanted to test whether the boon really works and so,
he chased the Lord himself to put his hand up on his head. Bhasmasur had left a trail of death and destruction in his wake. Alarmed, the rishis and chota devatas appealed to Lord Vishnu to save them from Bhasmasur…
“We are like this only”
‘Why because’, we Indians believe the butcher and are ever eager to offer our heads at the altar of deceit, every time we enter the polling booth. Our own 21st century incarnation of Bhasmasur had ascended the throne promising ‘acche din’, rupees 15 lakhs of Swiss black money in every Indian’s account, crores of jobs for youth and what not. The powerful monopoly media was behind him, projecting a super inflated image of him as the saviour of the nation. He was the chosen one of big biz to deliver the unadulterated neo-liberal reforms they were eagerly waiting for. Having attained power, this Bhasmasur has now put his hand on the heads of the very common people who had voted for him and gave him power. In the last 31 or so months that he is in power, he floated so many hot air balloons, which soon vanished once they were launched. ‘Make in India” that promised to bring in hundreds of lakhs of crore rupees of foreign investment, along with modern technology and ‘ten crore jobs’ is not traceable. It simply vanished in to thin air, true to the fact that it is after all a hot air balloon. Neither was there any new technology coming in nor the much awaited foreign capital inflows. In fact, India recorded the lowest ever creation of new jobs in the last 15 years, just a pathetic 1.14 lakh jobs, when more than 30 crore young people are waiting endlessly for livelihoods. ‘Swatch Bharat Abhiyan’ succeeded in only fleecing the citizens as an extra burden of cess on tax, with the positive outcome nowhere to be seen. Our ‘pious’ rivers, as well as our streets and lanes are as dirty as ever. Perhaps, it is only the promise of ‘acche din’ that had some substance. Indeed, ‘acche din’ had dawned on the super rich – it was never meant for the 128 crore Indians anyway!
The latest Game Show
Mody had floated another new hot air balloon, with the promise that once the 50 days of ordeal of demonetization is over, black money will be wiped out, corruption will vanish and that prices will come spiraling down. Even after so many failed promises, many people had fallen hook-line-and-sinker for his magical promises, believing that a pot of gold awaits them at the end of the proverbial rainbow. After December 30th, it was promised to be ‘all be milk and honey’ as the proverb goes. Well, in the 80’s film Umrao Jan starring Rekha, a line in a famous song says, “Jindagi tujh ko to bas quab me dekha humne” (I have tasted life only in my dreams). That sums up the state we have landed ourselves in. December 30th had passed, without bringing any respite to the poor and the middle class. Crores of people have lost their livelihoods and are starving. More than a hundred poor souls had ascended to heaven, unable to bear the excess joy of the great dreams of super abundance once our own Don Quixote, slays the proverbial dragon of black money and fake currency. And our Sancho Panza, Amit Shah and his sidekicks, the RSS goons are ever ready to inflate the already bloated super ego of their fÜhrer further, by defending his every farcical move as a heroic deed.
Much has been said and written about demonetization. It does not require much of an imagination to understand that the move to take out 86% of the money in circulation, without prior preparation for speedy replacement with new currencies, is to say the least, an ill thought out move, poorly planned and poorly executed. But the idea of a “Shock and Awe” treatment of the Indian Economy is as per the dictates of International Finance Capital, as pointed by Shri Sreedhar in an article in Countercurrents. Slowly the truth is emerging that the real motive behind the BJP regime’s catastrophic move is neither the hunt for Black money nor the effort to weed out fake currency. Had the BJP’s economic advisers really believed that the twin purposes will be served by the demonetization move, they would not have qualified as economists at all. All this talk about weeding out just Rs. 400 crores of ‘fake currency” is simply an alibi for a larger motive lurking behind that. Or for that matter, it is common knowledge to every economist and taxman that only a tiny fraction of black money will be kept by the hoarders in the form of higher denomination currency. As is explained by many an economic analyst, the moment a large amount of black money is generated, it flows out of the country through the Hawala route. In many instances, if the kick-backs are received from overseas companies and agents, the slush money never enters the country, but gets deposited directly in to tax-havens. In sectors such as wholesale and retail trade, real estate and construction, a large amount of black money generated is reabsorbed into the sector as benami holdings, or as jewellery and other assets. To sum up, just to take out 3-4% of the black money in the form of cash or just Rs. 400 crores worth of fake currency, if demonetization of 14.5 lakh crores worth of currency is resorted to, it is not only bad economics but also ruinous administration. And now, the fact that some of the cryptocurrencies can be used as a vehicle for shifting wealth overseas is emerging in to the open. There are reports that there is a sudden surge in the adoption of cryptocurrencies. Many countries are waking up to the fact that cryptocurrencies have the potential to launder illegal earnings and can be used to transport the amounts to any port of call for parking in safe tax havens.
Who Benefits from Demonetisation?
But immediately after announcing the demonetization, the net brokers such as PayTM had come out with large advertisements, thanking Modi. Modi and his gang had immediately started singing the sacred slokas of “Cashless Economy.” They envisage a quick transfer of all the money exchange transactions in the country (amounting to about Rs. 150 lakh crores annually) to plastic and electronic mode. That is precisely the reason why enough replacement currency was not put in place intentionally before the move of demonetization. Their assumption was that faced with an acute shortage of paper money, people will automatically shift to net banking and credit cards. No matter that people will be inconvenienced for a few weeks to stand in queues before banks, but after that, they will see the wisdom of shifting to digital money. If it is the upper class netizens and the urban employees they had in mind, when they hatched this scheme, it shows their utter lack of touch with the reality of the Indian economy. It is a fact that the daily earnings of 80% of Indians are barely enough to sustain their lives and indulging in the pleasures of cashless transactions is unthinkable for them. This 80% of Indians do not qualify to own a credit card, as per the present banking rules and norms. All the while, the politicians and babus were telling us that “no matter, if 60 crore Indians are thrown out of agriculture to make it productive and profitable, they will migrate elsewhere and seek livelihoods in greener pastures. When there are more than 30 crores of unemployed and more than that number partly or under employed, how on earth can these additional 20 crore or so peasants thrown out of work get absorbed in to the economy is anybody’s guess. The neo-liberal process of dispossession of peasants is going on at full swing, (‘accumulation by dispossession’ as David Harvey says), but the speed at which it is being done is not to the satisfaction of the International and National Finance Capital. They want quick results and hence Modi had no other option but to resort to this “Shock and Awe” treatment.
It does not really matter to the super rich that 128 crore people of this country will suddenly find their lives crashing around them. 50 days after the demonetization move, money is in short supply and many a small and medium business had to be shut down. With the informal and SME sector providing jobs to 93% of the total nation’s workforce of about 47 crores, demonetization had already made a majority of the small enterprises unviable and hence inoperative. Businesses are shutting down in hordes and millions are of out of work. Similarly agricultural operations have stalled and millions of migrant workers are returning to their homes, empty handed. More than 88% of transactions in the country are through cash and now with artificial restrictions on cash withdrawls, many businesses are finding it impossible to continue. Production and distribution activities are severely handicapped. It is common knowledge that less money in circulation results in less demand. Reduced demand leads automatically to a drop in production. These effects are mutually reinforcing and what ultimately results in is a severe drop in economic activity, in other words, recession. The adverse impact on various sectors of the economy is dependent of many interconnected factors. Even large businesses are not insulated from this adverse impact. Their supply chains are getting paralysed. The country’s exports are heavily dependent on SME for cheap supplies to remain competitive in the international market. This is acutely so in the case of areas such as gems, garments and leather products. We are going to see a sharp drop in export activity in the coming months. On the consumption side, with acute shortage of cash, people are cutting down on their purchases. A majority of India’s population, both urban and rural lead a hand-to-mouth existence and most of their expenditure is on daily rations, health and education. We hear capitalist economists talking about people postponing their purchase decisions temporarily and that the economy will rebound full force, one we tide over the crisis. It is their utter lack of sensitivity to the plight of more than 90% of this country’s population. Close to 50% of the people subsist on daily earnings and they are already facing starvation. As days creep on, we see even lower middle classes comprising petty traders and workers and employees in organized sector, facing a dead end with shortage of cash. Starvation is looming in the face.
The Long-term Impact of Demonetisation
It is not the question of loss of a few basis points in the nation’s GDP growth. It is the question of the devastation of lives of a majority of this country’s population. Even if we suppose that by some miracle or by a proverbial magic wand in the hands of Modi, we manage to tide over the crisis as being touted by the BJP and the big-biz media, enough damage has already been inflicted on the vital sectors of the country’s economy, that the ill effects will be felt for a much longer time. The attitude of reducing the problem to a set of numbers, that can be erased and rewritten, shows the total ignorance of the law makers wielding power. It is not the question of numbers – peoples’ lives matter. Indian economy will be plunged in the coming days into a deep crisis, resulting in starvation and deprivation for more than a billion Indians. Their lives cannot be restored back to normalcy anytime soon. That this dispensation wielding power are more interested in paving a 8 lane freeway for MNCs and big-biz to zoom in and seize the market is a amply evident. What is of concern here is that – to whom will the lavish supermalls and automobile giants sell their products? When more than 70% of this country’s citizens are earning less than 2 dollars a day, and even those just above this poverty line lead a marginal existence, the MNCs have face the eerie silence of the graveyard.
Let us analyse the long-term impact of the demonetization on the Indian economy:
- Economic Impact:
- Tight money condition will prevail for a longer time even after all the demonetized currency is replaced. Conditions may return to some semblance of normalcy for the middle and upper classes, after restrictions on money withdrawls are lifted.
- But the condition of the poor, who constitute a vast majority of the country’s population, will continue with their already precarious condition, doubly impacted adversely by demonetization.
- Millions of people have lost their livelihoods and until the economy gets back on its rails, this downturn will continue. Some economists are predicting that even after normal conditions are restored, reaching the level of pre-November 8th levels of livelihoods might take a much longer time.
- It is now believed that all the money taken out can be put back in to circulation not before the end of April 2017. But then, by that time, summer drought in various parts of the country will set in and any immediate recovery will be questionable. In fact, Indian economy is highly sensitive to summer droughts and the erratic monsoon. Hunger and starvation are very much on the cards.
- With the SME sector enterprises shutting down like a pack of crumbling cards, their revival will prolong, with the added adverse condition of unpaid loans from the SME sector. Banks will be unwilling to lend anymore money until such time that all the debts are cleared. A similar, but bigger problem will persist in the case of farmer’s loans. This will slow down the bigger industries, which procure their raw materials and components from SMEs and micro enterprises. But the big-biz will have a field day with more loans (NPAs) from the money accumulated in banks.
- The overall recovery of the economy may well get slowed down for at least another 2 years.
- Social factors:
- Major loss of livelihoods in the informal sector, mainly in agricultural, construction and service sectors, coupled with slowdown in SME and Micro-enterprises will lead to large scale unemployment and loss of livelihoods in secondary sectors such as daily labourers, rickshaw pullers, physical labourers and small shopkeepers. Because of economic slowdown, the government will severely curtail expenditure on health, education and support for farmers. This can further aggravate economic disparities. With a slowdown of the economy, coupled with on-rush to implement neo-liberal restructuring, social welfare spending will take a back seat.
- With major loss of livelihoods, migration to urban centers in search of greener pasture will accelerate, making the lives of the poor in cities to degrade further. But with conditions deteriorating everywhere, there will be no new greener pastures to migrate to. Sprawling slums in cities and towns will become hell-holes of filth, ill-health, crime and social unrest.
- As the rich try to insulate themselves from the vast majority, who are pushed in to precarious existence, social exclusion and anti-poor sentiments, coupled with demands for upper caste reservations will aggravate further. Communal and casteist forces will try to reap rich dividends, by inciting internecine strife.
- Politcal fall-out:
- Modi and BJP might be trying to win-over the support of International and national big business, by going full steam with neo-liberal reforms. But it can cost dearly for them, with the erosion of support from the traders, workers in the organized sector and informal sectors, and poor peasants and rural poor getting adversely affected. The coming state elections will be preview of what is going to happen in 2019.
- Youth who were bought-in with promises of job creation for crores of young people are already disillusioned with the BJPs propaganda.
- The propaganda that every Jan-Dhan aacount holder will find Rs. 2 lakhs deposited in to their accounts, is a gross lie propagated by the Sangh Parivar, starting with Modi himself. It does not require much of an imagination to see that to deposit Rs. 2 lakhs in to 26.8 crore accounts will amount to Rs. 54 lakh crores, equal to 3 annual budgets. Where from this kind of money can come from, the Modi brigade cannot explain.
- The naked and crude justification of the government’s actions by the cadres of the ruling party is creating a negative feelings and cynicism among the ordinary citizens, especially among the youth.
Indians are known to take any injustice in to their stride, with our all powerful karma siddhanta teaching us that your sufferings are the result of your own sins in your past janam. Let us hope that people will wake up before this Bhasmasur wreaks total havoc with the economy and ruins the lives of the 1.28 billion Indians.
This article is an extract from the paper read out by the author at the 8th Annual National Workshop on “Finance Capitalism and its Impact on the Indian Economy” organized by the All India Progressive Forum at Tiruvananthapuram from 21st till 23rd December, 2016.
Vijaya Kumar Marla is a retired engineer and is presently National Working President of All India Progressive Forum, an organization of socially conscious intellectuals spread over 18 states in the country. (email@example.com)