January 22, 2025

Since it is now amply clear that the government did not anticipate the enormity of the problems demonetization would cause (to be fair, only some of the problems could have been anticipated beforehand and the negative comments about the rest are just wisecracks based on hindsight), the least it could do is to apply its mind to try and control the situation and mitigate the hardships being faced by the people. Instead, various government departments are indulging in scaremongering, which will turn the hitherto largely appreciative public against it.

To do so, the first thing that needs to be done is to refrain from tinkering with withdrawal and exchange norms on a daily basis. Frequent change in policy confuses and scares the public and harasses the bank staff. If the bright idea of inking fingers with indelible ink was in the offing, there was no need to change the swap limit from Rs 4500 to Rs 2000. It is true that ‘ghost’ exchangers (people who were exchanging old notes for other people on a fee basis) were the main culprits, but given the Indian penchant for jugaad, this could have been easily anticipated. Ever since inking was announced, the queues have vanished at some centres.

Then there was the question of having sufficient stock of new notes spread all over the country before announcing such a major scheme. It is quite possible that the scrapping of the notes would have been announced sometime in January, but the government’s hand was perhaps forced by the scare of a leak. Whatever is the reason, arrangement of sufficient stocks of new notes and recalibration of ATMs must have been done well in advance. Further, since the Rs 1000 notes were being scrapped, the best way was to keep the size of the new Rs 2000 notes exactly same to obviate the need for recalibration. Someone in the RBI design department goofed up big time. Also, the problem of finding change for the Rs 2000 note in the absence of the new Rs 500 note must have been anticipated and sufficient new Rs 500 notes must have been printed in advance. That would have allowed ATMs to dispense the new notes from day one.

Next, there is no need for the Income Tax department to come out with daily statements that, although designed to warn the public, are creating panic. Every person is within his rights to deposit as much cash as he can in his bank account, provided he can prove that he was carrying that much cash in hand from previous years. If they are assessed to tax, they can do so by showing their previous ITRs and balance sheets and if not, by providing other supporting documents. By scaring the public with statements such as they can be jailed for 7 years under the new Benami Transactions (Prohibition) Act, the department is doing a great disservice to the nation. It is also hinting at the return of the inspector raj and corruption, where money would be demanded for regularizing substantial deposits. That would defeat the purpose of the scheme.

The government must step in to reassure the public that nothing of the sort is going to happen. As it is, rumours are afloat that bank lockers are next in the line. The department should check all suspicious deposits but genuine depositors must not be harassed. Inspector raj must be avoided at all costs if the benefits of demonetization are to accrue to the economy. The department should train its gun on the cash trail instead, where deposits in one account are subsequently transferred to other accounts on whatever excuse. It should employ its resources in netting new tax payers and in matching the deposits of already assessed to ascertain whether they had avoided paying tax. Jailing people will not solve the problem. Scaremongering befits scoundrels and not government departments.