Demonetisation and a divided India

Demonetisation has divided India. These divisions tell a tale where those fortunate enough to have their salaries paid into their account or indeed those who have bank accounts to begin with, have gushed over just how brave and far-sighted the government has been. Of course, nothing can be further from the truth.

While the very people who have access to internet and telephone banking argue on social media about how people should bear some pain for ‘the nation,’ others who depend on daily cash payments have been stuck in interminable lines outside banks. It seems that many people think that the life of the poor is not anyway circumscribed by hardship and pain.

Meanwhile, citizens have been told that they can only access a limited amount of their money while the very same public banks into which money is being deposited are being unable to collect loans worth billions from wealthy individuals and corporations. Indeed, it is incredible how large parts of the middle classes and the elites have bought into the narrative that this move is all about fighting corruption and terrorism. Both these issues evoke such emotional and indeed visceral responses that most people are unwilling to think about them dispassionately.


Firstly, it is a mistake to think of corruption as one homogenous problem. Indeed it is crucial to separate the high-powered world of rent seeking from the everyday corruption that is practiced by petty officials including bureaucrats, police officers and low-level government employees. It is the latter that affects the vast majority of the population with the former largely being the subject of interminable judicial commissions and sporadic parliamentary and public debates. Then there are instances such as the Vyapam scam, which involved both high and low level officials. The large scale admission and recruitment scam of petty officials perpetrated by an organised network of senior politicians, officials and businessmen, is no longer even whispered about in the corridors of power. It is still unknown just how many people paid kickbacks to obtain a government post.

Furthermore it is precisely this level of government servant- food inspectors, teachers, transport officers, forest guards and petty clerks amongst many others- whose corruption affects citizen’s daily lives. It is undeniable that the demonetisation will affect these kinds of officers but it is a gross exaggeration, actually completely wishful thinking, to assume that the move will also affect those big builders, politicians, bureaucrats and government officers whose scale of corruption is nowhere near taking a few thousand rupees to move a file from one desk to another.

Tackling the kind of low-level corruption practiced by revenue officers, local policemen and municipal government employees amongst others is a positive step but it would be mistaken to think that demonetisation will eradicate larger-scale corruption from India. Of course there are those who have hoarded large amounts of cash and who will now be stuck as to what to do but for the most part, anyone with half a brain and a large amount of cash will have already laundered it. Gold, diamonds, property and even luxury watches- the ones that do not depreciate-, are just some of the ways in which this money is converted.

Another efficient way of laundering money and one that is highly visible across India is by building educational institutions. It is virtually impossible to drive across rural constituencies in any state without noticing the plethora of engineering colleges, polytechnics, law schools, dentistry colleges and teachers training colleges that have cropped up. Most of these places will only have a small number of real students and then have many more ghost students on their rolls who do not really exist but who are phantoms that pay fees. The point is that anyone worth their salt would not only have converted their illegal cash but furthermore would have created ‘legitimate’ businesses in order to protect their assets.


As is already abundantly apparent, people have found ways to get around demonetisation and as is usual the poor and those who have kept their life’s savings in cash are getting affected. The going rate in UP for 2000 rupees last week was 1800 rupees. Obviously those conducting these transactions have a way of guaranteeing their profits.

Prominent politicians have already started mobilising workers and others to convert old currency for a cash incentive. Money-lenders and others are having a field day converting money for a cut and now there are also stories of bribes being paid in kind rather than cash. The fact is that people will always find ways around corruption when large sections of society are also looking for a shortcut or a way to bypass the system. It is nothing less than naïve to think that demonetisation will suddenly transform India into a country of upstanding politicians and government servants and even more upright citizens.

It is not as if a land registry official or a petty clerk at a government office will stop accepting bribes in the new denominations out of some nostalgia for the old currency. Neither is demonetisation going to suddenly inculcate civic sense where people will happily pay a fine rather than get away with a bribe at a fraction of the cost. In any case, for larger transactions there are always other ways to pay bribes: foreign bank accounts and gemstones being just two.


Meanwhile, as the government slowly realizes that demonetisation will have an adverse impact on the upcoming state elections in Punjab and UP, local BJP workers have started to overplay the terrorism card. There is no doubt that terrorist networks often operate with cash so as to not leave a trail behind but the fact remains that these very same networks also have trans-national actors and other states backing them who will merely switch to another currency: real or even virtual, like bit-coins. So the fact remains that while the demonetisation might make a temporary dent in criminal organisations, it is not going to do anything more in the long term. Indeed, the whole terrorism discourse is actually manifesting itself in communal way on the ground where in parts of western UP, which is already largely divided along Hindu-Muslim lines, the presence of women in burqas in bank lines is being deduced as some kind of massive money laundering ploy by ‘terrorist’ organisations.

As it happens, most of the people involved in the informal cash economy in Western UP are Muslims and so their families are coming out in large numbers to deposit cash. This is not only being equated with them hoarding black money but also resonates with the old adage that ‘all Muslims are not terrorists but all terrorists are Muslims.’ And so the whispering campaign has begun where common people, frustrated by the demonetisation, have yet again found the mysterious, visible yet invisible ‘other’ onto which they peg their problems, rather than facing the reality that the government’s policies are fundamentally the cause of their current problems. The resentment bourn out of this will no doubt benefit those who are seeking to communalize and divide the electorate as various states go to the polls.

Terrorism, by its very nature, is present everywhere and yet nowhere because it is largely grounded in a fear that the terrorist can strike anywhere at anytime. This trope lends itself well to misdirecting people’s insecurities as well as public anger. The spectre of terrorism combined with a false sense of nationalism- the comical equivalence drawn between standing in a bank queue and defending the borders- has meant that people have willingly ignored the cold hard reality of demonetisation and have sought to justify it by invoking emotional and moralistic arguments. Ultimately, demonetisation, like most anti-corruption measures, only adds another obstacle or impasse that has to be negotiated by those who seek to bypass the system. Real measures involve institutional reform but these rarely pay the political dividends that populism, at least in the short-term, guarantees.

Courtesy: timesofindia