By imposing fresh restrictions on deposits of demonetised ₹500 and ₹1,000 notes, just nine days before the option to deposit such notes comes to a close, the Reserve Bank of India has broken the Prime Minister’s promise to the people — besides reinforcing the belief that it is not in control of the situation. In his address to the nation on November 8, Narendra Modi had said: “Persons holding old notes of 500 or 1,000 rupees can deposit these notes in their bank or post office accounts from November 10 till close of banking hours on December 30, 2016, without any limit. Thus you will have 50 days to deposit your notes and there is no need for panic. ” The latest move — part of a series of whimsical administrative fiats and flip-flops (about 60 in all!) that have sought to restrict withdrawals and deposits — is particularly regrettable because it undermines the Prime Minister’s word. The nation has stoically backed Modi’s move because it believes that demonetisation will finally deliver positive social and economic outcomes. People have sacrificed individual freedoms in good faith, accepting legally questionable restrictions on use of their own money. The Prime Minister has repeatedly thanked them for their forbearance, while cajoling them to put up with just a few more days of hardship. The latest RBI directive makes a mockery of this pact of trust. Now, every other depositor may end up being viewed as a black money hoarder. Worse, by not defining what a “satisfactory explanation” — now required if one wishes to deposit more than ₹5,000 — is, the latest fiat opens up scope for misuse of power, while the spectre of ‘tax terrorism’ has once again reared its head.
The Centre seems to have been thrown off guard by the magnitude of demonetised currency that has returned to the system. This is inching closer to the ₹14.5-lakh crore mark, or the value of the currency removed from circulation, as the December 30 deadline draws near, implying that the black money extinguished may actually be quite insignificant. There has been no logical explanation for this, nor for the large volumes of new currency being seized by police in various places. The latest directive seems to be yet another attempt to check this laundering, but apart from punishing the aam aadmi , it is a case of closing the stable door after the horses have bolted.
A government that promised ‘minimum government, maximum governance’ is veering towards the opposite. We seem to be sliding back into the Indira Gandhi years of bureaucratic overreach, annulling 25 years of reforms. The Modi government must get back to its initial agenda of promoting India as an investor-friendly destination by making government procedures simple and transparent. Transparency in governance and reforms of specific sectors will check the future creation of black money. Only then will the people’s faith in the demonetisation exercise be vindicated.