Maverick's World

Demonetization is failing to achieve its objectives

News reports are emerging that the amount of "black" money coming into the banks is simply not enough to make the entire demonetization justifiable. The result of this is that the committee that planned this entire thing is wondering why more black money has not been uncovered. The needle of suspicion points towards the bankers. That sense is driving major strikes against private bankers (Hawala traders and their couriers i.e. Angadias) and against "corrupt" bank officials. The IT department has been put under pressure to strike hard against people - the legality of these strikes is at best questionable.

The news channel ABP has been going around in the villages. The reports are in Hindi (if you can understand the language please use the original source), for those who don't understand the language, I summarize the gist of the overwhelming majority of the reports

1. 1) The rural business side is hit hard with most people reporting 80% loss of income after demonetization
2.  Rural people are being driven towards insecure and predatory lending. This system is turning into a major black economy in itself. 
3.  The people "support" the initiative - but question whether any of the higher level goals of "eliminating black money" are being reached. 
4. Farmers and agro businesses are convinced that there will be a significant yield issue in this years winter crop as the sowing cycle has been delayed. 
5.  Most people feel they can somehow endure this for a few weeks at best, if the situation turns into months they are looking at starvation as local credit sources will dry up. 
6. The support for the Prime Minister is weakening as people are beginning to question whether he thought this whole thing through. 

A number of allegations have emerged of personal corruption against Prime Minister Narendra Modi. These are being aired via Congress (I) channels in the media. A lot of people are wondering if Sri. Rahul Gandhi can prove these allegations beyond all doubt, but such people are naive about how cruel politics really is. In an age where people are inundated with news, the allegations put the onus on Prime Minister Modi to prove that he is clean. At a time when he is struggling with the biggest self inflicted economic wound in Indian history - he now has to defend himself against allegations of corruption. This is adding overhead to the governance process. These allegations are slowly but surely corroding Sri. Modi's image of being "incorruptible".

People like me who watched BJP leaders launch utterly baseless attacks on Prime Minister Manmohan Singh's competence on a daily basis cannot sympathize with Prime Minister Modi's condition, after all we were educated by our BJP friends that "that's just the way politics works".

That being said - the policy of unnecessary seizure of funds from the subterranean economy - specifically this set of raids - will likely be significantly damaging to India's natural security. It is important for all the OSD types in Modiji's PMO to understand that when you take money out from the underworld like this - the underworld tends to become very aggressive about getting its money back with interest.

Demonetization is failing

1) It is not generating a positive public image for Sri. Modi.
2) It is not leading to more money in the RBI's hands.

The best thing to do now is to cancel the initiative after the 50 day period so that Modiji can save face and say "Well we tried and it didn't work - I am sorry". That way this can all end before someone does something really really stupid. 

posted by maverick @ 4:44 AM