The Big Story: Cashless economy

To quote a different Yogi, it is deja vu all over again. About a year and a half after the vast majority of Indians were forced to line up outside banks and ATMs in the aftermath of Narendra Modi’s decision to invalidate 87% of currency overnight, the cash crunch seems to be back. A shortfall that has been bubbling around in a number of states spilled over to the main stage on Tuesday.

Economic Affairs Secretary Subhas Chandra Garg admitted that there is a cash crunch around the country. Finance Minister Arun Jaitley insisted it was temporary. Minister of State for Finance SP Shukla said it would be sorted out in two or three days. Banking Secretary Rajeev Kumar said the shortage would prevail for five to seven days. The Centre formed a state-wise committee to look into the matter. The Reserve Bank formed an inter-state committee to do the same thing. The RBI also insisted that it has sufficient reserves of cash but will nonetheless increase the printing of Rs 500 notes five-fold. Clearly, the wheels of the government are turning.

Those moves appear to be belated. There have been indications that this has been happening for some time now. As early as February, reports emerged from Andhra Pradesh about ATMs running dry. Never mind Opposition theories about the government intentionally limiting the amount of currency it had made available, even Madhya Pradesh Chief Minister Shivraj Singh Chouhan of the ruling Bharatiya Janata Party spoke about a “conspiracy” that had caused Rs 2,000 notes to disappear.

There are many theories about why the cash crunch has occured and why it is happening now, 17 months after demonetisation. Few of them are fully convincing. The government’s primary response has been to blame an “unusual spurt” in currency demand in some states. However, it has yet offer a credible explanation for that spike. As a result, many theories have spread – from ideas as benign as this being a problem with ATM calibration to the wild Opposition claim that the Nirav Modi scam has caused a banking collapse.

The government has presumably mobilised enough resources on the problem for it to be resolved soon. That there was a crisis at all, however, tells us two things.

  • One, there is still a tremendous lack of trust in the banking system. Something as disruptive as demonetisation, and the subsequent chaos, leaves a deep impression on citizens, more so when it turns out to be a failure. The shock has shaken people’s faith in the system, and the government has not done enough to earn it back.
  • But also, the government does not seem to be aware what is going on, either financially or politically. The Centre and the RBI were intentionally opaque about demonetisation and its aftermath, meaning a move as big as that has not been carefully studied by a government that already has a paucity of financial and economic expertise. Even if it did not pick up the economic indicators, the fact that the reports from Andhra in February did not tip off the BJP politically should also be alarming.

Yet again, after Gujarat, the Nirav Modi scam, the SC/ST Bill and, most recently the Kathua and Unnao cases, the Centre has been caught napping and forced to react to situations rather than shape the narratives. What does that say about the fifth year of a government that was supposed to bring in firm leadership, “acche din” and a vision that goes far beyond its first tenure?

The Big Scroll:

Punditry

  1. “I suggest that, in desperate times like these, when the spirit of collegiality has been thrown to the winds, it would not be inappropriate for us to adapt that last sentence in the above quoted traditional chant as the fervent prayer of India’s citizens: God save the republic of India and the honourable Supreme Court,” writes Fali Nariman in the Indian Express.
  2. “What is true today is that post-Independence, India has never encountered anything like China in its vicinity whose intent and capabilities are posing the kind of challenge to Indian interests which New Delhi is finding hard to manage,” writes Harsh V Pant in the Hindu.
  3. Ajit Ranade in Mint looks at why India is lagging behind its neighbours on exports, and suggests a wholesale relook at the export policy.
  4. “At a moment when its global interests are expanding, the pragmatists in Delhi argue, India must make the best use of all available multilateral forums, including the Commonwealth,” writes C Raja Mohan in the Indian Express. “Pointing to India’s current temptation to join any forum that has its doors open, realists point out the bird in hand is worth two in the bush.”

Giggle

Don’t miss

Sohini Dey takes a look at five North Eastern designers who are putting the region on the fashion map by showcasing its fabrics.

“Over the past decade, the Indian fashion industry has devoted considerable time and effort to revive heritage textiles, resulting in a new generation of consumers who are keen to champion weaves as varied as chanderi, ikat and banarasi. Much of this spotlight has focused on states like Andhra Pradesh, Uttar Pradesh and Madhya Pradesh, neglecting one region in particular: the North East. Most Indian consumers have only a vague notion of the dress codes of the seven states and are often unable to recognise the jainsem as traditional Khasi attire, distinct from the Manipuri moirangfi or Assamese mekhla-chador.

In an attempt to shift the conversation and showcase the textiles and crafts of the North East, Lakme Fashion Week Summer/Resort hosted North East Mojo, a special showcase of designers from the North Eastthis past February. From breast cloths worn by Tripura’s tribal women to nettle weaves from Sikkim, these designers highlighted how traditional fabrics and techniques adapt deftly to new technologies and markets. The show was supported by the United Nations and the British Council.

Jaspreet Chandok, fashion head and vice president of IMG Reliance, said, ‘The North East was our focus for the Sustainable Textiles day, and the collaboration [with United Nations] aimed to boost local economy, showcasing the North East’s potential to mainstream stakeholders, including brands and designers, and the benefits of doing business in the region.’”