Demonetization: Still Not people friendly decision of Modi

Rama Krishna Sangem

The Supreme Court of India’s 4-1 judgment on the demonetization of Narendra Modi government hasn’t surprised us.  Many of us are of the view that the apex court’s verdict at this stage – 6 years after the decision and its implementation – is of little value. Nearly 70 people, most of them old and women, died in queues in front of ATMs and banks  in the harsh winter of North India, and they can’t be brought back.

The SC verdict has only validated the process of demonetization, as there was no evidence to show that it was against to the Section 26 (2) of Reserve Bank of India Act 1934. The Section 26 (2) says: On the recommendation of the Central Board (of RBI), the Central government can declare any series of bank notes of any denomination cease to be legal tender. Precisely based on this section, the apex court justified the demonetization of 2016.

Thanks to the verdict, now we all come to know that there is no provision in the RBI Act that the Centre can abolish all series of notes of one or two denominations. Of course, there are precedents in the past when the Centre cancelled Rs 10,000 notes, but through a proper ordinance. This time, there is no legislation or ordinance on nullifying of Rs 500 and Rs 1,000 notes.

The constitution bench of SC led by Justice Abdul Nazeer mainly focused on the right of the Centre or RBI in cancelling any currency notes anytime. 4 of the 5 judges on the bench are satisfied that there was proper consultation between the Centre and  RBI on the decision to demonetize the big notes. Now it is proved that the Centre has recommended the RBI to recommend to it to cancel the notes. Such a circuitous consultation!

What about public suffering?

We still remember PM Modi appearing on TVs at 8 pm on November 8, 2016 and saying: “Aaj raat se...”. This announcement came as a shock to millions of people who kept Rs 500 and Rs 1,000 notes with them. I was driving on the roads of Hyderabad that night and saw thousands of people, men and women, lining up in front of ATMs, which ran out of cash.

We had to use our influence or contacts with the bank officials to convert our cancelled notes into valid notes. In most cases, innocent people like those from villages were fooled or looted by middlemen or brokers. Many of such people who couldn’t exchange their invalid notes had suffered a lot. Unscrupulous bank managers exploited the situation and made huge money. That is one benefit of demonetization to them.

The SC has avoided the controversy over the usefulness of demonetization. PM Modi claimed that it was aimed at bringing out black money from the rich or super rich. It was estimated at the time that out of the total (guess work) Rs 16 -Rs 18 lakh crore of cash, at least Rs 3-4 lakh crore was the black money. That they cannot exchange it with banks.

But what happened? RBI 2 years later declared that over 98 per cent of the total liquid cash came back to banks, leaving less than Rs 50,000 crore didn’t come back. This may be the black money or the money remained with the innocent people who could not exchange it on time. Demonetization was also linked to war on terrorists or extremists. We have seen, bigger terror attacks happened much after that and Naxals are not dependent on cancelled note alone.

Justice BV Nagarathna is talked about

Because of dissent judgement,. Justice BV Nagarathna is much talked about judge in the country today. She rightly questioned the absence enough transparent process before the Centre’s decision as well as the evidence of the usefulness of the decision.  We hope, her observations will prevent in future such hasty decisions by the Centre. In fact, all the judges have felt that now there is no point in reversing the demonetization. Or they cannot reverse the decision.

Indeed it is a blot on the image of PM Narendra Modi who is hailed for many of his other bold decisions like abrogation of Article 370 etc. The SC (all 5 judges) have appreciated his (or Centre’s) clean intentions behind the decision, but they couldn’t openly say it has benefited the nation. Moreover, they connected some dots and completed a sentence for the sake of RBI and the Centre.

Benefits are smaller compared to the costs we have paid due to demonetization. Some say, the move has hastened digitization in India. May be true. But for that we need not undergo such harsh and punishing process which can only be likened to Mao’s Cultural Revolution. Even Covid-19 too contributed to digitization, but should we welcome the pandemic? There should be other better methods to achieve health objectives in the economy.