Ends and means

On the face of it, the decision to promulgate the Specified Bank Notes (Cessation of Liabiities) Ordinance, which seeks to divest ₹500 and ₹1,000 notes of all legal validity after March 2017, does not come as a surprise. It is meant to ensure that the currency which does not return to the system before March 31 ceases to exist as legal tender, and therefore can be converted into profits on the books of the Reserve Bank of India. This can be transferred as dividend to the Centre. But the move to penalise those holding more than 10 old notes (why 10 and not any other number?) after March 31 makes no sense whatsoever — unless the Centre considers coin and currency collectors to be criminals. Mercifully, the jail-term proposal has been revoked, but reports of the ordinance slapping a fine of ₹10,000 or five times the amount of such notes held (the Ordinance draft has not been made public), whichever is higher, are at once ludicrous and alarming. With an eye on political gain, the drive against black money is being positioned as some sort of righteous, almost vindictive, crusade rather than a reasoned exercise in economic reform. It is of a piece with the ad hoc diktats of the last two months, in respect of which both the Centre and the RBI have been resolutely opaque, the latter even more so than the former. The people have taken both inconvenience and secrecy in their stride since the big bang demonetisation announcement on November 8. While the objectives of the exercise cannot be faulted, the hiccups in implementation need to be accounted for. Above all, the RBI must be open about how many new notes and of what denomination it has released so far. One hopes that the Government is not trying to engineer a shift to cashlessness by rationing currency. The shift must be made gradually, by creating the necessary systems. To jump-start such transformations without preparing the people for it can prove counterproductive; currency shortage will lead to the hoarding of new notes.

What’s perhaps most disturbing of all is that we are seeing a transformed state — one that sits better with a dirisgme regime than a liberalised economy. A regime that seems inclined to wield power for its own sake, or let loose income tax officials, if not over-inquisitive bankers, on anyone they choose to suspect (not necessarily just those depositing more than ₹2.5 lakh since November 8) hardly sounds like the same government that promised ‘minimum government and maximum governance’. An obstreperous state could compromise consumer and investment sentiment, besides putting individual liberties at risk.

One hopes that the new year opens up a more measured and less frenetic approach to dealing with black money and creating a cashless society. The Centre should display a transparent and trusting attitude, as it pursues its goals. Means are as important as the ends.

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