Two years ago, on November 8, 2016, Prime Minister Narendra Modi, in a speech broadcast to the whole country, announced the decision to ban all Rs 500 and Rs 1000 notes. The Prime Minister warned that the people would suffer “temporary” pain as a result of this measure. However he promised that there would be “long term gain” for the people.
The Prime Minister claimed that note ban would result in unearthing black money, end corruption and terrorism, and reduce the inequity of wealth distribution. In other words, note ban was allegedly for benefit of the masses of people.
Every one of these claims have been proved to be lies.
More than three lakh small and medium industrial enterprises are reported to have closed down resulting in nearly four crore jobs being lost. Migrant workers left for their villages. Two years later, many of these companies have still to restart their operations. This was called “temporary pain”.
In a year of bumper harvest, peasants were faced with government-organized devastation of their livelihood. The buying and selling of agricultural produce in the mandis, dependent on cash transactions, was completely wrecked. Peasants had to resort to distress sales and had no cash to buy the fertilizers, seeds, and pesticides needed for the next sowing season. The peasantry of India still continue to suffer from this “temporary pain”.
Several other sectors of the economy that largely depend on cash transactions, such as wholesale and retail trade, construction, tourism and other services were severely affected. Many deaths were reported because of people being unable to pay for emergency medical services.
Two years after the implementation of note ban, it is clear that while the note ban has meant prolonged pain for the majority of people, it has resulted in both short term and long term gain for the Indian and foreign monopoly capitalists.
A prolonged period of acute cash crunch was created through demonetisation, in order to force people to shift from cash to digital transactions. People were forced to deposit all their savings in the banks and move to digital payment mechanisms. This was done in order to provide an opportunity for huge profits for the Indian and foreign monopoly capitalists by setting up digital payment companies. The huge number of digital payment companies and payment banks that have come into operation all over the country in the last two years merely confirms this.
Demonetisation led to a boom in savings bank deposits, along with tight limits on cash withdrawal, thus opening up prospects for profitable bank lending.
Another important objective of the note ban was to expand the potential base for taxing the public and for levying service fees.
The Government of India's claim that the economy grew by more than 7% in 2016-17 in spite of the Note Ban is a blatant lie. This estimate is based on data which cover only large-scale firms and excludes the unregistered and informal units which suffered the most from the cash crunch.
At the time of the note ban, the government had claimed it would result in unearthing over 3 lakh crores black money. The Reserve Bank of India annual report, released on 30th August 2017 revealed that as much as 98.96 per cent of banned currency has come back into the banks. It is obvious that whatever “black money” that was kept in the form of cash has been legalized. The government is yet to declare how much “black money” it has unearthed.
Prime Minister Modi had claimed that note ban would result in eliminating counterfeit notes being used by external powers to finance terrorist activities in India and weaken terrorism. The fact is that global sponsors of terrorism use many modern channels of financing; they do not depend on counterfeit notes. Terrorism continues unabated because the Indian ruling class needs it as a justification for unleashing escalated state terrorism against the people.
Corruption continues unabated, starting from the highest levels of the government and state. The refusal by certain big capitalists to pay back loans worth lakhs of crores of rupees from public sector banks, is one of the biggest corruption scandals and exposes the nexus between the heads of the banks and financial institutions and the highest levels of the state. Numerous other corruption scandals, including the recent multi-billion Rafale defence aircraft scandal, show that the claim of fighting corruption was a total lie.
All this confirms the correctness of the assessment made by the CGPI in its publication, 'On the Note Ban: Real Aims and False Claims', January 2017.
In sum, the note ban has caused enormous destruction of productive forces and ruination of crores of workers, peasants and other working people including small traders. There has been further concentration of wealth in the hands of a few super rich. All available data show that the rich have been getting richer at a faster pace than before in the past two years. Far from reducing the inequity of wealth distribution, the note ban has increased this inequity.