Demonetisation and the Poor

Prime Minister Modi has taken a huge gamble by demonetising 1000 and 500 rupee currency notes. This move has resulted in immense hardship among common people.  Many people have to standup is long queue to withdraw money from banks. Many people are poor, daily wage labourer, many lost their days work to withdraw money. Some people had relative in a hospital. Some had family function like marriage that got derailed due to demonetisation. Yet, most people have acknowledged being inconvenienced but supported the move, albeit, grudgingly. Supreme court of India has also refused to put a stay on demonetisation.

It seems most neutral observers believe that intent of the move is goodImplementation is not so good.  Given the size of Indian black economy move was necessary. But this move of demonetisation cannot be end all, it has to be backed by other systemic changes. What is important to note is Modi has staked his chair for something he believes in. He did not want to beat around the bush and simply do nothing. Prime Minister has done well by going to the people and making an effort to explain his side of the story. 

Most vociferous protest has come from the political class. This is expected keeping in mind upcoming state elections. Most parties must have created a war chest for use in the election. Sadly, the money if it is unaccounted, and most likely it is, it has become useless. In the guise of speaking for the poor, our political leaders are intact crying hoarse about their own misery. Politicians want the demonetisation drive be withdrawn. Some have threatened possibility of violence unless the situation is brought back to normal. 

A very common argument put forward are as follows:

  • Poor people are not familiar with banking system. 

  • Most villages do not have any bank. So what are people living in villages going to do? 

  • Government did no prepare before it introduced the decision. 

India has 700, 000 villages of varying population density. In last few years since the present government came to power, 22 crore or 2200 lakh, Jan Dhan accounts have been opened. This means nearly 200 – 300 individuals from each family were introduced to banking system. If one family has a minimum of 4 members, conservatively 80 crore people would have access to banking system. Each Jan Dhan account is a zero balance account, it comes with a Rupay debit card and 30, 000 rupees accident insurance. 

Government had tried to transfer cash benefits directly to Jan Dhan accounts. UPA government had introduced MGNREGA program. According to this program one family member of each family will be guaranteed a minimum 90 days work per year. Average daily wage for MGNREGA is about 160 rupees per day. Government transfers the wage to account of the worker. So at least some people in rural area knew how to access banking system. Given the bank was 20 km away from their home was not an impediment before and should not be an impediment now.

People who did not open an account or did not put their money in the account also got wage of Rs. 160 per day. This amount is much lower than 500 rupee currency note that has been demonetised. It is curious to know a person what gets 160 per day, why would he be seriously affected by lack of 500 rupee or 1000 rupee currency notes? Rural poor deal in currency of smaller denomination and that currency remains intact. Those who have some currency they can get them exchanged from a bank.

It appears government did some preparation after all to help people. The question that needs to be asked very seriously, if our politicians are so concerned about poor, why after seventy years villagers have to walk 20 km to reach the nearest bank? Why people still are illiterate and what has been done to improve their lot? 

Chief Minister of West Bengal was so anguished by currency demonetisation, that she wrote a poem describing how cruel central government move on demonetisation was. It is strange, however, in her own state when people lost their lives savings due to Sharada Chit Fund scam, honourable chief minister did not compose any poem. In Sharada scam, members of chief ministers party were involved. It seems deep agony brings poet out of a human. Kalidasa, the great poet, was moved by death of a crane when a hunter shot it. Our chief minister was also pained, but her agony was directed at her own misery because her election funds have turned into paper.

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