Economy

Demonetisation May Be a ‘Big Bang’, But It’s Not a Reform

Post-demonetisation, this government’s reputation for decision-making and implementation lies in tatters.

People stand in line outside ICICI bank. Credit: Reuters

People stand in line outside ICICI bank. Credit: Reuters

Finance minister Arun Jaitley sounded more than a little exasperated this weekend, when he was asked — as he has been so often — about “big bang”, or transformational, reform. “The last two years,” said Jaitley, “I was being asked where the big bang was. Now you ask if we can afford [big bangs like demonetisation].” This is, like most statements from high officials of this government, simultaneously true and false. It is true that demonetisation is a big bang — in the sense that it is accompanied by a terrific amount of noise and nobody is sure for a while exactly what the explosion has destroyed. It is false, however, that demonetisation is any kind of transformational reform. In fact, given that it is statist in orientation, reduces choices for market participants, depends enormously on inefficient government machinery and increases the costs of doing business for the foreseeable future, it is on pretty much every count the opposite of “reform”.

Of course, you have to feel for Jaitley. Who would want to be the man nominally in charge of driving the economy when your boss orders you to swerve it into a ditch of unknown depth? And when the justifications for ditch-diving that you must repeat can change weekly, even daily? (At the time of writing, the prime minister’s stated justification was that it would mean beggars could go cashless. He had apparently seen a video on WhatsApp to that effect.)

 

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By arrangement with Business Standard.