Category: India and Pakistan

On the evening of November 8, the Prime Minister of India, Narendra Modi, went on live television to tell over one billion people that their 500- and 1000- rupee bills were invalid as of that night. They could exchange their invalid bills for new 500- and 2000-rupee bills at the bank. The exchange of notes was stopped on November 24, equally abruptly. There is a new deadline of December 30, 2016 for the deposit of all of the demonetised notes.

The economic damage caused by this unannounced fiat remains to be calculated. But it will be devastating. A ratings agency, Fitch, predicted a reduction of growth of 0.5% of GDP solely due to this ‘demonetisation’. Other estimates have been a 1% reduction, or a 2% reduction in growth. But the Forbes article reporting the prediction, in its title, points out that “No One Really Knows”. As for the editor of Forbes Magazine, he has called demonetisation “sickening” and “immoral”: “What India has done is commit a massive theft of people’s property without even the pretense of due process–a shocking move for a democratically elected government.” Forbes compared the move to the forced sterilization program of the 1970s: “Not since India’s short-lived forced-sterilization program in the 1970s–this bout of Nazi-like eugenics was instituted to deal with the country’s “overpopulation”–has the government engaged in something so immoral.” Historian Sashi Sivramkrishna pointed out that induced currency shortages helped cause the Great Bengal Famine of 1770.

The idea of demonetisation was to crack down on “black money”. The government claims that the users of this “black money” to attack India’s currency and conduct illicit business include, of course, the insurgents in Kashmir, the Maoists in Central India and of course, Pakistan. A flood of articles predicting the damage that would be done to these “black money” users followed – sourcing the police and army. Like this one, that said the demonetisation was “set to cripple the Maoists”. Or this one, a week after the announcement, that says that youth in Kashmir stopped throwing stones at the Indian military because of demonetisation. Other miracle cures by demonetisation will surely follow, as these ones are discredited.

It is worth noting that “black money” is unpopular. But, as this video from The Wire shows, demonetisation doesn’t address “black money” production by big businesses who don’t declare income or bribes by politicians who move their money overseas. Indeed, an astounding exemption was made for political parties who will be able to deposit their old currency freely.

The problem is that hundreds of millions of Indians – 80% of them, providing 40-50% of the GDP – work in the rural and informal economy and depend on cash transactions to survive. They don’t have bank accounts and consequently faced strict limits on how much they could exchange. Their small businesses are done in cash. Investigators from the left website Newsclick found a 25% reduction in the flow of vegetables to Delhi. These people had to run to banks that don’t work well for them at the best of times. They traveled to the banks however they could, stood in queues, and went back cashless day after day. The Indian Express counted 33 deaths in the first week. This video by the news site The Wire is indicative. A villager needed cash to see a doctor. Her husband waited in line for four days at the bank before giving up. She died. Now the husband has no cash for her funeral rites.

The other problem is that, while the surprise nature of the announcement was designed to catch black money users off their guard, the government also surprised itself – the banks weren’t ready, the printing presses weren’t ready to produce the new currency, and people who got the new notes were so afraid that a problem of hoarding the new currency immediately arose – a classic cash crunch. The best move at this point, would probably to be to walk back from this manmade disaster and re-monetise the notes, as Sashi Sivramkrishna argued in The Wire. Sivramkirshna also noted that the government was unlikely to re-monetise, but instead likely to double down and proceed into an artificially induced recession.

The government’s response has been to ease the process of demonetisation for the middle class – those with bank accounts and cards for cashless transactions – and to mount a PR campaign, including some paid tweets with the hashtag #IndiaDefeatsBlackMoney. But “black money” will emerge from this fiasco unscathed, while poor people lose their livelihoods and, in unforgivable numbers, their lives.

As Venezuela, facing genuine economic warfare including attacks on its currency, makes desperate moves to try to counter its own “black money” problems, Modi’s demonetisation should be a warning. The Venezuelan government backed away from a sudden plan to demonetise the 100-bolivar bill and has extended the deadline once, showing a flexibility in the face of reality that Modi has lacked. There are better plans out there for a government that actually cares about its poor majority than following Modi in bankrupting them.

First published by TeleSUR English: http://www.telesurtv.net/english/opinion/The-Carnage-of-Demonetisation-in-India-20161223-0011.html

Since Narendra Modi began campaigning to be Prime Minister of India in 2013, he and his party, the BJP, gave the impression of an unstoppable march, culminating in a massive electoral victory in 2014. The BJP’s story went like this: Anti-incumbency was strong, and the people were sick of Congress corruption. As Chief Minister of Gujarat, Modi had administered the Gujarat miracle, reaching developmental heights unheard of elsewhere in India. Given the chance, he could do the same for the entire country. If there were accusations that he had also been Chief Minister during an organized massacre of Muslims in Gujarat in 2002, well, was there any proof? Hadn’t the courts given him a clean chit? And anyway, with so many terrorist threats facing India, maybe a tougher hand like Modi’s was needed: to keep Kashmir in line, to fight the Maoist rebels in central India, and, of course, to stand up to Pakistan.

None of the elements of the story were actually true. Economist Jean Dreze showed that Gujarat’s economic achievements were middling. They also "largely predate(d) Narendra Modi, and have as much to do with public action as with economic growth". Nirmalangshu Mukherji showed that there was, in fact, no clean chit and there was plenty of evidence of Modi’s involvement in the massacres of 2002 in Gujarat. The Indian state under Congress had shown plenty of "toughness", if "toughness" includes the willingness to violate human rights, in Kashmir, in Chhattisgarh and elsewhere in the counterinsurgency war against the Maoists. As for Pakistan, even the "toughest" leaders on either side need to be careful, given the possibility of mutual nuclear annihilation.

Even the electoral victory was not quite what it seemed. Nirmalangshu Mukherji’s post-electoral analysis in Kafila foretold some of what was to happen this year. Mukherji’s analysis argued that Modi’s party, the BJP, had only a very modest increase in the popular vote from 19% in 2009 to 31% in 2014. The major achievement of the BJP, Mukherji argues, was the scientific method used by the campaign of increasing communal strife in key disctricts and profiting from these electorally, gaining the maximum number of seats with the minimum increase in the popular vote. When, in February of this year, the BJP were routed in the Delhi legislative elections, with a relatively new party, the AAP, winning 67 of 70 seats, the BJP’s march was shown to be stoppable, indeed.

Once unable to get a US visa because of the 2002 massacres, Modi now has a direct hotline to Obama, reports the NYT. The hotline, if the NYT article is to be believed, appears to mainly be to talk about how to "contain" China – a very dangerous road for the US to take, and ten times more so for India. And a little bit of saber-rattling with Pakistan over Kashmir is also happening right now.

But domestically, the Delhi elections were a blow and his legislative program has been slowed down by opposition. The Indian media talk about a ‘resurgent Congress’: left writer Badri Raina analyzed the Congress return in May. Modi had planned a series of changes to India’s Land Acquisition Act, changes to facilitate the transfer of peasant and indigenous lands into corporate hands. Economist Smita Gupta, in an interview on Newsclick, called the planned act a "return to colonial oppression". But strong opposition in the legislature has set the Act back: now it will wait for the winter session of parliament.

In a new interview for Outlook, Arundhati Roy summarized these developments: "The attack we are up against is wide and deep and dangerous, but the euphoria around the Modi government has evaporated pretty fast, much before anyone would have expected. I fear that when they get really desperate, they’ll get dangerous." As an example of the danger, Arundhati mentioned the hanging of Yakub Menon, convicted of participating in a conspiracy in a series of 1993 bombings. Badri Raina wrote about the BJP euphoria around the hangings and the hatred directed against those espousing a position against capital punishment, as the arrival of India’s own Tea Party.

India’s Tea Party has another target, one of the lawyers who has been following up on Modi’s role in the 2002 massacres: activist-lawyer Teesta Setalvad, who has been targeted for some malicious and frivolous prosections as well as an organized campaign of bullying by BJP followers – a campaign so vicious that it has made the NYT as well, in a story by David Barrow on August 19 titled "Longtime Critic of Modi is now a Target."

Another area of danger where all of these threads come together: the political value of a "war on terror", valuable land to be acquired for corporates, the need to overcome legislation protecting people and the environment – is in central India, where an active counterinsurgency operation continues against the Maoists, and ends up violating the rights of indigenous people throughout the territory. In 2005, the state of Chhattisgarh was carved up into a series of memoranda of understanding (MOUs) with corporations. The MOUs coincided with the rise of the paramilitary, anti-Maoist organization, Salwa Judum, by Mahendra Karma. Salwa Judum was declared an illegal organization by the Supreme Court, after they had already burned villages, killed, and displaced people across the state. Mahendra Karma was killed in an ambush by Maoists in 2013. His son, Chavindra Karma, founded a new successor to Salwa Judum in May of this year. Activist Gautam Navlakha, in an interview on Newsclick, argued that the re-founding of Salwa Judum followed a visit by Modi to Chhattisgarh and the announcement of a whole slate of new MOUs with corporations. On this file, the state has distinguished itself with the "insane, inhuman" arrest in May of a completely paralyzed academic, N. Sai Baba, because he expresses views sympathetic to the Maoists.

Modi may be running out of steam, or he may find a second wind. The deeper issues India faces preceded his rise and will continue after he’s gone: the extraordinary and deadly inequality, the ongoing land grab, counterinsurgencies in Kashmir and central India, and a justice system that still has the death penalty and that offers those trapped in it a horrendous and impossible bureaucratic maze (see Manisha Sethi’s book, "Kafkaland", for examples). Modi has channeled these problems in anti-secular, chauvinist directions and exacerbated them; India is a more dangerous place because of him and his party. But resistance to him and his agenda has arisen fast. It has been surprising. Perhaps there are more surprises ahead.  

First published at TeleSUR English: http://www.telesurtv.net/english/opinion/Many-Dangers-for-India-Ahead-Despite-Modis-Decline-20150901-0011.html