Vol. XL No. 47 November 20, 2016

End this Unrelenting Attack on People

THE withdrawal of 500 and 1000 rupee notes is unfolding as a war on the common people instead of a war on black money.

The media has been focusing on the long queues of people outside banks, ATMs and post offices waiting to exchange the withdrawn notes for fresh notes upto a paltry amount of Rs 4,000 (now Rs 4,500).  But this is only one feature of the problems faced by the people. 

What is worse is the monetary shock leading to the loss of livelihoods and incomes for crores of workers, farmers, fishermen, small traders, shopkeepers and all those who are dependent on cash transactions.

The picture, one week after the prime minister’s announcement on November 8, is of an economic standstill.  The rural economy has ground to a halt with incalculable consequences for agricultural production and consumption demand.

Farmers are unable to get payments for the crops they have harvested.  Where rabi sowing operations have started, they have no money to pay for seeds and fertilisers.  There is no money to pay agricultural workers. Vegetables brought to the markets are not being taken by traders and are left to rot.  So also is the fish in the fish markets.

All the small enterprises, from brick-kilns to factories, who have to pay cash wages to workers have stopped working or are not making full payments for wages. They were allowed to withdraw only Rs 25,000 per week.  This has been increased  to Rs 50,000 a week but it is still insufficient in most cases as wage payments amount to Rs 2 to 3 lakhs per week.

As per the RBI directive, district and primary co-operative banks which cater to millions of farmers are not allowed to exchange notes.  This has paralysed the banking operations causing hardships to farmers and the rural population.  This has had a particularly adverse effect in Kerala which has a wide network of primary cooperative banks.

For the lakhs of people working in markets and running shops in both urban and rural areas, for transport workers and casual labourers, their incomes have dried up.  They cannot buy rations or other essential commodities.  The scale of human suffering for the working people is magnified with the inability to pay for treatment in private hospitals or buy medicines.

The informal economy which predominates in India is widely dependent on cash transactions.  When 86 percent of the money circulation is withdrawn (500 and 1000 rupee notes), the brunt has fallen on the unorganised sector workers, the agricultural workers, the farmers and the urban and rural poor. 

Narendra Modi is only making a cruel joke of the sufferings of the people by declaring that the “Poor are sleeping well while the restless rich are searching for sleeping pills”.  The demonetisation episode has glaringly exposed the reactionary class outlook of the Modi government and the BJP.  The savage attack on the livelihood of the working people is termed as a temporary inconvenience.  The way the whole exercise has been conducted has revealed the utter inefficiency and bungling by the government.  There were no preparations to ensure adequate  supply of the new currency notes.  The ATMs were not calibrated for the new size of the notes.  The finance minister has himself admitted that it will take weeks to recalibrate the ATMs. 

The prime minister and the BJP government are trying to portray the demonetisation of 500 and 1000 rupee notes as a big step to unearth black money.  By this, they spread the fallacious idea that black money is the hoarding of huge amounts of cash in currency notes.  The bulk of the black money is converted into real estate, gold, jewellery and foreign currency kept abroad.  Black money exists as a parallel economy.  It is generated by economic activities which are either illegal or undertaken in excess of what is legally permitted.  The incomes generated from these activities are not declared to evade taxes.  For instance, in the real estate sector, most of the transactions undertaken are not fully declared to evade taxes and many are benami properties.  Another source of generation of black money is the under-invoicing or over-invoicing of exports and imports and much of this money is stashed abroad.  Hawala transactions take place to transfer the black money and to “white-wash” it. 

The Modi government has done nothing to plug the loopholes which generate the flow of black money in the economy. It has not taken any action against the big business houses which have evaded taxes or defaulted on the loans they have taken to the tune of thousands of crores from the nationalised banks.

The claim that this is a step to fight corruption is a hollow one.  As long as the nexus between big business-ruling politicians and bureaucrats is not broken, corruption will thrive.  The new 2000 rupee note will only facilitate bribes being paid. 

The real intention of the cancellation of the 500 and 1000 rupee notes is something else.  It is meant to divert attention from the abject failure of the Modi government to bring back the illegal money stashed abroad and the election promise to create millions of jobs. It is also intended to disarm the opposition parties in the run-up to the assembly elections in Uttar Pradesh and Punjab where their use of monetary resources is sought to be crippled.  The chicanery of the move is brought out by the fact that despite the claim of absolute secrecy surrounding the demonetisation, in Kolkata, on the eve of the announcement, the BJP state unit deposited Rs 3 crore in 1000 and 500 rupee notes in four  installments into its bank account.  How this was done needs to be probed.

The Modi government has to be compelled to stop this unrelenting attack on the people.  The only way this can be ended is by ensuring that, till alternative supply of currency is fully available, the use of the 500 and 1000 rupee notes are allowed for all transactions till December 30.  This is a right the people must have.  A powerful movement must be developed to see that this right is granted.

(November 16, 2016)