It was two years ago, on that fateful night of November 8, 2016, Prime Minister Narendra Modi announced his “historic” decision of demonetisation promising that it would act as a game changer in the Indian economy by driving out black money, weed out fake notes and check terror funds but the Reserve Bank of India’s figures show nothing has been achieved in the last 24 months, whereas the informal economy still remains shattered leading to high joblessness and under employment.
Finance Minister Arun Jaitley has been continuously changing the thrust of the initial objectives announced by the PM during announcement year after year and on this second anniversary of demonetisation, he claimed in his blog that confiscation of currency was not an objective of demonetisation. Getting it into formal economy and making the holders pay tax was the broader objective. The system required to be shaken in order to make India move from cash to digital transactions, he said. Nothing is far from truth.RBI figures again show that cash is back and there has not been substantial change in digital transactions.
On the other hand, the disruption which the demonetisation created, led to deaths of about 120 persons, mostly poor many of whom died while waiting in the queue before the banks and crippled the informal economy which is still to recover. PM and the FM are not talking of terror funds or black money. Jaitley is now talking in more general terms trying to explain how the tax collections have improved leading to more resources, better infrastructure and a better quality of life.
The opposition parties have decided to observe this demonetisation day as black day. The Congress spokesperson Manish Tewari has demanded an apology for running and wrecking the economy. Former Prime Minister Dr. Manmohan Singh has correctly said that in the case of demonetisation, time has not acted as a healer, the scars and wounds to the economy are only becoming more visible with the passage of time. The Delhi Chief Minister Arvind Kejriwal was more direct when he said that ‘ though the lists of financial scams of the Modi government is endless, demonetisation was a self inflicted deep wound on the economy which even two years after remains a mystery”.
In the recent weeks, much of this mystery is being unraveled as reports are appearing how some businessmen including bullion merchants took advantage of the demonetisation in making huge money through foul means. Further many of the people had some inkling of the measure coming. The impact in the job market was immediate. Studies made about first four months of 2017 show that 1.5 million jobs were lost during January-April 2017due to demonetisation. The estimated total employment during the period was 405 million compared to 406.5 million during the preceding four months of September-December 2016.A CMIE study showed that the lasting effect of demonetisation in labour participation rate is apparent in the months of 2017 and in 2018 also, the jobless growth is continuing and it is most visible in the informal sector.
The situation in the informal sector of the economy is still pathetic. According to the economic census, there are 56 million non-agricultural enterprises and if 72 million farmers are added to this, 120 million economic entities exist in the informal sector. This sector has the largest number of employment in the country and it is in distress. There is really no reliable data about the real impact of the demonetisation on the rural jobs, but the rise in distress among the farmers , is an indication of the nature of woes that have hurt the informal economy.
The CMIE report for the first four months of 2018 also indicate that the number of new jobs is going down. A report by the International Labour Organisation has projected that the number of unemployed has risen in India I 2017 and the trend will continue in 2018.CMIE has also recently reported that the employment situation is getting worse. The unemployment rate was 6.6 per cent in September 2018 up from 6.3 per cent in August. This is when the labour participation rate has fallen to 43.2 per cent in September 2018 from 46 plus in September 2016.
What better quality of life is the Finance Minister talking? If there are no jobs and the prospects in the next six months are dim, how can the quality of life of the people improve? Finance Minister has talked of positive impact of demonetisation on collection of taxes. What is the actual position? Against the budgeted growth of 19.15 per cent of net tax revenue, the growth rate between April and September 2018 was only 7.45 per cent over the collections in the corresponding period of 2017. To reach the target, the net tax revenue has to grow by 28.21 per cent in the remaining six months of this fiscal. Is it possible?
The Indian economy is in a real mess and it is not possible to revive it before the coming Lok Sabha elections in April/May 2019.The BJP government and its frontmen including the PM and the Finance Minister will be deploying all methods to project a picture of a buoyant economy to the electorate. But that is not going to click. The Karnataka by elections results have shown that the Modi magic is not working. Arun Jaitley’s bid to project demonetisation in a positive manner, has also failed. Time has come for frank admission that the PM made a historic blunder on November 8, 2016 night.
Nitya Chakraborty. Views are personal.