Demonetisation in the Largest Democracy

A case study of complete cooperation despite terrific sufferings

Dr. N. Bhattacharyya

Bharatiya Janata Party and some regional parties formed the National Democratic Alliance 2 (NDA2) and are ruling at the centre since 2014. The National Democratic Alliance 1 (NDA1) ruled at the Centre during 19972003. Governments both in the states and at the centre have to protect interest of every Indian both resident and nonresident irrespective of caste, creed, religion, culture, language etc. The Supreme Court and Election Commission recently ordered all political parties not to use ‘religion’ in any electoral issue! The British policy which was accepted by politicians of undivided India to divide India on a ‘religion’ basis in 1947 proved absolutely a stupid policy. The poor people of East Pakistan defeated Pakistan in the ‘1971 war of independence’ and created Bangladesh only on the issue of language spoken by people of that country. However, even after 70 years of independence the constitutional provision of ‘secularism in India’ is still to be implemented wholeheartedly by all political parties. All of us know that such ‘basic structure’ can’t be written off, but why are the political parties not punished for ignoring it. The present Prime Minister of India as Chief Minister of a State failed to perform his Constitutional duty of ‘Raj Dharma’ as mentioned by Sri Atal Behari Vajpayee, Prime Minister of the NDA1 Government, when people of one minority religious group was mercilessly butchered (Godhra- anti-Muslim pogrom, 2002).

Since the NDA2 came to power at Centre after ten years in 2014, people around the country including some supporting parties were protesting against the ‘intolerance’ and ‘harassment’ by the activists of the party in power. Some eminent persons respected in the country for their independent constructive opinion were eliminated by anti-social elements. Protests by people on any issue in a democratic country are declared anti-national and condemned by police as act of ‘sedition’ in different states. Many intellectuals returned their decorations conferred by the State. University Professors and their PhD scholars are feeling insecure to speak the truth. India is rated as ‘oppressive and unsecured’ for the students in Higher Educational Institutions. JNU Student’s Union was the target to teach students community in the country a lesson. JNU Student Union President, Sri Kanhaiya Kumar and other activists were sent to jail on charges of ‘sedition’ for some ‘demonstration’ in the campus. Learned lawyers in a capital’s court mercilessly beaten him in the court complex. Recent happenings in JNU with members of faculty clearly establish beyond doubt that some unseen hands are officially engaged to destroy this particular University in north India. AUniversity without a VC can run efficiently but without students and Professors what will happen to that institution. It is the responsibility of people of India to see to it that institutions of higher learning are not destroyed by vested interests. The suicide of Rohith Vemula a PhD student of Hyderabad Central University clearly showed a deep sense of hatred and humiliation towards ‘dalit’ students in Central Universities funded by taxpayer’s money. After one year of his death Rohith’s friends and family members were disallowed from expressing their grief and respect to departed hero of that University. One PhD student of JNU evaporated from its campus in 2016 and the Ministry of Home Affairs responsible to maintain law and order in Delhi is still clueless! The people of this vast country are suffering from deep sense of uncertainty and insecurity even in 2017.


On November 8, 2016 at 8 pm the Prime Minister of India suddenly (!) announced from Delhi the ‘demonetisation’ of Rs 500 and Rs 1000 currency notes. The vast majority of daily wage workers in north India’s extreme winter cold were in bed after a day’s hard labour. Waking up on 9th morning they found that world for them had completely changed. Many went to work to earn a daily wage, but gradually they found themselves on the streets as employers became ‘cash less’ and gradually many small traders, small and medium manufacturers and people working in various occupations of informal sector became unemployed due to the scarcity of working capital. In Delhi’s Jumma Masjid area, rikshaws were parked but the scarcity of cash reduced the number of customers. Rickshaw pullers left for their villages. Millions of people of this vast country from Kanya Kumari to Kashmir, from Gujarat to Nagaland had no idea what to do with those old notes, they could not be used to purchase their day to day requirements. Those who had these ‘big value notes’ started waiting as beggars before banks and ATMs to get back their own money lying with banks in trust under RBI Act 1934. This is a new experience in India in 2016, around 70 years after independence.

The writer of this small story was 7 years old when the British Prime Minister in 1943 (in the middle of the 2nd world war) ordered to put all the foodgrains in warehouses to be used exclusively for the army. People were ordered to take rations from shops. Despite a bumper crop people used to wait in long queues before ration shops to take some rice even unfit for animal consumption. That was the inauguration in India of ‘Queue’ in 1943. 4 million people died in 1943 ‘Bengal Famine’ and the British Prime Minister wrote: ‘to teach a lesson to the country men of Mr. Subhas Chandra Bose’. In 1952 after first general election in independent India Mr. Rafi Ahmed Kidwai, Minister of Food and Agriculture allowed the selling of grains in the open market and Queues before ration shops started declining. Demonetisation 2016 revived that back breaking ‘Queue’ of the forties. Senior and super senior citizens in 2016 don’t have the courage to go and stand in queues, even then there were people old and sick who tried to stand in queue and around 100 persons died in undergoing such cruel ventures! A bench is constituted in Supreme Court to examine the Constitution validity of ‘Demonetisation’. Who will examine ‘the torture and mental anxiety’ that millions suffered quietly during those 50 and odd days and continuing till in mid January, 2017 it is yet to be normalized. Are not banks under legal obligation to compensate for such loss of life? Can any democratic Govt. without approval of Parliament undertake such ‘actions’ affecting life and livelihood of all people of this vast country? What Supreme Court says in England on role of Parliament on Brexit issue, though it was approved by ‘referendum’? The word ‘secrecy’ in law is to be examined.

The publicity machine of the government claims that a section of black money holders happily converted their ill gotten wealth in gold ornaments at any price during the night of 8th November. A question was raised why did the government allow this to occur, after 12 at night. Why were the shops permitted to continue business till the early hours of 9th Novenber, 2016 to carry on such illegal activities? Has any agency recorded these transactions and taken necessary actions as per law? It is also charged by the press that unemployed workers were deployed by people to stand in the queue for a price. From time to time press reported that XYZ officials of this or that Bank were detected for illegal activities involving new and old currency notes. Most amusing is the report the government showed that ‘terrorists’ killed in Kashmir during the demonetisation period was carrying new ‘Rs 2000 notes’ before it reached public for distribution! Both the print and visual media of the entire world were busy since 9th November, 2016 to show to the people around the world for 50 days that ‘Indians are not trust worthy’, they are punished for ‘funding terrorism’, ‘accumulating black money’ and ‘circulating counterfeit notes’etc. At the same time Indians are grateful that a section of national and foreign media refused to buy such widely publicized defamatory charges against the citizens of this vast country. People rather criticized the politicians for such an unplanned adventure that caused immense hardship to the poor of this country! High value currency notes are no longer used in the 21st century and India reintroduced Rs 2000/- value of currency notes! However, in the Public Accounts Committee meeting held recently with the RBI Governor, an honourable member of the Rajya Sabha handed over new Rs 2000 notes (fake) to the RBI Governor! The government announced on 8th November that their ‘operation demonetisation and remonetisation’ will be over by end of December, 2016 but it failed on both the fronts.

Though the RBI and the Central Government is yet to accept the findings of the International Financial Press like Bloomberg that around 97/99 percent of the demonetised notes were returned by people by 30th December, 2016. According to reports there was hardly any so called ‘black money’ at least in form of cash (!). The people are angry and demanding from the government why they were compelled to undergo such inhuman humiliation and what is the compensation for such sufferings for all and sundry! People working in the unorganized sector never thought that from morning of 9th November they may face starvation as gradually their ‘employment’ evaporated into thin air and in next fifteen days they had to decide to stay in cities without any income or go back home where too they had to starve with members of their family. Recent reports by organisations like the Manufacturers Associations clearly brought out how production suffered from 9th November, 2016 for a cash crisis brought about by their own government. Loss of production created huge losses to mainly small scale and medium scale producers. Huge increase in demand for daily wage work under MGNREGS in November/ December 2016 over corresponding period last year clearly shows return of village labour due to chaos created by ‘demonetisation’ in the cities and semi urban centres.

In January 2017 cultivators were totally frustrated that winter fruits and vegetables including onion and potatos etc. had no demand due to shortage of cash and there were reports of a huge wastage of agricultural products throughout the country. The unorganized sector suffered tremendously and the government is behaving in the 21 century like that ‘monkey’ who advises people ‘not to hear’, ‘not to see’ and ‘not to speak’. No one is uttering a single word to compensate for this well planned loss/ sufferings imposed on millions of poor workers and farmers. The move of demonetisation will be remembered for long time how poor and middle class in India suffered immensely for no fault of their own. No one is explaining how many new people have entered into already existing ‘unemployment market’ in India. Without making arrangement for the relief and rehabilitation of these unfortunate people and their family members how our policy makers can go to bed to sleep and rest?


Already the Banks in India are shattered by huge unrecovered loans called ‘Non Performing Assets’ (NPA). On June 2016 the total Non Performing Assets was around Rs 4 lakh crores. Due to demonetisation large numbers of small and medium industries will fail to repay their loan to banks and that will increase the value of outstanding loans. On the other side the government has succumbed to the pressure to reduce interest rate on bank loan as banks are flooded with newly returned currency. Banks are in hurry to lend new loans and forget to collect old outstanding loans and interest thereon. So banks and their old debtor-friends are playing a beautiful game to cheat public institutions. This is called Indian capitalism in 2017. The big money bags never suffer! In demonetisation ordinary people have suffered the maximum loss both physically and economically.

School text books say the Reserve Bank of India (RBI) is responsible for ‘Monetary policy’ in India under the RBIAct of1934. The Government decides the financial policy of India. Government appoints Governors to run RBI. In 2015 a new Committee on Monetary Policy was formed and till to-day people are kept in dark whether this monetary policy committee was taken into confidence or not. RBI Board Members knew in January 2016 that demonetisation will take place. Why proper arrangements were not planned to collect illegal tender of around Rs 15.44 lakh crores of high value notes and simultaneously distribute new notes through branches of banks and ATMs? The role played by RBI as a statutory autonomous monetary policy organization on ‘Demonetisation—2016’ has attracted criticism from all concerned citizens of the country. Various committees of Parliament are busy finding out the role of RBI on demonetisation and subsequent remonetisation. People, male and female, young and old are waiting to know how far ‘demonetisation’ was able to locate ‘black money, terror funding and counterfeit currency rackets’. We have to answer to rest of the world how far we were successful to locate the criminals who are engaged in ‘money laundering’ in India. The BJP president’s claim that the demonetisation issue was decided by NDA2 after the 2014 election victory and after all preparations it was implemented after 2 long years. So what we saw during last 70 days was the result of well planned foolproof preparations \ by the RBI and government! The RBI was asked its opinion on demonetisation on 7th November, 2016 to reply by the next day!

Zero balance Jan Dhan accounts were also opened throughout the country by the NDA2 Govt. while this preparation for ‘demonetisation’ was going on since 2014. Many such accounts were without any balance till demonetisation was announced on 8th November, 2016. Govt. claims that some of these zero balance accounts were used successfully to hide ‘illegal income’ or black money. Suspicion is natural that why such accounts were opened before ‘demonetisation’, it provided holders of black money to defeat the main purpose of ‘demonetisation’: small amount each in zero balance Jan Dhan acoount can hide huge black money. Why it was not thought of while opening Jan Dhan Accounts?

The government is trying to explain why remonetisation is lagging behind the scheduled last date of demonetisation. The RBI Governor informed the Parliamentary panel that the exact amount of currency returned was under calculation, but till middle of January, 2017 the government circulated only Rs 9.2 lakh crores worth of new notes or around 60 percent of demonetized notes. It is clearly evident that after declaring 86 percent of currency in circulation as ‘illegal tender’ on 8th of November, 2016, it was planned to remonetise only 60 percent of the value of currency withdrawn. Once RBI calculates the amount of money returned by people we shall be able to calculate the gap between currency collected and currency circulated. If only 60 percent of the demonetised currency was remonetised and that created a virtual social crisis for more than 60 long days, the authorities involved are accountable to people of this country.


As part of ‘Globalization’, our government agreed with the World Bank and IMF to increase digital payment and to allow MNCs to increase their plastic card transactions in India. Indians particularly in rural India are under pressure by foreign agencies to increase the quantum of cashless transactions. The government of India implemented in 1991 the ‘Globalisation’ plan of World Bank and IMF. WTO was introduced in India in 1995 and opened all gates of import to India from developed world. Our export market and manufacturing industry suffered from acute competition from China and other developed countries. MNCs have successfully exploited huge market in India of 1300 million people and high profile advertisement that ‘globalisation’ will create huge job opportunities to millions of our unemployed youth remained a day dream! Yes, our youth are used as contractors’ labour by e-commerce industry funded mainly by MNCs. Only information technology cannot solve this huge problem of unemployment in India. ‘Cashless transactions’ are increasing every day.

Plastic card traders like ‘Visa’, ‘Master Card’ etc. are trying to take advantage of ‘demonetisation’ and the government is helping them by delaying its programme of ‘remonetisation’. Why there should be rationing on withdrawal from banks even after 15th of January, 2017, around 70 days have passed and the bona fide customers of banks are deprived of their right to withdraw their own hard earned money. International plastic money industry is thanking the present government for creating such huge opportunities to earn unscheduled income from this vast country.

The World Bank and IMF are there to look after the interest of only a limited number of developed countries and to pressurise the governments in the rest of the world to allow only the MNCs to operate at the cost of local initiative. It is their initiative to hand over the Indian market of the second largest populated country to ‘digital payment’ companies. Visa Card, Master Card many other payment systems are there for long time but they refused to accommodate the need of not so rich customers. Recently Govt. ordered petrol pumps to go for card payment business, petrol pump owners refused to accept cards because of the ‘high transaction charges’ of these card companies. The government of India appears committed to fulfill the demand of the World Bank and IMF. It wants a ‘Cashless economy’ in a country of 1300 million population where 70 percent of people still live in villages devoid of all modern infrastructure required for civilized living. Most of them are small and marginal farmers and landless labourers. They only know currency issued by RBI and some metal ornaments, may be needed in emergency. Hardly one-fifth of Indians are using the so called ‘smart phone’ and for card selling companies it is not an average Indian they are interested, rather they are searching only ‘money bags’ who are still not in their net. These Digital Payment companies want laws to compel these big fish only to carry on exclusively ‘digital payments’. These MNCs are in India for a long time and charging huge charges from their customers. Is there any law to fix their various charges or they are allowed to trade as our private money lenders do? What is the interest rate they charge from defaulters? Is there any statutory authority to supervise the activities of these digital companies engaged in monitory services? Can the RBI ignore supervision of their transactions? Is there any one in the country to see that unorganised customers are not exploited by these MNCs in third world countries? Village moneylenders are criticized in India for extortion and the suicide deaths of their clients due to harassments. These Plastic card companies have to gain the confidence of people that they are not oppressive in their dealings with customers.


In the capitalist system of the 21st Century international trade is operated mainly through the well planned geographical distribution of ‘Tax Heavens’. India and many emerging economies are officially treated as ‘aid receiving countries’ because without Foreign Direct Investments (FDI) the emerging countries will remain poor. History tells us these poor colonies in Asia, Africa and Latin America helped the economic growth of the now rich countries in Europe and America who pretend to help the emerging countries by trade and aid. Colonies of yesteryear are now bad words but what is the role of the MNCs and international trade agreements? Oil producing companies are all from developed countries and by reducing oil production recently are they helping poor countries or taking away what they gave them as FDI? ‘Over and under invoicing’ is treated as a modern scientific means to cheat countries where these corporations are registered. If fair calculation is done by some impartial international agency the result will show that what is written in textbooks is never practiced in real life. Rich countries never help by investing in poor countries, rather poor countries get poorer by the well planned exploitation of their natural resources and unorganised labour by these foreign corporations. Recent experience in India will be remembered for long time.

A particular foreign company did transaction in one of the Tax Heavens, earned Capital Gain and escaped capital gain tax as it was earned in one of the Tax Heavens. When the law was amended to give effect retrospectively eminent lawyers irrespective of political affiliation supported the foreign company, though such actions are criticised as ‘antinational’ publicly. Thus it is not very difficult to prove that though so much advertisement is made that rich countries are responsible for the development of poor countries through FDI transfer etc. but in real life poor countries are getting poorer and rich countries are accumulating more wealth. In December, 2016 the USA Federal Reserve increased the interest rate, immediately all investments of the world migrated to USA. Foreign investors in India withdrew Rs 66,507 crores in November and December, 2016 and Rs 5,145 crores in January, 2017 or a total of Rs 71,652 crores during the demonetisation period. (Indian Express 23.1.2017) This is their love for emerging countries. What role these tax heavens are performing in 21st Century? Poorer countries are cheated both ways: their export price is manipulated and they receive less foreign exchange as ‘receiving countries’ and even then so called rich countries are treated as ‘donor’ countries. However, it is yet to be agreed that without huge contribution from emerging economies so called ‘rich countries’ cannot maintain their ‘richness’. The disturbing factors are many in the capitalist system; role of Tax Heavens and invoicing methodology have proved beyond doubt that it is not rich countries that help emerging countries but in reality it was working in reverse direction. What India lost during colonial rule for 200 years and helped the developed world of today it lost a larger and larger amount by allowing malpractices in invoicing mechanism and international trade through ‘Tax Heavens’. This is explained in detail in a recent article: Aid in reverse: how poor countries develop rich countries | Jason Hickel ( and development)


Demonetisation has opened a Pandora’s box. What was the compulsion to drag all the Indians throughout the country to line up before banks and ATMs? We have various organizations and judiciary to implement laws of the country. If it is proved that 86 percent of the currency on 8th November was demonetised and returned by the holders, then the government has to answer where black money in form of cash is? Wait for the result. The government has agreed there was no counterfeit currency received by banks. Already new notes are available which are counterfeit. So technology has to improve. Tax Heavens and their role are now going to stay, if the government of India feels they are functioning against the interest of the country, the necessary changes in our Tax laws are to be made to discourage transactions through tax heavens to stop loss of taxes. Demonetisation has taught a good lesson that average Indians are basically honest and peace loving citizen, they suffered without protesting. Unreasonable harassment in the hands of bureaucracy, they are still silent not that people are weak, but they are waiting for the expression of ‘sorry’ by the government for such inhuman torture of millions of people all these days. All political parties know that in a democracy citizens are masters and each and every citizen should be respected irrespective of age and gender. Accumulators of wealth through illegal means in India are known to bureaucrats. Many politicians in India are working as paid agents of some institutions and groups who are working against the interest of ordinary people of this country.


The discussion will remain incomplete if it is not mentioned here that during the demonetisation issue period one felt the absence of our ‘trade unions’ and the heroic role of the Trade Union Movement of the 60s and 70s. The repressive mechanism has totally destroyed the will power of workers to fight against oppression. Some efforts were made by employees and officers’ association of RBI to question the ‘deaf and dumb’ behaviour of the RBI administration, but it was very mild. The rest of the Public Sector Bank Employees Unions remained silent while working from morning till late night all these days and ordinary citizen appreciated sincere and hard work done by them. People wanted more constructive suggestions from their organisations because they fought for the people on many occasions a long time ago. It is good that workers of Indian Banks have decided to go for one day strike on 7th. February, 2016. We desire Trade Union Movements in the country to be more active at this moment to retain whatever workers gained from their oppressive employers after long sacrifices all these years. We should see the clear writings on the wall.


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