28 February, 2021

Fumble No End

Defence of any dose can’t stand against the DeMo blunder

Photograph by PTI
Fumble No End

Last year’s demonetisation is undoubtedly the most irrational economic decision taken in post-Independence India. There have been decisions in the past that have been objectionable; but this announcement on November 8, 2016, simply defied reason. Not surprising, thus, that the government’s subsequent defence has kept changing over time to camouflage the irrationality of the proclamation made at four hours’ notice nullifying 86 per cent of the country’s currency.

The original argument was that demonetisation will attack black money, since its operators would not dare to come to banks to deposit or exchange old notes for fear of awkward questions. Rs 3.5 lakh-crore being immobilised in this manner was bandied about, which, it was argued, would deal a crippling blow to the black economy. Talk even centred around how this money, being a windfall for the Reserve Bank of India and hence for the government, should be distributed among the people. Against this, it was pointed out even then that such an immobilisation of a stock of money would not...

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