People are adapting faster than we had thought: Nirmala Sitharaman

“The problem with the opposition is that if we do this, they say you were unprepared and if don’t do this, they say you are not doing enough…”


Aasha Khosa | December 1, 2016 | New Delhi

#Industry   #Commerce   #Currency   #Demonetisation   #Nirmala Sitharaman   #Interview  

As part of the government, how do you look at demonetisation?

It’s by far the bold… the boldest of all the steps, in line with several other steps the government has undertaken since 2014, to make the economy robust and transparent. The government has taken steps to set up SIT [to unearth black money], the passing of the Benami [Property] Act, asked various countries to share information about the money Indians have deposited in their banks without giving information at home, the income disclosure scheme that just ended, the signing of double taxation avoidance treaties with Cyprus and Singapore… These all steps were being taken continuously as the opposition was asking the government questions about unearthing black money within the country. This will make the economy a lot more cleaner and all transactions transparent. Also, the money circulation will eventually improve. After the 8th [November] announcement, Rs 21,000 crore have been deposited in the 5.5 crore Jan-Dhan accounts alone. This clearly proves our point that the high denomination notes of Rs 500 and Rs 1,000 were stacked outside the economy and these have now come in the system. In the medium and long term, these are all indications of accelerated dynamism to sustain the growth momentum.

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But the government seemed to have not made any preparations to deal with its aftermath? That’s the reason for the chaos.

If you think through, you will realise that the decision of this magnitude and this nature can’t come with a follow-up. The people have been given time till December 30 to exchange [deposit] their old currency. One has to remember that preparations also meant secrecy. The new Rs 2,000 notes are already in circulation and recently Rs 500 has also been introduced. After printing the currency, the RBI has to send these to various currency chests from where it goes to the retail outlets like banks and ATMs – this all takes a bit of time. However, we are now seeing that the queues outside banks are shortening. We are getting daily inputs from all over the country, which suggest the situation is only improving. On the basis of this feedback we keep revisiting our decisions and come up with fresh responses to people’s problems. Because of this, we have allowed farmers to use their old money to buy seeds. People can still use these [old notes] in hospitals and for buying medicines and making payment for public utilities.

These steps have indeed helped people in urban areas but what happens to the far-off and inaccessible areas where people have to walk miles to reach a bank?

Such problems are natural to arise on the ground in a country of the size of India and its given diversity. However, the government has rushed Bank Mitras (business correspondents of banks) to such areas and they are helping people with mobile phones. These steps had to be taken for achieving a less-cash, if not a cashless, society.

However, many experts in India and abroad say this is a botched-up operation. It has resulted in too much of a chaos to be seen as a bold measure.

I would like to know the context in which these experts have made such cursory comments about this major move. Can’t they see the folly of a system in which 86 percent of currency is in higher denominations of Rs 500 and Rs 1,000 and a considerable part of this is not coming out? This money is sitting somewhere. I’m not sure if any other country faces a similar situation. Do they realise that the decision of this nature was taken because the bulk of higher denomination currency was not coming out [in the economy]? Can they give me an example where a considerable part of a nation’s 86 percent currency is not in the system? I wonder in what context these experts are talking about India’s demonetisation; when on average most of the developed countries have only 4 percent of their GDP in cash and they [experts] are happy about it. But the same experts are commenting on India and raising questions about the move which is aimed at dealing with a situation where 14 percent of GDP is in cash. While most of other developing nations are also trying to reduce the use of cash by going for digital economy, should India not even be moving towards this or why can’t India even aspire to do so?

How has it been for people like you in the government post-demonetisation? Is there a sense of urgency in the government about tackling the aftermath?

The government is functioning as per routine; all the ministers are busy with parliament. However, every morning, the secretary of the department of economic affairs [Shaktikanta Das] has to take a call on various steps that need to be taken to correct the situation. All the respective government departments have been giving their inputs to him for decision-making. It’s he who decides if the relaxation for accepting old currency is to be given or not. However, we are all part of the responsive government machinery which is dealing with the issue.

Don’t you think the farmers are in distress because of the lack of cash when it’s time to sow the rabi crop?

The agriculture minister [Radha Mohan Singh] has stated the situation clearly. He said till November 18, the acreage of wheat, pulses and oilseeds [in rabi] had increased substantially over last year’s corresponding period. These figures prove that the claims of those who are saying that ‘Oh, my god, farming has come to a standstill because of demonetisation’ are not true. On the basis of a system that involves reviewing the situation daily, exemptions have been given to farmers to use old currency. Recently, the cooperative banks have also been asked to exchange the old currency. The problem with the opposition is that if we do this, they say you were unprepared and if don’t do this, they say you are not doing enough…

Going digital is good idea, but in a country where illiteracy remains a major challenge and many people are too poor to open a bank account, how do you think the majority will deal with the cash crunch?

I am sorry to say that most of the educated and well-off people tend to be too patronising towards the poor believing that they may not be able to cope with technology or handle a situation. But the reality is that many educated people, having passed their college and done a PG [post-graduation], are not savvy with their mobile phones or don’t know about phone banking. However, a woman vegetable vendor today is able to use a mobile phone to make a transaction by just keeping her phone in front of the digital barcode [that enables transfer of money]. Dealers in wholesale markets of Andhra Pradesh, Karnataka, Assam and even in Kanpur have started making payments through Paytm and other private money-transacting tools. The other day, a minister, who had no cash with him and had landed at a wrong airport in a city in a private craft, was helped by an intern accompanying him, who just called one of the app-based taxi services. Not that I am suggesting any plastic money company to people, but today we all are discovering that our phone is capable of doing much more than just make a call. We must remember how life has changed for all of us since mobile telephony was introduced in the mid-90s. It has changed the lives of all, including the people living in remote villages, BPL card holders, women, dalits, etc. Today, you don’t even need [expensive] Android phones; [cheaper]app-based phones are able to help you with all transactions. The app-based phones have led to greater empowerment of people. Therefore, to say that those who are dispossessed would be hugely inconvenienced because of digitalisation is wrong. They, in fact, are quicker in adapting to the changes.

However, this argument does not change the fact that 69 people have died so far in the aftermath of demonetisation – for various reasons. How can the government claim all is well?

I am not saying that in a decision of this scale, nobody would be put to inconvenience. We had to keep the secrecy but that does not mean the government is insensitive. In the name of cleansing the system you [the opposition] keep asking us what steps we have taken to bring back the black money. But when it actually comes to supporting us on this, then I am shocked to see even the Left parties opposing it. In fact, the accounts opened for all the people under the Jan-Dhan yojana should have been seen as serving to fulfill the basic demand of the Left parties that workers should not be exploited. Earlier, the employer could pay much less to the workers and make him sign on a dotted line to show that he had complied with labour laws and the minimum basic wages. But now, the employer would have to put money in workers’ account. I am shocked to see the reaction of the Left parties in particular. If they can’t support us in this decision then they should stop speaking for the poor. Today, all these so-called secular parties have got together to save the corrupt. Where is their black money agenda? An ex-prime minister is telling the parliament that this [demonetisation] is mammoth mismanagement: What about the 2G, Antrix, coal and CWG scams that he had presided over in his tenure and which have generated a huge amount of black money? It’s an irony that he didn’t feel the same while there was underlined corruption in [his] decision-making [that caused scams] and no transparency.

Why did the government not take the opposition on board on the decision, not necessarily before but soon after? That could have avoided clashes in parliament.

The government had started this process of briefing the opposition on sensitive and important matters with the situation on the border. As soon as it was over, the government had shared with them the information on what is now known as surgical strikes on terrorist launch pads in Pakistan-occupied Kashmir. In fact, on this too, the prime minister wrote to all the chief ministers the same day the cabinet took a decision on demonetisation.

Manmohan Singh as well as many economists predict that demonetisation will impact the economy and GDP growth rate could go down by 2 percent. What is the government’s view?

It’s too premature to make an assessment at this stage… difficult to say if it will at all cause damage to the economy. In fact, I had held a meeting of the exports promotion council, which has 31 categories of exporters, to discuss their problems related to demonetisation. Only those exports which were dealing in labour and needed cash to pay the workers had problems. They wanted the currency withdrawal ceiling to be hiked to sort this out. They assured me that they were ready to adjust with this, as they too see that this [cash crunch] is a temporary problem. I have no idea how those people are crystal-gazing.

Wouldn’t the introduction of a higher denomination note of Rs 2,000 make it easier for people to hoard money?

Introducing the Rs 2,000 note does not mean that we should not have a Rs 1,000 note reissued. The whole idea behind introducing new notes is to have a better management of currency.

Is it true that there is less unrest in the south in response to demonetisation? What do your reports say?

Yes, the south is definitely better but there are encouraging reports from even a state like Rajasthan which has a huge export-based industry. People are also adapting fast in Punjab. In a nutshell, the spirit of the public of India is more along facilitating the move. People are adapting faster than we had thought and this is the reason why Paytm has seen a 200 percent rise in its business.

(The interview appears in the December 1-15, 2016 issue)



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