Economy

Demonetisation Isn’t an ‘Inconvenience’, It’s a Gross Violation of Our Rights

Demonetisation is a political move couched in economic terms. Calling its fallout as mere ‘inconvenience’ insulates it from popular dissent.

People sleep outside a bank as they wait for the bank to open to exchange their old high denomination bank notes in the early hours, in the old quarters of Delhi, November 16, 2016. Credit: Reuters/Adnan Abidi

People sleep outside a bank as they wait for the bank to open to exchange their old high denomination bank notes in the early hours, in the old quarters of Delhi, November 16, 2016. Credit: Reuters/Adnan Abidi

It was all so dramatic, the cheer and trepidation, on November 8 when the prime minister announced the demonetisation Rs 500 and Rs 1000 notes. It was the ‘surgical strike’ in his government’s crusade against ‘black money’. But for it to succeed, some ‘inconveniences’ were inevitable and had to be borne by all – which a teary-eyed prime minister assured will last no longer than the next 50 days. What has unfolded since has been an unmitigated disaster. Many prominent economists have analysed and critiqued the design and implementation of demonetisation. However, its politics bears the mark of an undemocratic and anti-poor state shielded by the persona of its leader.

The violence and violation of demonetisation

So what has this ‘inconvenience’ looked like? At the time of writing, there were 47 deaths connected to demonetisation. People have been made to stand in queues for hours, even days, outside banks and ATMs to access their own money as if it were charity. Weddings have been cancelled due to the cash crunch. Small and marginal businesses, who largely rely on cash transactions, have suffered a massive drop in trade. Farmers, in the middle of the sowing season, are unable to pay for seeds, fertilisers, other farm inputs or access loans. Patients, including infants and the chronically ill, have been denied treatment. Travel, both domestic and foreign, has been disrupted. Daily wage earners, agriculture labour, migrant and informal workers and contract workers, are some of the worst hit by this move, unable to earn a wage or use their savings. Women, children, the elderly and persons with disabilities are particularly vulnerable and face the severity of this move acutely. Every day, new tragedies unfold. All this brought about by just an executive order, without even the courtesy of an ordinance.

Calling these mere ‘inconveniences’ is both trivialising and insulting. It is a term appropriate for a minor traffic deviation or a flight delay. What this demonetisation has caused is a violation of fundamental and basic human rights. A quick word on ‘rights’ seems necessary these days. Every single individual has fundamental rights such as the right to life, property, health, livelihood, privacy and movement guaranteed under the constitution and under international human rights law.

These rights are not given by a ruling government and are not enjoyed at its discretion. They have to be respected and protected by the state at all times and it cannot violate them – not for 50, five or even one day. In fact, barring a few exceptions, these rights are protected even in times of national emergencies. These are vested as basic human rights precisely in order to prevent the state from trampling upon them at its discretion. Any interference should be an extraordinary exception and only if it meets the standards of necessity, proportionality and lawfulness for a specified period of time. None of these seem to have been fulfilled in this case. There was no impending exigency to explain why this measure couldn’t wait beyond November 8, till the government was better prepared, or that this was the most appropriate and proportionate means to address the government’s concern.

Apart from the impact of demonetisation, the policy and implementation also raise serious human rights concerns. The state has virtually expropriated the cash asset of its people, by excessively and unreasonably restricting the ability to use, access or earn money. There is a constitutional right to property (which covers movables like cash) under article 300A of the constitution, which guarantees “no person shall be deprived of his property save by authority of law.” The legal basis for this demonetisation is the gazette notification No. 2652, issued by a joint secretary, under section 26(2) of the RBI Act. While the demonetisation per se might not be illegal under the Act, other measures, especially limitations on withdrawal, find no authority in law. The constitutionality of the measure is rightly under challenge in the Supreme Court.

The government has tried to repeatedly tried to hide this colossal failure behind good intentions. Demonetising 86% of currency notes in a country where 90% of all transactions are done in cash hardly seems to be the smartest way to smoke out ‘black money’, only about 6% of which is held in cash. But even if one were to buy into it, a measure of this magnitude necessarily requires meticulous planning, infrastructural support and full preparation so as to ensure the least disruption. This is not simply an ideal or a better way, but the only way to execute a policy like this. The government has a legal duty to care for its citizens. The irrevocable harm and hardship that shoddy implementation could cause was reasonably foreseeable. In not taking enough steps to mitigate that, the state is guilty of more than just an innocent oversight; it is guilty of recklessness and gross negligence.

The politics of the economics of demonetisation

The politics of the economics. The justification around demonetisation has been spun around familiar tropes; one ‘the economy’ and other ‘the people’, where ‘the people’ have to suffer inconveniences to rid to ‘the economy’ of black money. What is the economy if not for the people? The economic is inherently political. It distributes power in particular ways by determining the material health of individuals, groups and sectors. Demonetisation is a political move couched in economic terms and calling its fallout as mere ‘inconvenience’ insulates it from popular dissent. But in constantly making these rhetorical distinctions, the economic is carved out as a distinct sphere, sanitised and separate from politics, decisions related to which are relegated to experts and technocrats. It escapes the scrutiny and rigour of political and democratic processes; ‘the people’ are alienated from ‘the economy’ and ‘the economy’ insulated from the polity.

This alienation is not new or particular to this government. We have followed an expert and executive-driven, technocratic and undemocratic system of economic policy-making during most of independent India. Be it during the days of planning, the 1991 reforms or post reforms, the larger polity has never actively participated in formulating economic policies, except voting on its approval or otherwise every five years. The demonetisation drive is the imposition of the same executive will on the people for the sake of ‘the economy’. Although it affects every individual, it was brought about by subverting federalism, parliamentary debate and judicial scrutiny. It was cased in an ‘economic’ shell, shielding it from the ‘the people’s’ most fundamental right of citizenship – to participate in the governance of the country.

The politics of demonetisation. Rallying around ‘black money’ generates greater political benefits than economic ones. In chasing this illusive villain, the government spins a Robin Hood narrative for itself – robbing the rich to help the poor. The redistributive effects of demonetisation are narrated simplistically – no black money means better welfare for the poor. This cannot be further away from the truth.

Let’s be clear – with or without demonetisation, the rich would remain rich and the poor would remain poor. Demonetisation has, at best, made a few very rich people a little less so. For that matter, even a ‘white economy’, while undoubtedly necessary for the rule of law, does not by itself ensure prosperity for all, unless policy and politics fundamentally change from serving ‘the economy’ to serving ‘the people’. If the current policies are continued, whatever the colour of the economy, India will not see any significant fall in malnutrition levels, infant or maternal mortality, increase in education, health, employment or wage levels. ‘Black money’ serves as a convenient explanation, ‘the other’ that we need to build, to explain the economic inequalities and poverty of the nation. This is indeed a masterstroke, only because it has deflected from the anti-poor measures of the government. On the one hand, it hails demonetisation as pro-poor and anti-rich, on the other, it is weakening the Mahatma Gandhi National Rural Employment Guarantee Act, increasing corporate tax concessions, stripping labour protections, lowering wages and diluting whistleblower protection.

So the anti-poor urban bias of demonetisation is not difficult to understand. Overnight, the cash economy has been discredited. There is a lazy and misleading link being made between cash and black money, vilifying the people, mainly the poor, who overwhelmingly rely on and almost exclusively transact and save in currency notes. The excessively stringent measures to curb cash outflows, the monitoring, surveillance and inking of people as if they are potential criminals, the constant berating to move to a cashless economy, has cast a shadow of suspicion on all things cash. There is nothing inherently ‘bad’ about cash or inherently ‘good’ about cashless transactions, except that this shift would heavily favour bigger businesses over smaller ones. On the other hand, the rural economy and the informal sector, which employ most of the poor, have been paralysed. We have used a cannon to kill a fly and made the poor cannon fodder.

The politics of ‘inconvenience’

Terming the serious damage that has been inflicted, as a mere ‘inconvenience’ is not just a matter of misplaced semantics. An ‘inconvenience’ is minor, temporary, innocent and even inevitable. A government can impose them and expect compliance. Resisting demonetisation due to its impact on the people, then gets framed as a refusal to accept minor ‘inconveniences’, a resistance that can be easily dismissed as unreasonable, destructive, malicious and even childish. It negates the legitimacy of the opposition and absolves the government of accountability. Calling the ‘inconvenience’ what it really is – a violation of human rights and fundamental freedoms by the state – is necessary in order to make such resistance not just serious but also a political necessity. The state cannot denounce its most basic democratic and constitutional duties chasing an illusive ‘black money’. Neither can one group of citizens ask of others to suffer such abuses, let alone do so enthusiastically.

Any responsible and reasonable government is bound to assess the extent and nature of this ‘inconvenience’ before unleashing its policy. Nothing of what has followed was unforeseeable. Especially when only 53% of the adult population has banks accounts and even those suffer a very high dormancy rate, only 39% of all account holders in India own a debit or ATM card and only 1.4 million POS (point of sale) terminals service the country, mainly in urban centres. This leaves recklessness, insensitivity or malice as the explanations.

If eliminating black money was the intention, demonetisation should have been the last step, not the first. The government should have taken more targeted measures on off-shore accounts, non-performing assets and benami transactions before it decided to steam-roll this ill-thought out measure on the whole population. But they wouldn’t have had the same theatrical effect as demonetisation – the sudden announcement, the asking for ‘sacrifice’, the higher morality of the people willing to suffer at the call of their leader, the discovery of ‘sacks of cash’ and the euphoria of a retributive justice. The ‘inconvenience’ is very much a part of its theatrics.

Demonetisation is a political gamble that might or might not yield the results that its architects imagined. Its economic gains look fleeting. The long-term macroeconomic impact of this measure is to yet to be seen, but it has crippled the economy for now by delivering a demand shock. No matter how ‘the economy’ performs, the distress that ‘the people’ have suffered will go unaccounted and un-redressed. The medicine that the prime minister has served us will be far worse than the disease.

Rashmi Venkatesan is an assistant professor at the National Law School of India University, Bangalore. She teaches human rights law and law and development.

  • Samir Thapa

    Please forgive me if I am blunt and call spade a spade.

    A country that cannot stand “hard decisions” in her favour will cease to be a country or will have to give up her independence. A political leader who cannot make a right and hard decision is not a real leader, he or she just wants win an election. India is a broken country that has been misgoverned by the Nehru dynasty.

    One of the hard decision that we wished Nehru or Shastri or Indira would have taken: ” Control our population. In 1950, Indian population would have been about 20 or 30 crore”. Nehru could not take this hard step, neither could Indira do it in 1970s.

    One of the hard decision that Pakistan should be making to save herself is to get rid of all terrorists and terrorism from Pak. This will save Pakistan. But can Sharif take such hard steps?

    Curbing black money is one such Hard Step that India desperately needs. It is like a surgeon fixing a broken leg of a person. There will be some pain, but fixing the leg is necessary else the person will limp for the rest of his life.

    • Rah Ul

      Hitler made a lot of harsh and tough decisions. Putin has been doing it for over 15 years now. What was your point, again? oh, yeah.. Real Leader, right? hmm…

      • Samir Thapa

        Which hard decision that favoured Germany did Hitler take?

        For your kind information the extermination of Black Money is not the same as the extermination of Jewish People.

        The government decision of demonitisation is akin to great decisions like “Abolution of Slavery” by Lincoln that caused unlimited pain to the farmers in US ( as black slaves were usually farm labourers), but the country gained immensely from it and is one of the reason today US is the world’s only Super Power.

        • Rayhan Ali

          super power.! power to the people :-/ and you should read history.! Lincoln never wanted to free slaves.! he wanted them to throw back to Africa.! you other facts are speculation as well.!

        • DariyaSophia

          Good lord. You’re comparing the emancipation of slaves and its untold misery and underlying racism to some illegal money? Shame on you. The BJP is as corrupt if not more than Congress, it knows where the untaxed income lies and refuses to get it because it gets a portion of it from its friends. Has anyone in the Panama Papers been prosecuted? No. Modi is probably complicit and knows about this.

          It’s really sickening that BJP supporters liken this killing machine to the abolition of slavery, which proves you know nothing about either. The poorest are being made to give up their lives so the higher class can think of the PM in a morally satisfying way with respect to a half-baked attempt to get money in banks. Then, when enough people have been killed, they will declare it largely a success and roll it back some more.

    • Rayhan Ali

      only hard decision India needs to make is to make states stronger is income taxes and services taxes or any individual taxes should be under state control.

      second India needs to strip power of govt. big govt is communist no matter how it comes into being.!

  • K SHESHU BABU

    It is deplorable that supreme Court did not consider the magnamity of the impact of the policy and pointed to the legal and economic fallacies. Instead, it has allowed the rulers to continue with demonetization. Though it has warned of ‘ riots’ due to scramble for notes, court’ s failure to check the implementation reflects the inability if judicial system to stand up for the vast majorityof people, even though it involves difference with govt.

  • whomeworry

    Check the donors list for the wire, and you’ll understand this article much more deeply. News media is a dying industry, people have expenses and most of us often have to choose daily lives over idealism.

  • S S Sandhu

    What a silly article

  • R Joseph

    A PIL has been filed in the Supreme Court and the next hearing is on 25/11/2016.

    • Homer Ji

      The PIL was disallowed in the SC. Filing a plea is hardly an effort. Filing a credible plea is worth boasting about.

  • Rah Ul

    Your comment justifies your name quite well.

  • Samir Thapa

    Please allow me to say: In no other way it could have been done. There is no alternative ways.

    The opposition is trying to create an artificial wave “common-man-sufferings” when they themselves did nothing to alleviate the common problems faced by people when and where they are in power.

    Those who oppose this demonitisation are hypocrites because these political parties – – Na khood karte hain, na hi kisi ko karne dete hain

  • Rohini

    Madam, what do you mean by ‘their’ leader? Whose leader?

  • Arpit Agrawal

    Sometimes the change has to come from within every citizen. When you asked for your birth certificate, did you bribe just to hasten the process, or was it impossible to get it without bribing the concerned officer. While buying a computer a responsible citizen would demand for a bill, on which both he and the seller will pay taxes. the seller can’t force you to hold a transaction without a bill.
    Awareness and a feeling of responsibility can bring about a change. Steps like demonetisation bring more harm to poor, daily wagers, who definitely don’t have loads of cash stashed under their carpets. The ‘chalta hai’ attitude is what we make it. It is a device of our own bringing which no government policy can tackle. A change comes from within us, until then we will be ‘forced’ to live in corrupt India.

  • whomeworry

    Where is my comment? Inconvenient truth?

  • Samir Thapa

    “…. Demonetisation, as visible, has only led the common man to suffer more. …” is absolutely wrong.

    The black money recovered will be a blessing for the country. Just wait till 31st Dec 2016 and we will know the details.

    31st Dec is not too far.

  • Samir Thapa

    Very well said:
    Most times action reasonably well deliberated are far superior to no action. Because there is no planning for every contingency and every problem.

    No plan ever made is perfect.

  • Rayhan Ali

    this step was taken to save big, real big bank defaulters.! initial estimate is INR 8 trillion.!!! strangely most were not even loan is were fraud.! like Malaya took loan but just gave money to himself and didn’t use that money for business.! that is fraud.! sbi just wrote down 7000 Cr in bad loans.! more to come.!!

  • Rayhan Ali

    sorry… the transfer you are talking about is through bank.! nobody will use that route for black money.!

    that limit is actually good for India or else Indian export would have collapsed because INR would have become very strong.!

  • Rayhan Ali

    modi has no clue how economy works.! reminds me of panchtantra story – monkey with a sword.!

  • Rayhan Ali

    riots happen when one set of people habe to get something from other. here rights cannot happen because everybody is penniless.!

    business disruption might happen through… a farmer’s having too much to sell and no buyers might dump his produce. it has potential to collapse supply chain and millions could die. and I bet you have no clue about supply chain.!

  • kujur bachchan

    Natasha Sarin and Lawrence H. Summers, in an article in this paper, write, ‘Moreover, the definition of what is illegal or corrupt is open to debate given commercial practices that have prevailed in India for a long time.’ It is, indeed. Mr. Narendra Modi does not consider his use of Adani’s jet for electioneering or allowing Ambanis to use his picture to advertise their 4G telecom as corrupt practices ; we do not think twice to receive/pay a percentage of the price of our property we sell/buy, in unaccounted for cash; how many of us have obtained our driving licenses by dutifully following the prescribed procedure?; we, especially the residents of Delhi, manage to get train tickets out of management quota. Not corrupt?; list is endless.

    While I may not agree with Rohini’s views on this government’s so-called demonetisation, I admire that she has been able to maintain her integrity by refusing to succumb to demands of bribe. I do not claim to be so strong (driving license, train tickets, you see!). Be that as it may, my point is that the ordinary citizens, particularly the poorest of the poor in the country’s hinterland, are forced to succumb to the demand of bribe by a venal bureaucracy (from a peon to the senior most) who have tasted blood from the hands of big landowners or the wolves of Indian business. These poor hapless illiterate/semi-literate villagers do not have a chance before the vultures (in the guise of government officials) in the fields out there. The local bureaucracy is the lord and master of all that it surveys!

    Why are these poor millions being put to this totally arbitrary and criminal inconvenience for the sins of the fat cats and the venal bureaucracy. There already are elaborate laws, rules, regulations,system along with trained personnel at every level to detect, investigate and prosecute the pedlars of parallel economy. A good government is that that uses this machinery to unearth the unaccounted-for money and to nab and prosecute the culprits. The officers and officials of these departments are trained and appointed for the very purpose of ensuring that country’s economy remains robust and healthy. A democratically elected government does not trample upon the rights and dignity of the very people who voted it to power; fascists and megalomaniac dictators do.

  • Rohini

    If you read my poins abovem you will see that I am specifically talking about a violation of my rights due to a lack of personal probity in this country…at a citizen, individual level. The govt institution – i.e the building, or the tables and chairs or some hologram is not asking for the bribe. It is the human being, an unethical Indian who thinks its ok to harass a tax paying citizen who asks for that bribe.
    And all bribes are ‘black money’. Now, you should be able to link that to demonetisation. If you can’t, then it’s a case of keeping your eyes closed and refusing to see.
    It’s interesting to see the attacks/cross-questioning/cornering I am facing online for stating my very strong viewpoint on the lack of personal probity in Indians by and large. Imagine then, how it is in real life to negotiate a system that is FED by corruption and yet refuse to yield to it!
    I repeat – Indians should be ashamed of their lack of personal probity, which leads to low public probity.

  • Ayushman Basu

    Yeah I understand the point you made about the people who have black money. If they would get a sight hint about their wealth being attacked they would definitely take action. But tell me, after the demonetisation has been done, how many news have you read about any black marketer getting hit by the process? If you see the amount of news coming out, all you can see are deaths in the queues and people waiting in the cold outside for the banks to open. By the sheer proportion of news coming out, it can be said that demonetisation did not hit the target it was suppose to hit.
    Also, as you rightly claimed that the black marketers are connected, they are also wise. They will obviously not keep hard cash with the hidden inside secret cases beneath the bed or something like that. They will hide the money through their investments in different sectors. So banning certain notes will definitely not hit them as much as it would the common man, because the normal citizens use hard cash in their daily transactions. I have faith in the government, because they are in power through a democratic process. This is a brave step, accepted, but a brave step is not equal to a viable step.

  • Sagar

    Hi,

    Nobody exercised rights on your hard earned money, the restriction is only on cash transactions,that too only for the period of stabilizing currency flow. you are left all other mode of transactions with out any restrictions. Please consider this restriction on cash transaction is for providing fair chance for more number of people.

  • DariyaSophia

    The second paragraph sounds like denial of the “right to life” as guaranteed by the constitution.

  • DariyaSophia

    It doesn’t. Rohini is just defending the “scheme”/diktat because she’s bought the PM’s argument hook, line and sinker.

    • Rohini

      Having an opinion in support of demonetisation and against corruption is ‘buying the PM’s argument hook line and sinker’? Then, by the same logic, since you don’t buy the argument, I suppose you are a holder of bags of black money, deal in corruption and hold benami properties. That’s why you are totally and wholly against this move by the govt. Is that right?

  • DariyaSophia

    “..the article is not against demonetization itself, but the way it was implemented.”

    Did you not read the title of the article?

  • Rohini

    Thank you for elucidating.
    My standards are considerably higher. I want a system where asking for bribes is NOT the norm. I exoect to get my job done asap, not talk about bribes whatsoever.
    Different standards, clearly, from yours.

  • Rohini

    My question is about the citizens of this country who think its ok to hold black money, to ‘cheat’ the system, to do everything possible to earn those few illegal bucks. Like those who hand it fake medical bills to claim medical reimbursement from the private firms 🙂 You KNOW that happens, right? Or fake rental receipts to claim the HRA exemption in tax 🙂 Ahha! in private firms, yes!
    And so on and so forth. No personal morality, that’s the problem. It’s all ok in India – its ok to be dishonest in these ways. The question is – why are Indians so venal? Where is their personal sense of morality?
    I hope its clear now.

  • Rohini

    Clearly, you are used to spouting whatever you read in media without critical thinking of your own. Banksbeing broken into in J&K is also a well known fact. Why would that happen? To make a merry bonfire or because they are starved for funds due to demonetisation?
    Besides, I wish you would use facts and figures to show how a couple instances of new notes found with terrorists will replace the crores that no doubt have vanished into thin air with demonetisation.
    When one runs out of arguments, one seeks refuge in nice vocabulary like ‘deluded’, ‘stupid’ and other similies. Nice try.