Economy down, insurgency up: So much for note ban!

By Anuradha Bhasin Jamwal. Dated: 11/13/2017 12:20:09 AM

A year ago, the country was caught in the midst of chaos when Narendra Modi government announced the demonetization of high currency notes, banning the 500 and 1000 rupee notes without making adequate arrangement and alternate cash. The nation was asked to be patient for 'a good cause' as the government took the high moral ground of justifying the note ban policy with the logic that this was aimed to end black money, counterfeit notes and terrorism. One year down the line, there is sufficient data to comfortably say that the move fulfilled none of the cited and promised goals. What happened instead is a sagging economy, declining growth rate, dismal GDP, weakening of unorganized sector and increased unemployment. The saga is reminiscent of a Hollywood comedy from the nineties 'Mouse Hunt' in which two brothers struggle against one small but stubborn and crafty mouse for possession of a house that was willed to them by their father. They are determined to rid the house of any pest that could potentially ruin their plans of restoring the mansion for auction. The intelligent and crafty mouse outwits them completely. The two brothers try every trick to get rid of or exterminate the mouse but end up bringing down the house instead. Howsoever well intentioned, if that is where the inspiration for demonetization came from as the die-hard and slightly reluctant Modi bhakts would believe, the policy has wrecked more havoc than having accomplished any common good.
Either the government is inspired by naivette or it is fooling the people to further its sinister interest of controlling its authority on the nation. The best of economic experts have argued against demonetisation being good economics or a step to end black money et al. There are sufficient reasons to say now with certainty that in so far as the specified targets of the policy are concerned, it is a failure, whether it was misconceived step or one that was executed without doing much homework. Facts speak for themselves.
Only 1 percent of the cash did not return to the banks after demonitisation, exposing the hollow claims of the government on black money and leaving bare its uninformed opinion that black money exists in the form of cash. It exists more in form of assets and even shady business ventures. That is why even the official claims that the government was able to track accounts with alleged illicit foot-prints and brought under the scanner Rs. 17,000 crore taken out of 35,000 shell companies (NDTV report) does not sound convincing as it accounts for only 2 percent of the total demonitised money. News reports also reveal that amounts of alleged black money brought under scanner in previous years is much higher.
As far as counterfeit notes are concerned, the government admitted in July that that the total counterfeit currency discovered since demonetisation is worth Rs. 11.23 crore. The RBI calculates the entire amount of fake currency notes for the year after demonetisation at Rs 43 crores. This is not even a fraction of one percentage of total demonetised currency. A comparison with previous years, shows a definite decline in the amount of sized fake currency notes from over Rs 50 crores to Rs 16 crores; however, this does not indicate the actual fake currency in circulation but only the seized amount. That a change of currency did not bring to halt the methods of bringing in circulation fake money shows the limits of this foolish surmise in the first place.
When all the stated targets of the demonetisation policy have failed, the government narrative has changed with greater emphasis on the 'boons of a cashless economy' and choking 'terror funding channels'. Both are preposterous claims.
According to RBI, cash in circulation fell from 12.2 per cent of India's GDP in March 2016, to 8.8 per cent by end-March 2017, "comparing well with a host of advanced and emerging market economies". This celebratory mode of a cashless economy is inspired by the unscientific belief that lower cash-to-GDP ratio leads to cleaner economy or signifies greater development. Economic experts are not convinced. Countries with higher ratios than India like Japan, Hong Kong and Switzerland are neither less developed than India, nor notorious for the kind of black money culture that persists in India.
The most ridiculous of all claims is that demonetisation helped bring a decline in terrorism by choking the funding channels. This claim is based on a poor understanding of the genesis of insurgency in the country and an over-simplified view of the functioning of the funding channels. Last week, union finance minister Arun Jaitley, nonetheless boasted about the imagined reduction in terror financing and terrorism activities, linking it to declining numbers of stone pelters in Kashmir.
The government is erroneously once again obliterating lines between anger and insurgency, stone pelter and an armed rebel. But even if stone pelting is to be connected to terror funding, the argument is not based on ground situation.
The comparative figures of stone pelting this year and last year are misleading. 2016 was a more magnified version of the unrest of 2010 which saw a phenomenal peak in civilian unrest and massive stone pelting incidents. They declined by the end of summer and did not emerge with a similar ferocity in the subsequent summers until 2016 with much greater venom. There was no demonetization factor back then. Unlike post 2010, after which occasional incidents of stone pelting continued, anger which transforms into stone pelting mobs has now assumed different and more challengeable forms. Stone pelting mobs now fearlessly grapple with security forces at the sites of major encounters with militants without the fear of being killed, apart from engaging police and CRPF in ding dong battles on the streets, despite a huge graph of civilians killed, injured and pelleted during these protests. Needless to point out that less than 5 percent people voted in the parliamentary by-poll in Srinagar-Budgam in April and the South Kashmir polls had to be post-poned in view of the inability to deal with the acute sense of anger, alienation and the consequent stone pelting.
The NIA crackdown on some separatist leaders caught in a sting operation admitting to have taken huge sums of money to organize unrest across the Valley began in May. The videos were apparently shot during the winter months. The money, if purported to be spent for fueling massive unrest, must have already been in circulation by the time NIA swooped down. By that logic, the Valley should have seen another summer of unrest. Only, it did not.
Whether the terror funding across the country is believed to come from Pakistan or the petro-dollar funded radical Islamist channels, the demonetization operation may not have made even a dent. In all likelihood it may only have boosted up the business of merchants involved in black marketing of the new currency notes. Far from making even a temporary impact on subversive activities, militancy has revealed a higher trend post-demonetisation. There has been rise in number of militant related activities in Kashmir where 301 incidents were recorded in 2017 as compared to 283 in 2016. 336 infiltration attempts were recorded this year as compared to 221 last year. According to official data, the number of civilians killed in the valley registered a three-fold rise as compared to 13 in 2016 to 36 in 2017. The number of security personnel who lost their lives in 2017 was 66 as compared to 67 in 2016 in Jammu and Kashmir.
The 'demonetisation success' narrative handpicks only the beefing up of military operations and tries to view militancy merely from the number of kills. The security forces, during many operations, killed 180 militants, revealing a slight increase from 130 the previous year. They also arrested 73 militants and carried out 112 encounters with security forces in 2017 as compared to 85 last year. This narrative also does not take into account the many sleeper cells of militants and the increasing number of youth picking up arms to wage a battle against the Indian state. The other trend that such a narrative tries to trivialise is the growing numbers of foreign militants and the probable increasing influence of organizations like Jaish-e-Mohammad and Lashkar-e-Toiba.
The government is building a false narrative that does not eventually wish away militancy or terrorism. Whether it are ill-conceived policies like demonetization or NIA crackdowns, as long as the government continues to believe militancy to be a genesis of shady funding channels and not essentially a consequence of socio-economic and political conditions, it will continue to chase a false mirage. As for now, it must have busied itself selling illusions and fictions about demonetization, economic situation and terrorism. But illusions will be illusions. They will eventually be untrue.



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