P Chidambaram - Monumental mismanagement seems to be the signature tune of the NDA government
Dr Manmohan Singh is
a man of few words. He speaks softly and is careful not to offend anyone.
These, in my view, are excellent attributes of a leader but, in a loud and
raucous democracy, they are regarded as failings. Our democracy is poorer for
encouraging lung power. Our debates are poorer because fact and logic are
overwhelmed by falsehood and rhetoric.
Dr Singh spoke in the
Rajya Sabha on Thursday, November 24, 2016. He spoke for barely seven minutes,
softly, haltingly, almost apologetically for intruding into the business of the
House! He said that in the implementation of the decision to demonetise
currency notes, the government was guilty of “monumental mismanagement”.
The Prime Minister was
present but, inexplicably, did not choose to respond.
However kind the media
may be to the government (some sections have been disgustingly indulgent and
unctuous), they were obliged to report Dr Singh’s remarks. So, the words
“monumental mismanagement” were played over and over again on television and
were repeated in the social and print media. They have left an indelible
impression in the minds of the people.
Signature Tune: ‘Monumental
mismanagement’ seems to be the signature tune of the NDA government. Any
challenge that they take up, ends up more complex and dangerous than before.
Demonetisation is the latest example. It is now clear, by putting together
private first-person accounts and the movement of the persons concerned, that
only four officials had been taken into confidence and tasked to carry out
demonetisation. None of them had sufficient knowledge of currency production
and management and, therefore, none of the following critical questions was
asked or answered:
1. How many discrete currency notes will cease to
be legal tender on the midnight of November 8-9, 2016? Ans: 2,300 crore notes.
2. What is the capacity of the government’s
and RBI’s printing presses? Ans: 300 crore notes per month.
3. How long will it take to replace the
demonetised notes by new notes? Ans: If we replace note for like note, it will
take seven months. If we replace a 500-rupee note by a 100-rupee note, it will
take five times longer. If we print more 2,000-rupee notes, the time will be
shorter.
Bizarre Decision
4. Is there a justification to introduce
2000-rupee notes? Ans: None at all. If the problems of corruption and black
money stem from high denomination notes, and hence 500- and 1,000-rupee notes
will be demonetised, there is absolutely no case for introducing a higher
denomination note.
5. Can the new notes be distributed through
ATMs immediately? Ans: No. The ATMs have to be re-calibrated to stack and
dispense the new 2000- and 500-rupee notes. Re-calibrating 2,15,000 ATMs will
need a month, perhaps more.
6. So, how will the new notes be distributed
quickly? Ans: They cannot be distributed quickly because of limitations of bank
branches and bank staff.
7. Will there be a currency shortage and for
how long? Ans: There will be an acute currency shortage and it will last for a
long time. Apart from the limitations mentioned above, the more crucial factor
is the skewed distribution of bank branches and ATMs:
Bank Branches
(Total: 1,38,626)
* Two-thirds are
located in metro, urban and semi-urban areas.
* Only about a
third (47,443) are in rural areas and the distance to the nearest branch could
be several kilometres.
ATMs (Total:
2,15,000)
* 55,690 ATMs are
located in the seven metro cities.
* 90 per cent of
all ATMs are located in 16 states.
* Only 10 per
cent of all ATMs (21,810) are located in 13 states and 7 Union Territories.
* The seven states in
the Northeast have only 5,199 ATMs, of which 3,645 are in Assam.
Cost to economy
8. What will be the cost
of demonetisation to the economy? Ans: The cost will be significant. Assume,
conservatively, that GDP will drop by 1 per cent. According to the Budget
papers, the size of the GDP at the end of 2016-17 will be about Rs 150 lakh
crore. One per cent of that will be Rs 1.5 lakh crore.
The Centre for
Monitoring Indian Economy has calculated the cost of demonetisation for the
50-day period from November 8 to December 30 as Rs 1,28,000 crore:
*Households (queuing,
transaction cost): Rs 15,000 crore
*Government & RBI
(printing): Rs 16,800 crore
*Business (loss of
business, sales): Rs 61,500 crore
*Banks (staff cost):
Rs 35,100 crore
9. How much of the demonetised currency will
return to the system through exchange of notes or deposits? Ans: The total
value of the demonetised notes as on March 31 was Rs 14,17,000 crore. If 90 per
cent of the notes, by value, returns to the system, the ‘effective’
demonetisation will be only Rs 1,40,000 crore, that will be more than wiped out
by the loss of GDP.
(As on November 27, Rs
8,44,982 crore, by value, of notes had been exchanged or deposited. My sources
tell me that over Rs 11,00,000 crore had been deposited until Friday last. If
deposits will be made at the same rate over the next four weeks, the notes that
could return to the system may exceed 90 per cent of the demonetised notes!)
10. If it is possible that nearly all the
‘demonetised’ notes could return to the system, why should we do this exercise?
Ans: Because, sometimes a government amuses itself with Khoda pahad nikli
chuhia!
http://indianexpress.com/article/opinion/columns/manmohan-singh-demonetisation-currency-notes-ban-monumental-mismanagement-parliament-winter-session-p-chidambaram-column-4409140/