Monday 23 May 2022
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Deconstructing Manmohan’s Speech

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[dropcap]E[/dropcap]ven as the stories around demonetisation continue to dominate the media and the news cycle in our country, human stories of Indians dealing with cash access decline is getting replaces with political stories that have now come to dominate the front pages of media. Of the various developments on this dimension, the one to find more significant attention was Manmohan’s Singh’s rather brief speech of less than 700 words in Rajya Sabha. In itself the speech was not significant, it was on expected lines,  a reaffirmation of Congress’s stated position and did not add any new material over what had been already said by other members of the party, neither did the speech delve into details of economics or politics. If we were to disconnect the speech from the person who presented it, it would not merit publication even as an opinion piece in any meaningful media channel. Nevertheless since the adage of the messenger being the message is not untrue in real world, a speech by once economist and ex-PM ended up gathering attention and some analysis. While the attention has been neutral, the analysis of the speech has been mostly negative, calling into attention the crimes of commission and omission by Manmohan’s government and his track record and its variance with the current position.

Image result for UPA scams

The examination of the economic content has largely been on lines of correctness of the few statements Manmohan managed on the actual topic in the message, calling into attention the lack of sanctity of the estimate of impact on GDP, how it differed from mature studies with proven methodologies. In addition, apart from various analyses, the actual economic data available since the step, even though limited, surprisingly points to a positive impact on economy rather than a negative one. This indicates that significantly more rigorous studies are needed to assess the true impact rather than throwaway predictions. However even if the speech was of questionable merit and has been widely critiqued, there are still aspects to those which need to be examined, as it forms the main axis of the political attack on the demonetization effort by the current government.

The climax of Manmohan’s speech has been the characterization of the move as an “organized loot”, and this was the eye-catching phrase which has headlined his effort in Rajya Sabha. Let us therefore focus on the centerpiece of the speech of the erstwhile appointee PM. A loot by its basic definition, involves transfer of assets from one party to another, by force. While a politician of the ilk of Mamta Banarjee can get away with such throwaway statements under the amnesty for rhetoric they have, an economist like Singh cannot be allowed this leeway without risk to his remaining credibility. Surely, as he isn’t Humpty Dumpty, he must know what he’s saying when he chooses his words? And if he does so, then it is incumbent on him to explain the mechanics of the loot, specifically whom has the money been taken from and who is the party is it has gone to? The largest part of the Indian populace have either deposited the money they has as cash into their accounts, or have converted them into new notes. To speak of the translation of money from the idle physical form of cash to a interest earning deposit in the bank as loot, is exceptionally ridiculous if it has to come from anyone with a modicum of economic knowledge and even more so from someone of Manmohan’s background. What then explains such a statement ? This is an important aspect, but to understand the rational, let us first look at some aspects of history before we tie them together.

 As we have suspected before and has been reaffirmed since by the government, the effort towards demonetisation is targeted towards a less-cash economy, which in turn supports the aims of eradication of black money and fake Indian currency. It is the 500 and the 1000 rupee notes, which have formed the base of the two problems plaguing Indian economy, but how have things come such a pass where the challenges of fake currency and black money need precipitate such mammoth steps to tackle them? This situation has not come about in a single day, and has been building up over the 2004-2014 period, and the mechanics of both these have been the high-value currency notes in operation. Over 2004 to 2014, the high value currency notes were allowed to grow unchecked, in far greater proportion to the overall cash supply than before. A related development though was the lack of security of Indian currency in the same period. The De La Rue scam was uncovered when the Panama papers were leaked by Wikileaks but have not seen sufficient media traction. The exposé brought into light the affair where currency note suppliers were pushing substandard inputs, while being shielded by handsomely paid middlemen who kept the government occupied elsewhere.

Image result for fake currency network

The security lapses do not stop there unfortunately. High quality ink which is used to print the notes, is a cornerstone of currency sanctity and that too has been compromised. Not only does the supplier of ink to Indian operations also to countries like Pakistan, but there have also been incredible lapses such as letting shipments getting stolen. The UPA government over the 10 years of its existence appears to have taken an exceptionally lackadaisical approach towards the problem with no real and specific steps to curb black currency, while at the same time encouraged increased distribution of high value notes. This has caused hoarding and distribution of black cash and FICN (Fake Indian Currency Notes) much easier.

Clearly, if there is a set of assets which are being taken away by force, it is the FICN network as the hordes of black currency. These will reflect in government treasuries as unclaimed bills. Only If someone does not see the government as having a moral right to disrupt illegal operations, one may then characterize Prime Minister Modi’s step, taking assets away from the international currency networks and black money operators, as a loot. Indeed force has been used to transfer assets, for some it would be a moral force, but to those who don’t necessarily see it that way, the textbook definition fits. Given that Manmohan’s limited economic observations are indeed repudiated and his past government has been directly implicated in various scams and acts of mis-governance, it begs the question as to who are the parties, for which ’s cries out in pain? When he rose up to speak in Rajya Sabha, something he is not known for, it was certainly not the Indian people of Assam, whom he ostensibly represents, speaking through him. The only possibility which remains is then the illegal economy that grew under his stewardship and it must be on behalf of this corrupt system that he is batting now, as he was alleged to have done before.

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Satyakam Sudershan
Satyakam Sudershan
VLSI professional, working in international financial operations

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