Post-mortem of the note-ban

When Meera Sanyal was a child growing up in Mumbai (she recalls in her book), her father, an officer in the Indian Navy, once took her on a stroll past the Gateway of India. Just then, she heard a group of urchins running behind a tourist, shouting: “Dollar, dollar!”

Perplexed, the young Meera wondered what was going on: at that point, she writes, her father offered her “my first lesson in economics and currencies”.

That lesson concluded with her father prophesying, half-jokingly, that one day, Meera would be walking on the streets of New York — and that children would run after her asking for the Indian rupee!

Meera, who would later go on to become one of India’s most respected bankers, with an abiding, demonstrable commitment to public service, writes: “While I would never wish for children to run after me in any city, anywhere in the world, the image my father painted that day represented a rupee so strong that it would be a cherished currency.”

Tragically, the woman who oversaw a flourishing investment banking and corporate finance practice in India (and abroad) and worked to channel foreign investments just as the country was opening up to it — and, to that extent, contributed more than her fair share to realising the dream of an economically vibrant India — will never see a day such as her father envisioned.

Last week, Meera Sanyal passed away after a battle with cancer.

This book — a critique of the Narendra Modi government’s demonetisation of high-denomination currency notes in November 2016 — is her legacy, alongside her other banking and public-service accomplishments.

It is a clinical post-mortem of a disastrous initiative undertaken against better counsel, and which has — from every available metric — failed to meet the objectives that underlay it.

It is a cautionary tale of the folly of unthinking, uncaring policy-making, which inflicted misery on countless Indians and “knocked out” the economy.

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The demonetisation story has, of course, been told many times over — to the point where one may legitimately wonder if there is anything new to be said. Where Meera’s book distinguishes itself is in the way she channels her personal experiences — as a banker who has up-close knowledge of the workings of the financial system and of the key players (including RBI officials) — and frames it against the backdrop of public policy.

It also helps that as someone who mentored a micro-finance programme of ABN AMRO Bank/The Royal Bank of Scotland, she was invested in the well-being of over 6.5 lakh rural women, and was intimately aware of the financially frail ecosystems in which those at the bottom of the pyramid get by. She, therefore, brought to the debate an empathy for the poor that was markedly missing — both during the 50-day currency chaos that gripped the country in 2016, and in the countless official claims about the outcome of the entire exercise.

The government may have proclaimed from the rooftops that the demonetisation move represented a “surgical strike” against corruption, but Meera, wielding the scalpel with the dexterity of a surgeon, dissects that claim and lays bare the innards of the financial system. And using compelling data sets, she dismembers the government’s case to establish how none of the official claims cited to justify the move delivered the promised outcome.

‘Big goals’

Illustratively, going by the official pronouncements on various occasions in the days, weeks and months following the note ban, Meera identifies “eight big goals of demonetisation”: flush out black money; root out corruption; fight terrorism by rendering counterfeit notes useless; move to a digital and cashless India; expand the tax base; integrate the informal economy into the formal sector and create a ‘larger and cleaner’ GDP; lower interest rates by forcing ‘idle’ savings into the banking system; and bring down real estate prices.

Some of these goals were not even worthy of pursuit, Meera notes. In the case of a few others, where the objective may have been defendable, the methods deployed were ham-handed. Still others represented the government’s efforts to ‘shift the goalposts’ and change the narrative over time as it became apparent that the stated intentions weren’t being realised.

‘Complete failure’

Meera then proceeds to marshal facts and figures to draw up a “demonetisation report card” to give a sense of the costs that the move inflicted — on the economy and on citizens, particularly the poor. On the basis of this quasi-forensic study, she concludes: “Notwithstanding numerous claims of success by various ministers and bureaucrats, factual data show that the Modi government failed to achieve any of the eight major stated objectives of demonetization.”

The demonetisation, she adds, was not just “a complete failure, but given the crippling economic costs and the debilitating human impact of the move, also an unmitigated disaster.”

Constructive commentary

Given Meera’s political affiliation — she was a member of the Aam Aadmi Party’s National Executive Committee — it may have been tempting for defenders of the establishment to dismiss her book as a partisan outpouring.

However, Meera’s manifest sense of fairness renders that a difficult enterprise. She gives the Modi government credit where it is due: for instance, with the Real Estate (Regulation and Development) Act and the Insolvency and Bankruptcy Code.

“Though I am a member of AAP and disagree with… many of the policies of the BJP-led NDA government, I believe it is important for the government to succeed, if India is to succeed,” she writes. “Each of us have a vested interest in the success of our government, particularly with respect to the economy.”

That sentiment is representative of Meera’s grace and fair-mindedness, which is a rarity in today’s politically charged climate. Her passing has stilled a voice that had much to offer by way of constructive commentary on building a vibrant economy. This book is an encapsulation of her intellectual legacy — on one aspect of policy-making — that she leaves for future leaders to draw lessons from.

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