Unlike 1991, there was no imminent financial, economic, currency or balance-of-payments crisis looming large on the horizon in November 2016. No major “situation” anticipated either. On the contrary, a seven-plus per cent growth rate appeared a steady indicator of a stable economic barometer for India, in the midst of global gloom. Yet there took place the sudden, sensational demonetisation of Rs 500 and Rs 1,000 Indian currency notes! But the nation is still largely in the dark on why it had happened at this juncture. What was the reason for this timing — on the evening of Tuesday, November 8, as the world awaited the results of the American presidential election. Why then, why not earlier, or later? What could be the possible fallout, both in the short and long term? How soon will India be able to recover from the effect of this shock treatment? How are external actors and factors poised to interact and interface with the sudden currency shortage in the Indian market — particularly with India a lot more integrated into the global economy than it was at the dawn of liberalisation in the 1990s?
Before considering myriad views and suggestions of experts and economists on the current situation, it may be instructive to revisit the comments on the French scene by top British economist John Maynard Keynes a century back (in January 1915): “The story of French banking… is a long one — sordid, corrupt, disastrous and deeply intertwined with the basest feature of French political life… The French had come to depend more and more for profits on company promotion and speculative underwriting and industriously prostituted their influence with their clients to the end of inducing them to embark their savings in most doubtful enterprises.” The keen eyes of Prof. Keynes noted it was “still extremely usual in France both for private persons and for traders to keep astonishingly large sums of money in their possession”. Does the French scenario of 1915 have some uncanny resemblance with the Indian canvas of 2016? Experts may agree or disagree, but what struck this writer were Keynes’ words — “it was still extremely usual in France for both private persons and for traders to keep astonishingly large sums of money in their possession”. This implied the static cash spelt an overall loss to the economy of the state. Was this single factor one of the key causes behind the unprecedented demonetising of high-denomination Indian currency notes? One will have to wait to know for sure.
The ground reality is little known to millions of Indians. It is hardly their fault, but they do deserve to have some idea of the difficulties that the country faces today. Rajasthan, Punjab and J&K are the live operational targets of Pakistan to pump in FIC notes through three official land routes of Munabao (rail), Attari (road and rail) and Chakan da Bagh (road). The means to pump in FICN are myriad and there are plenty of people available to do the job. To make matters worse are the traditionally corrupt Indian officials transcending departments operating along the border, the benami immovable assets and cash stashing, that may no longer be impossible to unearth in the near future. One can say from firsthand professional experience that FIC notes are one of the most lethal means in the hands of terror masterminds and operators to destroy the economics of India. It has been extensively used to buy properties in “people to people contacts” between India and Pakistan in the border states of western India. Similarly, extensive land deals in the eastern states of India, through the Bangladesh-based Jamaat cells, have been made to make live operations a real threat. As so often in the past, corrupt officials of Central and state governments have become terrorists’ invaluable assets, and as conduits, to circulate and distribute FIC notes across the countryside.
The recent acceptance of huge bundles of cash by police officers as well as prominent politicians only show how deep the rot has set into the Indian system. When senior police officers in charge of border districts in India and the people’s elected representatives resort to such broad daylight anti-national activities, can any honest citizen of India doubt the necessity of demonetising the high-value currency notes? Indeed, from several pockets in the east to west, and also the south, the FIC notes and a few mafia-like government staff and elected representatives have rendered yeoman’s service to the anti-India terrorist outfits.
A few words about Munabao may be in order here. As a test case, let it be known that the number of Indians travelling to Pakistan is always half the number of Pakistanis travelling to India. The worst thing is that a large number of Pakistanis having FIC notes just vanish to trade with terror. This was going on several years. But sadly for them, the terrorists from Kashmir to Kolkata, Kochi to Kishanganj and Karimganj to Kathiawar, along with the extreme-left elements are suddenly bereft of the fake Indian notes. Unfortunately, however, the law-abiding people of India are now the victims of collateral damage. One only hopes that it will not be for too long.