No, the poor aren’t sleeping peacefully
The rich and the middle class have their digital wallets and credit cards; they can afford to wait two weeks, even 50 days, for their money to be exchanged
One has to be astonishingly callous or exceptionally removed from reality to think that the poor are sleeping peacefully and only the rich are frightened, needing sleeping pills in the wake of the great currency-exchange drama playing out in India. For that’s what it is; old notes are being replaced with new, and a new note of even higher value is being added.
But the fantasy description of blissfully asleep poor and terrified rich is just that—a fantasy. Even a quick look at the videos being circulated of the people queueing up to change their money shows their frustration and anxiety; and even if they aren’t below poverty line, they aren’t rich.
Indeed, the rich and the middle class have their digital wallets and credit cards; they can afford to wait two weeks, even 50 days, for their money to be exchanged. It is the day-wage labourers who suffer—three of whom are given a Rs1,000 note to cover their wages; the security guard who needs smaller bills with which to pay a hospital which would otherwise not do an MRI scan of his seven-year-old son who has a lung disease, and who breaks down; the children on the street who sell toys and flowers and pirated books but no longer earn enough to eat because nobody has the small change to buy their meagre offerings; they bear the burden of the sloppy planning.
Indeed, black money is a real problem. But statistics show that only a small part of it is kept in cash—by some accounts, 6%. Black money resides abroad too, but a large amount of it sits in India, as gold deposits, as land banks, as benami assets. Focusing on cash is like trying to catch the tiger by his tail.
There is also the question of what constitutes high-value currency. Indeed, currency notes of Rs500 and Rs1,000 are of the highest value in India, but they constitute more than 80% of the value of currency in circulation. When the Janata Party demonetized notes valued at Rs5,000 and Rs10,000, the amounts were worth about $640 and $1,280, respectively, at approximately Rs7.8 a dollar. Today’s “high” value notes are worth $7.38 (Rs500) and $14.75 (Rs1,000), respectively. That is still a lot of money for those who are absolutely poor, but those amounts aren’t high value for what they can buy.
And despite the efforts of banks and successive governments, a large part of India is still unbanked; an overwhelmingly large proportion of transactions—by some accounts, 90%—takes place in cash; smart technology notwithstanding, Internet connectivity in rural India (even parts of urban India) remains spotty, and there are too few automated teller machines for a country of India’s size and a very small proportion can be found in rural India. And the ones that exist aren’t designed to handle such intense use, most of them aren’t configured to slot the new Rs2,000 notes—which do not have microchips.
The government has sucked in liquidity from the country for the ostensibly laudable—but apparent—aim of eradicating black money, which has unnerved the poor who simply do not have the “working capital”—cash reserves—to tide over what is uncaringly referred to as “temporary inconvenience”. Yes, people are looking after each other and using barter, trusting customers and neighbours, and living on credit. But that’s relying on the kindness of strangers. Indians do it all the time. When there is a cyclone, neighbours look after each other because the State hasn’t reached the remote areas. But this is a cyclone caused by the State, whose responsibility is to protect the people, not to place them at a greater risk.
The prime minister feels the pain, but it is his own pain. His voice breaks and he says dramatically that the forces he has taken on may not let him live. Meanwhile, by one estimate, 33 Indians have died due to stress, heart attack, or anxiety; there is a report of at least one suicide. Each of those deaths was avoidable.
We don’t know what the economic consequences of this exercise will be. But if liquidity is drained off temporarily as a shock measure and then re-injected, there is no guarantee that the small businesses which have collapsed will be the ones which will get revived. Economic experiments are fine in safe lab conditions, on spreadsheets, in classroom simulations. But in the real world, ceteris isn’t paribus; other things don’t remain equal. To fault the poor for not having an Aadhaar card or a Jan Dhan account only adds insult to their injury.
Callousness abounds: the Maharashtra chief minister decides that old notes can be spent on seeing theatre even as the poor go hungry because those notes are worthless to buy food. Juvenal admonished ancient Romans for caring only about panem et circenses (bread and circuses). The Maharashtra leader reaches lower depths, ignoring the bread, offering circus. “People die in ration lines too,” say Bharatiya Janata Party leaders, failing to note the irony of having rationed people’s own hard-earned savings.
It is trite to quote M.K. Gandhi, but in the days before he died, he wrote a talisman for spiritual freedom of the vulnerable. What would he have said today? Perhaps this: “Whenever you are in doubt, apply the following test. Recall the face of the poorest and the weakest Indian whom you may have seen, and ask yourself, if the step you contemplate is going to be of any use to him or her. Will he or she gain anything by it? Will it restore to him or her a control over his or her own life and destiny? Then you will find your doubts and your self melt away.”
Salil Tripathi is a writer based in London. Read Salil’s previous Mint columns at www.livemint.com/saliltripathi
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