Note ban can have rippled effect on GDP growth and job creation, says ex-PM.

New Delhi, December 9

Former Prime Minister Manmohan Singh said in remarks published on Friday that Indians should be ready to face “a tough period over the coming months” due to demonetisation.

Writing in The Hindu newspaper, the Congress leader also said the November 8 decision would cause grievous injury to the honest Indian while those with black money will escape with a mere rap on the knuckles.

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The economist-turned-politician described as “impetuous” Prime Minister Narendra Modi’s move to ban the 500 and 1,000 rupee notes and warned that this would cause severe hardships to ordinary Indians.

It has “shattered the faith and confidence that hundreds of millions of Indians had reposed in the government of India to protect them and their money”, Manmohan Singh said.

The demonetisation has led to an unprecedented cash crunch across the country, with the Reserve Bank of India unable to supply adequate cash in exchange for the 86 per cent of all currency that was spiked.

This has led to long, daily queues at all banks and ATMs, both of which frequently go dry. The government has also put a cap on how much a person can withdraw from his own bank account.

Manmohan Singh, who was the Finance Minister when India unleashed economic reforms in 1991, said Modi’s stated intentions behind the note ban — fighting fake currency as well as corruption and black money — were honourable.

“However, the popular saying ‘the road to hell is paved with good intentions’ serves as a useful reminder and warning in this context.” Manmohan Singh underlined that all cash was not black money and all black money was not hoarded in cash.

“More than 90 per cent of India’s workforces still earn their wages in cash. These consist of hundreds of millions of agricultural workers, construction workers and so on.” He pointed out that more than 600 million Indians still lived in towns and villages with no bank and cash was the bedrock of their lives.

“To tarnish these as ‘black money’ and throw the lives of these hundreds of millions of poor people in disarray is a mammoth tragedy.” The demonetisation decision had breached the government’s fundamental duty to protect the rights and livelihood of its citizens.

Chiding the government for introducing the Rs 2,000 note, he went on: “This brazen policy measure (demonetisation) has neither tackled the stock of black money holistically nor has it stemmed the flow of it.” He said other countries which went for currency swap did so over a period of time “and not as a sudden overnight operation”.

“As someone who has experienced long lines for rationed food during war time, I never imagined that one day I would find my own countrymen and women waiting endlessly for rationed money. That all of this suffering is due to one hasty decision makes it even more disconcerting.” Manmohan Singh warned that the note ban can act as a negative shock to the economy.

“Consumer confidence is an important economic variable in a nation’s growth prospects. It is now evident that the sudden overnight ban on currency has dented the confidence of hundreds of millions of Indian consumers, which can have severe economic ramifications…This can have rippled effect on GDP growth and job creation.”

“It is my humble opinion that we as a nation should brace ourselves for a tough period over the coming months, needlessly so, ” he said. —IANS

SC asks Centre whether cooperative banks can accept banned currency

New Delhi, December 9The Supreme Court on Friday sought response of the Centre on the issues including whether the district cooperative banks can be allowed to accept deposits with certain conditions and can there be a minimum assured withdrawal from banks.A Bench headed by Chief Justice T S Thakur asked Attorney General Mukul Rohatgi to seek instruction and apprise it about the stand of the government on issues including the bar on district cooperative banks from accepting deposits in demonetised currency notes.(Follow The Tribune on Facebook; and Twitter @thetribunechd)The bench also comprising Justices A M Khanwilkar and D Y Chandrachud said that when the minimum weekly withdrawal limit has been fixed, then why people are not able to get that amount.“Can we say that this will be the minimum assured weekly withdrawal amount that a person can get from the bank,” the Bench asked and while fixing the batch of petitions for further hearing on December 14.The Bench, meanwhile, proposed to frame various legal questions to be deliberated upon in the future hearing.Rohatgi sought a direction that cases in various high courts on the demonetisation issue be stayed.The Bench said that it would take up this issue on next date of hearing.The top court had on December 2 asked the Centre to spell out the measures taken to ease suffering of and inconvenience to the people in rural areas.While hearing a batch of pleas challenging various aspects of demonetisation, the court had said that all parties should sit together and prepare a list of categories of cases which could be referred to high courts and those that could be heard by the apex court.The AG had said that the government was aware of the situation in cooperative banks which lack proper infrastructure and mechanism as compared to scheduled banks.The Centre had on November 24 filed an affidavit in the apex court on demonetisation and had said that the “bold move” would eradicate black money and slush funds operating since Independence which cast a “parallel economy” hitting the poor and the middle class.On November 29, the apex court had agreed to hear pleas of 14 cooperative banks of Kerala seeking its nod to transact business like banks and others seeking demonetisation of any currency note higher than Rs 100 denomination. — PTI

Government decides to print plastic currency notes

New Delhi, December 9The central government told Parliament on Friday that it had decided to print plastic currency notes.”It has been decided to print banknotes based on plastic or polymer substrate. The process of procurement has been initiated,” Minister of State for Finance Arjun Ram Meghwal said in a written reply in Lok Sabha to a query whether the Reserve Bank of India intended to print plastic currency notes in place of paper ones.The Reserve Bank for long has been planning to launch plastic currency note after field trials. (Follow The Tribune on Facebook; and Twitter @thetribunechd) In February 2014, the central government had informed Parliament that one billion plastic notes of Rs 10 denomination would be introduced in a field trial in five cities selected for their geographical and climatic diversity. The selected cities were Kochi, Mysore, Jaipur, Shimla and Bhubaneswar.Plastic notes have an average life span of about five years and are difficult to imitate. Also, currency notes made of plastic are cleaner than those made of paper. Such notes were first introduced in Australia as a measure against counterfeit notes.Replying to another question, Meghwal said the RBI had said in December 2015 that they had received some banknotes of Rs 1000 without having security thread that were printed at Currency Note Press (CNP), Nashik, on paper supplied by Security Paper Mill (SPM), Hoshangabad.Security Printing and Minting Corporation (SPMCIL) and the units involved (SPM and CNP) has initiated an inquiry.”Major penalty chargesheet has been issued to the personnel concerned. Disciplinary proceedings have been initiated as per departmental rules,” the minister said.Meghwal said action has been taken to strengthen quality procedure and online inspection system in manufacturing process and special training has been given to the persons concerned to avoid such types of mistakes in future.”Additional inspections have been introduced to ensure defect-free production,” he said. — PTI

A digital red herring

‘Cashless’ drive a bid to distract from currency disaster

A‘cashless’ economy, i.e. one that predominantly uses electronic transactions over cash, has well-acknowledged benefits, among them transparency and lower cost of running the cash infrastructure. The timing of the current push in that direction — in the form of a slew of incentives for making digital payments — however, raises doubts over the government’s intention. The demonetisation exercise was sold out as a “surgical strike” on black money, and a replacement of the old currency was promised. A month on, it is dawning upon all executioners of the scheme that neither is happening as expected. Enter the promise of a cashless economy. It is obviously being pushed to tide over the ‘cashless’ period. But then are we to assume that the promised new currency is never going to come? In case it does, in adequate quantities, the urgency for a cashless economy will again be gone.The current volume of electronic transactions — in numbers — is negligible. By some estimates, an investment of Rs 60,000 crore over the next five years will give us a semblance of a cashless economy, and save 0.25 per cent of the GDP in expenditure on cash maintenance. The challenges are well known: lack of digital literacy; inadequate payment interface; poor internet connectivity, et al. Cyber security, of course, remains the biggest concern, especially when a large ill-prepared population is co-opted. A real concern is what an overnight push may do to an otherwise desirable objective. Once bitten, a major section of the unprepared society may be shy of all things digital for a long while. The still underway demonetisation should be a lesson in what happens when a government undertakes a massive exercise without the required preparation.It is clear, getting rid of cash to any meaningful extent cannot happen before a few years. And all incentives or coercion being resorted to for it currently could well have been done without the demonetisation. Relating one to the other, thus, seems more an exercise in distracting an increasingly impatient populace. The Modi government must realise theatrical pronouncements may not be the best path to nation-building.

Demonetisation: CJI pained at lawyers outshouting each other

New Delhi, December 9“What kind of memory I would take with me,” was how a dejected Chief Justice of India TS Thakur, who is demitting office early next month, reacted when lawyers tried to out-shout each other during the hearing on demonetisation.A visibly pained CJI made his displeasure known by saying that never in his career as a judge for 23 years he has seen such unruly behaviour when junior lawyers are shouting and attempting to pin down senior advocates and making the atmosphere of the court like that of a “fish market”.Justice Thakur was anguished when some of the lawyers raised their voice to interrupt the submission of Attorney General Mukul Rohatgi, who was arguing for the government, and senior advocates like Kapil Sibal and P Chidambaram.”This is not a way to argue. You people are making it a fish market. You people don’t want senior advocates like Sibal to speak. See Mr Chidambaram has not yet stood up. This is very unfortunate.””In 23 years of me as a judge, I have not seen such behaviour. This is the last week as a judge and I would be going with a heavy heart. What kind of decorum is maintained? This is CJI’s court and yet no decorum. You can’t be allowed this kind of behaviour,” the CJI, who will be demitting office on January 3, said. — PTI

 

Govt stalls debate to avoid Oppn fire, SC turns up heat

DEMONETISATION Rahul hits out at ‘nervous’ Modi, SC asks if any groundwork was done before announcing policy

NEW DELHI: The government’s move to recall high-value banknotes came under fire in Parliament and the Supreme Court on Friday, with judges questioning cash rationing by banks and opposition lawmakers accusing Prime Minister Narendra Modi of “running away” from a debate.

*NOV 8 WAS THE DAY THE PM DECLARED DEMONETISATION OF HIGH-VALUE BANKNOTES

As a lingering cash crunch seemed to temper the initial euphoria over the high-stake policy move, the government has appeared less effusive about the November 8 decision. And with only three working days left, it wants to see off the winter session without any major embarrassment in Parliament.

So much so that ruling lawmakers were seen on Friday preventing a debate in the Lok Sabha, prompting opposition charges that the government didn’t want to be called out on the so-called demonetisation move which suddenly culled 86% of cash in the economy. The Opposition had initially sought a debate with a vote on demonetisation but later relented to one without voting. Only this time, the government has seemed reluctant to hold one at all.

“If they allow me to speak in Parliament, you shall see an earthquake will come,” Congress vice-president Rahul Gandhi told journalists. “This is the biggest scam in India’s history. If I say this inside the House, Modiji will not be able to sit.”

The Parliament’s winter session has so far been lost to disruptions by opposition parties, but, in a role reversal on Friday, BJP chief whip Rakesh Singh was seen gesturing to ruling NDA MPs to get up and shout the opposition MPs down.

For the government, the day was no better at the Supreme Court, which wondered if the restriction on withdrawal of “legitimate and taxed money” violated fundamental rights. Cash withdrawals from banks are capped at `24,000 a week, but most banks are unable to pay even that.

A bench headed by Chief Justice TS Thakur asked the government to consider fixing a minimum assured withdrawal which banks cannot refuse and allow district cooperative banks to accept banned 500-and 1000-rupee notes after stringent verification of the customers.

The court told Mukul Rohatgi, the government’s top law officer, to report back the progress on this on December 14 when it will issue an interim order to reduce people’s hardship.

“Did you have any projections as to how much will you receive and how much notes were to be printed? What would be your gestation period?” the bench asked Rohatgi, wondering whether there was any application of “mind” or “planning” before the demonetisation announcement.

A constitution bench will be set-up to hear 25 petitions that have challenged the government’s demonetisation move, aimed at curbing black money and counterfeit currency. The court said it will frame 11 questions for the consideration of the constitution bench.

Back in Parliament, ruling party lawmakers refused to allow Gandhi to initiate a fresh debate while parliamentary affairs minister Ananth Kumar demanded an apology from the opposition benches for disrupting the proceedings during the past days. At one point, BJP leader LK Advani was seen asking his party MPs not to disrupt the proceedings.

Later, a visibly upset Sumitra Mahajan, the Lok Sabha Speaker, adjourned the Lok Sabha till Wednesday morning.

“Jao sab chhutti par (Go on leave, everyone),” she said on the microphone. Her rebuke came a day after President Pranab Mukherjee castigated MPs for disruptions, asking them to run Parliament “for god’s sake.”

With only three working days left this session, the government is unwilling to allow opposition leaders an opportunity to attack it in Parliament for people’s hardship due to demonetisation, said sources. “The PM is giving speeches across the country but is afraid of coming to the Lok Sabha and is not willing to sit there,” Rahul Gandhi said, wondering about the reason for this “nervousness”.

Cash withdrawals from banks are capped at `24,000 a week, but most banks are unable to pay even that.

A bench headed by Chief Justice TS Thakur asked the government to consider fixing a minimum assured withdrawal which banks cannot refuse and allow district cooperative banks to accept banned 500-and 1000-rupee notes after stringent verification of the customers.

The court told Mukul Rohatgi, the government’s top law officer, to report back the progress on this on December 14 when it will issue an interim order to reduce people’s hardship.

“Did you have any projections as to how much will you receive and how much notes were to be printed? What would be your gestation period?” the bench asked Rohatgi, wondering whether there was any application of “mind” or “planning” before the demonetisation announcement.

A constitution bench will be set-up to hear 25 petitions that have challenged the government’s demonetisation move, aimed at curbing black money and counterfeit currency. The court said it will frame 11 questions for the consideration of the constitution bench.

Back in Parliament, ruling party lawmakers refused to allow Gandhi to initiate a fresh debate while parliamentary affairs minister Ananth Kumar demanded an apology from the opposition benches for disrupting the proceedings during the past days. At one point, BJP leader LK Advani was seen asking his party MPs not to disrupt the proceedings.

Later, a visibly upset Sumitra Mahajan, the Lok Sabha Speaker, adjourned the Lok Sabha till Wednesday morning.

“Jao sab chhutti par (Go on leave, everyone),” she said on the microphone. Her rebuke came a day after President Pranab Mukherjee castigated MPs for disruptions, asking them to run Parliament “for god’s sake.”

With only three working days left this session, the government is unwilling to allow opposition leaders an opportunity to attack it in Parliament for people’s hardship due to demonetisation, said sources. “The PM is giving speeches across the country but is afraid of coming to the Lok Sabha and is not willing to sit there,” Rahul Gandhi said, wondering about the reason for this “nervousness”.

Cashless economy a long way to go since cash is still king

HURDLES Vast rural population, few debit cards, fewer ATMs and point of sale machines… the problems are too many

NEWDELHI: Apart from the war on black money, the government’s move to ban old ₹500 and ₹1,000 banknotes was also a push towards a cashless economy (the old notes constituted 86% of the total money in circulation). Ever since November 8, the Centre has announced a number of sops to push for a cashless economy — discount on buying petrol and diesel through cards, waiving off service charge on card transactions up to ₹2,000 and no transaction fees on public dealings with PSUs if they are done digitally, among others.

PTIEven after a month, the queues still remain longer

But is India ready for a cashless society? Or how feasible is it for people to actually go cashless?

Two-thirds of Indian population live in rural areas. The number of bank branches and ATMs are far and few and very few people actually have bank accounts. Besides, most shops in these areas do not have the infrastructure to accept digital payments or plastic money.

There are around 1.45 million point of sale (PoS) machines in use in India, which makes it around 856 PoS machines per million people.

In a population of around 1.3 billion, India has only 662 million debit card holders as of March 31, 2016, according to the Reserve Bank of India (RBI). Most people use their debit cards only to withdraw cash.

Around ₹27 lakh crore worth of transactions happened through debit cards in 2015-16. Out of these, 92% were cash withdrawals from ATMs.

And people still prefer to withdraw money through cheques and slips.In 2015-16, cash withdrawal using plastic cards in India was only 32% of the total cash withdrawals; the rest of the money was withdrawn using paper clearances like cheques.

Lack of required infrastructure is another roadblock to the country’s digital drive. India’s mobile teledensity — the number of telephone connections for every hundred individuals living in an area — is 81, whereas in rural is areas it is even less – 51, according to data from the Telecom Regulatory Authority of India (TRAI). Though India is the fastest growing as well as the second-largest smartphone market in the world, there are just a little over 300 million smartphone users in India. The majority still use feature phones.

“India has probably has reached the tipping point. The infrastructure cannot be created overnight but you need to have that intent. There is a lot of ground to cover in terms of spreading financial and digital literacy,” said Rachna Nath, partner and head, digital consulting , KPMG India. “We need to use the complete ecosystem, such as community service centres, to create awareness.”

How note ban was kept secret

Prime Minister Narendra Modi handpicked revenue secretary Hasmukh Adhia to spearhead a radical move to abolish 86% of the country’s cash overnight and take aim at the huge shadow economy.

Adhia, and five others privy to the plan were sworn to utmost secrecy, sources with knowledge of the matter said. They were supported by a team of researchers working in two rooms at Modi’s New Delhi residence.

The secrecy was aimed at outflanking those who might profit from prior knowledge, by pouring cash into gold, property and other assets and hide illicit wealth. “One is never ready for this kind of disruption — but it is a constructive disruption,” said Narendra Jadhav, former chief economist of RBI.

Over more than a year, Modi commissioned research from officials at the finance ministry, the central bank and think-tanks on how to advance his fight against black money, a close aide said. He demanded answers to questions such as: How quickly India could print new banknotes; how to distribute them, and whether state banks benefit if they received a rush of new deposits.

The topics were broken up to prevent anyone from joining the dots and concluding that a cash swap was in the offing.

“We didn’t want to let the cat out of the bag,” said a senior official directly involved. “Had people got a whiff, the exercise would have been meaningless.”

But though secrecy was paramount, clues had been left.

The RBI disclosed in May that it was making preparations for a new series of banknotes that were confirmed in August when it announced it had approved a design for a new ₹2,000 note.

The printing presses had only just started turning when the media finally started to run with the story in late October.

“The plan was to introduce it around November 18, but there was a clear sign that it could get leaked,” said one person with direct knowledge.

Gap between haves, have-nots has widened: Manmohan

Says education can overcome division of people on religious, caste lines

Amaninder Pal

Tribune News Service

Chandigarh, December 9

Former Prime Minister Dr Manmohan Singh, the architect of India’s economic reforms initiated 25 years ago, today said the progress the country witnessed during the past 25 years was not “equitably distributed”. Certain sections of society such as SCs/STs, OBCs and minorities and those living in the rural areas had lagged behind and their gain or share in the progress of the country was much less than that of the well-off sections of the country, said Dr Singh, who had opened up the country’s economy with his Budget speech in 1991.Though Dr Singh emphasised that the country had made considerable progress, particularly during the past 25 years, but he also underscored the point that “inequality has increased substantially in the country.”Delivering the inaugural address at the 17th annual conference of the Indian Association of Social Sciences Institutions (IASSI), organised by the Centre for Research in Rural and Industrial Development (CRIID), Chandigarh, here today, the former Primer Minister spoke on “Education and Development: Issues, Challenges and Opportunities.”“The size of our economy today is two trillion plus ($ 2.076) compared to the $ 0.327 trillion economy in 1990-91.  The literacy rate has increased from 52.21 per cent in 1991 to 74.04 per cent in 2011-12.The population living below the poverty line has declined from 45.3 to 21.9 per cent from 1993-94 to 2011-12, but the benefits of this progress are not fairly distributed”, said Dr Singh.“The disparity in the country has increased considerably. As per socio-economic surveys for rural India, there were 74.5 per cent households with a monthly income below Rs 5,000 in 2011,” he further added. Dwelling on the quality of education being offered by government schools, he said it was far from satisfactory due to various factors such as lack on infrastructure, inadequate teaching faculty and equipment, etc.“Now, there are schools for the haves and have-nots leading to social segregation of children belonging to various sections of society”, he said.Critically commenting on the private education system, Dr Singh said though private schools were better monitored, they charge a high fee and were beyond the reach of the poor, who could not bear the financial burden such schools entail. He said there was a dire need to address issues like inadequacy of classrooms, shortage of teaching material, equipment and above all shortage of teachers in the schools.

Social divisions

The current tendency to generate and promote social divisions among people on the basis of religions, castes and regional lines can be overcome by educating people to acquire those values which characterised the struggle for Independence and the idea of India. Education must promote what Jawaharlal Nehru described as “scientific temper” and humanistic values. The technically educated individuals can be transformed into culturally advanced citizens, who have the capacity to enjoy their own liberty and respect the liberty of others in a multi-cultural and multi-religious society of India, which is correctly described as ‘unity in diversity’.  The educated and conscious citizens become participants in the deepening and the widening of democracy, in observing the rule of law and saving the polity from deviations from democratic principles, keeping it on the path to follow the cherished ideals of our Constitution, the ‘Sovereign Socialist Secular Democratic Republic’.   

Education as business

The new educational institutions coming up in the private sector are mostly for “profit” and are not like the old non-profit charitable private educational institutions. Though at the same time, it must be admitted that some of the private education providers have maintained high quality but there number is not much. He also stressed on empowerment of women through education.

‘Month on, no relief in sight any sooner’

Sqeezing cash, stretching queues: A long queue of people outside a bank in Ludhiana on Friday. Photos: Inderjeet Verma

Gurvinder Singh

Tribune News Service

Ludhiana, December 9

 

There seems no end to the cash crunch. Most banks and ATMs remained out of cash today as demonetisation completed a month. Even if cash at a few banks was available, withdrawal amount hardly exceeded Rs 6,000.Those who managed to get cash had a mixed expression of some relief and confusion about how they would use the ‘big note’. Most of the banks and ATMs are dispensing only Rs 2,000 notes. Many traders are not accepting Rs 2,000 notes as they don’t have enough change.“Though people have started coming with Rs 2,000 notes, there is no change in the market. Owing to the cash crunch, sales are already down. I have about twenty-four Rs 100 notes. If I give 19 of these to someone purchasing products worth Rs 70, what am I going to give other customers?” asked Baljinder Singh, a shop owner of the Dugri area.Rakesh Singla, a resident coming out of the SBI branch at Fountain Chowk, said he requested the bank official if he could get notes in small denomination. But he told me that those had been distributed in the first hour of cash disbursal and now only Rs 2,000 notes were available.“This is the height of mismanagement on the part of the government. One decision, 30 days, no relief yet and nor in sight any sooner. On top of that, none of the benefits of demonetisation has started manifesting as yet. The only results so far have been negative,” said Yoginder Grewal, a resident at a bank in the Feroze Gandhi market.

This is height of mismanagement

• This is the height of mismanagement on the part of the government. One decision, 30 days, no relief yet and nor in sight any sooner. On top of that, none of the benefits of demonetisation has started manifesting as yet. The only results so far have been negative. —Yoginder Grewal,a residen