Price of secrecy

In prioritising confidentiality, the Centre seems to have skipped some essential steps that could have smoothened the currency transition

His supporters have termed it a ‘surgical strike’. But six days into the Modi government’s game-changing move to demonetise high-value currency notes, even its backers have begun to question if the move was really planned with military precision. Reports of bank staff being besieged by irate customers, retail stores being raided, and agricultural mandis at a standstill — amid persisting shortage of low-denomination notes and large numbers of non-operational ATMs — suggest that the hardships for law-abiding citizens are nowhere near an end. That withdrawing and replacing 86 per cent of all the paper currency circulating in the Indian economy in short order would prove a logistical challenge, goes without saying. But the question is whether, in making confidentiality their top priority, Modi and his advisors failed to think through the numerous execution challenges that this mega move entailed.

For instance, three specific measures taken before the announcement could have greatly alleviated problems for ordinary citizens. One, it would certainly have helped if the RBI had printed and despatched the new notes of ₹500 denomination ahead of the ₹2,000 to banks’ currency chests. This, combined with printing an additional buffer stock of ₹100-denomination notes could have helped many small businesses, tradespeople and daily wage-earners manage this transition with just a single bank visit. Now, with most banks dispensing only ₹2,000 notes until yesterday, they’ve have been forced to run from pillar to post to change this into 100s. Two, if the scramble at some bank branches seems to be winding down, that for working ATMs shows no signs of abating. By the finance minister’s own admission, this is due to the new note’s dimensions being different. All two lakh ATMs now require manual recalibration. Even if initiating this recalibration ahead would have given the game away, the new notes could have been designed to the same dimensions as the old ones to avoid this logistical nightmare. Three, a better communication strategy was needed to reassure the public after announcing a policy move of such import. In addition to the Prime Minister’s televised address and the ministry’s press conference, the RBI or the ministry could have circulated detailed FAQs on the transition and its intent, in regional languages, via district administrations. This may have gone a long way in warding off rumours and panic in this unprecedented situation.

Yes, it is certainly good to see the finance ministry acting now and establishing a war room to oversee implementation. The decisions announced on Monday — to despatch ₹500 notes, deploy more banking correspondents, revise the daily limits for exchange and withdrawal from banks — are all steps in the right direction. But overall, better planning before the announcement may have reduced the collateral damage — both to the aam aadmi and the Modi government’s own political capital — from this surgical strike.

Published on November 14, 2016
This article is closed for comments.
Please Email the Editor