Did the PM Admit to the Nation That Demonetisation Has Failed?

We accept the PM’s ‘thank you’ note to the nation, but what about the glaring questions that remain unanswered?

Prime Minister Narendra Modi. (Photo: Reuters)

Questions the PM’s Address to the Nation Left Unanswered

• Where are the facts and tangible data about demonetisation’s initial success?
  
• How much black money has returned to the government since 9 November?
  
• How much cash out of Rs 15.44 lakh crore is back in the banks?
  
• When will the cash situation improve and the public get relief?
  
• How much money will the government re-circulate?
  
• Will the government make some direct transfers to Jan Dhan accounts?
  
• What is behind his cautious take on political funding?
  

Prime Minister Narendra Modi is expected to deliver a ‘significant’ speech on 2 January in Lucknow to launch the BJP’s election campaign in Uttar Pradesh. He could have thus avoided the address to the nation on the eve of New Year.

But since he chose to speak to the nation on 31 December, the obvious expectation was that he would give a closure report on his historic decision of demonetising a huge chunk of currency. He was expected to articulate the gains, backed by solid and tangible facts.

Two days ago, a minister had said that the government will share the data on returned cash on 30 December. Remember, after 10 December, this data has not been shared by the Reserve Bank of India.

But the Prime Minister chose to remain silent on this.

Recurring Silence on Pertinent Questions

The question is, how much black money has returned to the government since 9 November? How much cash out of Rs 15.44 lakh crore is back in the banks? And if the entire amount has made its way back, has the plan been successful or failed? When will the cash situation improve and how much money will the government re-circulate?

His silence on these pertinent questions proves that the entirety of the black money is back, and there are no fiscal windfalls to show off at this stage. The government had hoped, and its spin masters had declared that opposition parties will have to burn their stockpiles of cash and huge chunks of the money wouldn’t come back. It did, and with vengeance.

The government may argue that all the cash deposited in banks is not white and that it will examine the whole thing. Which means a complex, time-consuming, mass-scale probe will be launched, demands will be raised and challenged, and since the matter will have legal status, we may never have the data on how much money came to the public exchequer as a result of Notebandi.

Populism Vs Realism

The government is not in a position to claim a tax windfall and a fiscal windfall at this stage. The expectation that PM Modi would put some cash into crores of Jan Dhan accounts right away has proved to be wrong, at least after this address. He may have some aces up his sleeve for the Lucknow rally though.

Instead of any such direct transfer, he announced a number of pro-poor measures, from cheap loans for housing, to farm loan interest waivers, to easy working capital to small businesses. This is nothing but an attempt to ease the hardships of a section that seems to have suffered the maximum in the last 50 days.

In fact, it is a matter of relief that PM Modi did not go for aggressive populism as was being anticipated by some. This clearly shows that the government has no fiscal room to go for large-scale welfare funding. One can infer that even if there is big pomp and show about pro-poor schemes, the allocations may not be that big. India is a large economy and schemes with Rs 20-30 thousand crore allocation do not deliver much impact. Especially when ministries’ ability to spend remains a problem area. So the "stimulus" he has announced is not enough to bring the economy back on track.

Banking Upon Banks!

His address also gave clear evidence that he is unhappy with banks – both private and public. He warned of severe action against wrongdoers in the banks. But his reference to the fact that he has asked concerned officials to bring normalcy back to the banking system as soon as possible actually underlines his worry about banking, cash supply, adoption of digital economy, and lending to the poor and small businesses.

It wouldn’t be incorrect to conclude that from e-wallets to UPI to Aadhaar, the spectre hanging over the last few weeks suggests that banks are not being able to deliver what the PM wants and with the speed he wants.

Where Is the Data?

The nation did not get a sense of the costs and benefits of this whole disruption in hard numbers. There is a consensus that GDP will take a hit. If the hit is a loss of two percent to GDP, that means Rs 2.80 lakh crore. If it is 3 percent, then the economy is hurt by Rs 4.2 lakh crore. So any Notebandi gain less than that is a loss – in fact, a big loss.

In his address, Modi yet again instigated the poor against the dishonest. He warned beimans and said that the war against black money will continue, without mentioning anything about the next course of action.

Land, stock markets, corporates and political parties are the other fronts where a large share of black money resides. Despite showing intentions of going after Benami properties in his previous speeches, he mentioned nothing about it in the latest address.

This might be the result of the realisation that Notbandi’s jolt to the economy is too severe, and any new adventure can prove to be costly – hence, a pause is deemed necessary.

To Lead or Not to Lead By Example?

Most curious is his cautious take on political funding. What he said on Saturday was just lip service. People expected him to initiate voluntary action under which his party will declare no cash dealings and adopt the cashless route for party funding. By doing this, Narendra Modi as the party leader could have set a new Gandhian standard – but instead, he chose to be vague.

Currently, it seems that the negatives are weighing so high on Mr Prime Minister’s mind that he decided to simply deliver a nice ‘thank you’ note to all those who have suffered in the last 50 days. Mr Modi had promised that he would give hisaab after 50 days. He hasn’t.