We have been hearing this a lot since Nov 8. The entire process of “demonetization” was done without proper planning and could have been better executed. This has been the relentless drumbeat of the media, political parties and certain intellectuals over the last three weeks. Suffice to say that a significant fraction (more than just a fraction I’d say) are using this as an excuse to hide their *real pain*.
But then, it would be equally dishonest to insist that every single person who has complained about “poor execution” must have some axe to grind. So, today for argument’s sake, I would like to consider the question:
“Could demonetization have been better planned?”
Well, to start with, we have to realize that this is one of those blank questions with a blank answer. Roughly along the lines of questions such as “Could you have achieved a better life?”. Most people would like to think that the answer is “yes”. Could we all be nicer kinder people? I guess. Could the weather have been better today? I guess so too.
If you pick up almost anything in the world and ask whether it could be made better, the answer would typically be yes. In fact, that’s what humanity has been trying to achieve for thousands of years : making things better and better.
Could we invent faster, better and safer modes of travel?
I am pretty sure the answer is yes. But my “yes” is totally useless unless I have a real idea to offer you about how to find a faster, better and safer mode of travel.
It is in this light that I want to examine today the question that we hear people asking so often today: could demonetization have been better planned?
In response, I have to ask : define “Better”. What are your benchmarks?
Well, first of all, let us look at the size of the operation. India’s demonetization exercise is likely to be the largest fiscal operation in the history of humanity. In fact, the exercise is so big that no fiscal operation in history can even come close. Simply put, no benchmarks exist for something like this. There is no road map. Every single thing has to be done ad-hoc.
The demonetization exercise will require almost every single one of India’s 900 million adults to participate, possibly multiple times. Has anything ever been planned in history that has involved ordering around 900 million people? It is easy to point fingers at “mistakes” and “problems”. I would like to know how 900 million people can be made to go through something flawlessly.
And now let us take a look at the crew that Modi had at his disposal to plan this operation. Including Modi, the Finance Minister, the RBI governor and some top bureaucrats, the total number of people who were available to plan this operation before Nov 8 was around 10 people. Let’s see : you have 10 people to figure out the world’s largest operation involving 900 million…
The best example came from Modi himself. India’s General Elections are the only operation that can even come close in scale to demonetization. The Election Commission of India has decades of experience in planning and conducting elections. It can enlist staff and security personnel by the thousands…even hundreds of thousands to get its work done. All so that around 70% of adults will have to stand in one line for one day. There is no burden of secrecy. And yet, look at the holes.
That’s what happens when an exercise involves hundreds of millions of people. If you can’t vote, you would pissed off. But there are no immediate adverse consequences. On the other hand, everyone needs money. Otherwise, there could be disastrous consequences almost immediately. Frankly, I am surprised there haven’t been riots. Forget riots, I don’t think there has been so much as a major protest. And it seems to me that remarks from certain highly respected institutions can be interpreted essentially as frustration against the fact that there haven’t been any riots. I will not name these respected institutions because they are legally immune to criticism.
Simply put, the cash distribution system is currently handling a workload about 100 times what it was built for. And let’s keep in mind that you can’t just add people to the cash distribution system : everyone enlisted for this work needs to pass a rigorous background check.
As for the daily changes in policy being held up as proof of “poor planning”… well that’s what happens when you are doing something from scratch for the first time. And you have no roadmap whatsoever. You adapt and respond to situations as they arise. Because India is not following a well traveled path here. In fact, we are pioneering something. When you step out into the unknown, that’s what happens.
So, all those who want “better execution”, I would like you to offer even one concrete suggestion if you can. The columns of newspapers and internet portals have been filled with “experts” blankly asking for “better execution”. But I am yet to see even one person who made an actual suggestion. If we assume that there could have been “better planning”, one has to assume that such experts today are either unwilling or incompetent. Which one is it?
dynastycrooks 
This decision by Modi is equally great IMO http://economictimes.indiatimes.com/news/economy/policy/modi-to-amazonize-400-billion-in-state-bids-across-india/articleshow/55716822.cms
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Idea is great…but there has to be uninterrupted fast INTERNET!….wonder if the GOI is doing any thing in this direction?…with the present minister ….??
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I saw this and tweeted about it. It is a humongous step to weed out low and mid level corruption in public procurement systems. Let’s face it – every country in the world (including the darling of our media, the US) has high level corruption. People in positions of power will always lust for money and to be bigger than what they are – greed is human. Where India really suffers is in what I call the “street-level” corruption and our babus and governmental systems are the biggest culprits here. This will go a long way toward creating an open and transparent system with a digital trail.
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Modi’s Governance style is based on these pillars:1)save as much as you can(reducing imports in many areas),2)use technology to eliminate middlemen and corruption(DBT,now cashless push),3)unpredictability(surgical strikes and the nov 8 declaration) and 4)take bold decisions even though they might involve a lot of risk for the greater good.
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Hi Enigma….Excellent points!…regarding ‘Modi’s Governance style’!
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Good post!…..yes you are 100% right there is no question of better planning ….the element of surprise,which is the main thing vanishes! Especially as you rightly pointed out considering the mammoth proportion involved!
‘I will not name these respected institutions because they are legally immune to criticism’……lol lol lol… ‘these respected institutions’ must be the hardest hit,since they must be hording huge stash of money!!!
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Good information!
Dear Friends,
This is the time where Indians are shifting from cash transaction to electronic transaction. Whenever we use a debit card or credit card, do you know that there is a transaction fee associated with it? In most cases you may not be charged but the merchant will be charged. Let us understand what this is for. First of all, no banks or any entities provide any sought of financial networks. It’s all provided by international companies namely VISA, MasterCard, American Express etc. For example, when you get an ATM card with VISA label on that from the issuing bank, the bank provides you the facility to use the visa network. For that the bank has to pay a nominal fee to VISA for every transaction. The bank will get this back from the merchant. So each transaction makes these foreign companies rich.
Now let us see about the RuPay technology introduced by NPCI (National Payment Corporation of India) under the guidelines of RBI (Reserve Bank of India). RuPay is a similar network as VISA, MasterCard etc. This is managed by Reserve Bank of India. All most all public sector and private banks have started to give RuPay based cards to their customers. RuPay cards got a major boost through the Pradhan Mantri Jan Dhan Yojana as RuPay cards were issued to all Jan Dhan accounts.
The advantages are lot. The main advantage is the transaction charges. Charges are very minimal. While Visa / MasterCard / Amex cards creates a transaction fee of about 1.9% of the total amount, RuPay will charge only 0.01%. Secondly, these charges in turn go to the Reserve Bank Itself. Third and the most important – All the transactional data lies in the Indian Servers. The good news is that NPCI is trying to make it international, which means foreign banks will start using RuPay cards. You can get more information about RuPay from https://en.wikipedia.org/wiki/RuPay
Next time when you apply or renew a card, opt for RuPay card. Let’s make India better.
Please forward this information to all your friends.
#BetterBharat
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Mmsrinivasji, excellent informtion. Honest Indian entrepreneurs shold take over rom there. Should not be difficult with insurance experience in calculating risk factors.
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Hello,,, Now I can see a lot of articles started circulating about denotification that it will not help India and Modi Plan has been failed as till today almost 9LK money deposited and its expacted to be around 12LK till 30 Dec then almost all cash will return in banks and all money become white and then how govt benifitted on this. already RBI having 4LK as CRR deposit so all Depositted money will be around 16 LK… Earlier it was expacting 4 LK willnot return in the system then govt will be benifitted to this. but now it seems wrong …any suggestion on this guys…Please clear me on this..
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The following actions could have helped ease the challenge of demonitisation
1. The new notes could have been of identical size and thickness as the current notes. i.e new 500 of same size and thickness as current 500 and new 2000 of same size and thickness as that of Rs. 1000. In that case the alteration required in ATMs would have been only in the software which could have been done centrally/far more easily
2. Second suggestion – They could have brought the new notes into circulation and say within a period of 10 days announced the demonitisation.
If both the above steps had been done together the pain could have reduced.
Yes there would have been some leakage wherein people could have started changing the notes to newer 2000 during the period the new notes were in circulation (i.e doing step 2). If the objective was to avoid even this leakage atleast the first step alone would have ensured that the atms are functioning within couple of days of demonitisation. Most of the ATMs are not having cash in Chennai as of date. There are only few ATMs which function and they too get locked out quickly
I am not for a moment questioning the decision which has been made. I fully support the decision and willing to under go the difficulty. This is purely from the perspective of reduced pressure on the system and would have ensured that the opposition would not have had the opportunity of using poor and long queues as the front.
If government was aware that 86% of notes in circulation is in this denomination, they know that it is a huge challenge given the vastness of our country. For the information of readers, Chennai banks started getting Rs. 500 notes only around 26th November. Even now the bank branches are getting only one bundle of Rs. 500 per day which is just Rs. 50,000. As we read one of the nationalised banks i visited yesterday were giving only Rs. 2000 against weekly limit of Rs. 24000 and that too only one Rs. 2000 note
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Very good post. Shows mirror to all critics and intellectuals picking holes in demonetization without offering any alternative to it consistent with the goals of curbing black money, fake currency and terrorism together. Not only this was the biggest financial exercise but the difficulties seen in implementation are also mainly because of new currency accumulation by many of the same lot of black money holders in connivance with some corrupt bank officials and to some extent by the panicked general public. In any case situation is improving by every passing day.
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The most important requirement for planning and implementation of such unique and highly complex scheme like this is adherence to the secrecy. Without the required secrecy, the whole plan would have failed to achieve its goal.
We can see the frustration on the part of opposition. They try and try different thing hoping some thing will catch.
First they tried exaggerating the trouble general public is going through spending hours in bank lines.
Next they said, in the history of world those countries which tried demonetization like Nigeria, ended up ruining their financial health.
Now they are desperately trying to link hacking of Rahul Gandhi’s twitter account with ease of hacking anybody’s Digital Transaction.
They also claim that some 15 lakh Crore Rupees have been deposited since demonetization, but only 4 lakh Crore Rupees in new notes are given to the banks so far. But of this 15 lakh Crore Rupees how many Rupees got deposited which were just stored in the sofa cushion? Were all 15 lakh Crore Rupees in circulation? And this 4 lakh Crore Rupees will grow significantly before the end of December.
They had a great hope that first December (a salary day) will result in an utter chaos, but even that came out to nothing major.
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Demonetisation could have been better. Or may not have been. But that is not the issue.
Not everyone who is critical of the demonetisation move is doing so out of ulterior motives. I feel that many of the people criticising the move are not against the fight on black money itself, but the manner in which it has been done.
One can understand the need for secrecy and the resultant delays in recalibrating the ATMs and reaching the new cash to the banks and ATMs. And the effort put into getting this done as fast as it can be. Most of the people have taken all the associated pains of this move rather stoicly.
Which, incidentally, is a credit to the people, not to those who imposed this on them.
But just look at the shoddy printing of the new notes. None of us would have been allowed the luxury of such shoddiness in our corporate lives. No matter what the urgency or deadline we were all working against.
The writer, Mr Chaiwallah, is talking about demonetisation and how it may not have been possible to handle it better. And he is critical of its critics. “India’s demonetization exercise is likely to be the largest fiscal operation in the history of humanity.” he reasons. As though that was the issue.
The issue is not, and was not, demonetisation, but the fight against black money. The question was not “How do we demonetise such a large currency base without causing collateral damage?” But more correctly, the question should have been, “How do we get rid of the scurge of black money?”
Then the answers, or possible solutions, may have been different. And, perhaps, better. Even if one of the answers was to demonetise all large notes, it could not have been the only answer.
Everyone, more so the Govt, is aware of the people and sectors that are more prone to the generation and use of black money. It would have been more worthwhile, and effective, to attack those people and sectors in a direct manner via a genuine surgical strike. What has now taken place is akin to carpet bombing – there will be some impact on black money, no doubt, but a vast number of innocents are also being hurt and inconvenienced in the bargain.
I was amongst the first to tweet my congratulations on the move to end the problem of black money: “Great news. Fantastic secrecy maintained. Opposition should not nitpick. Problems we all will have to face in the short term. So be it.” Assuming, of course, that no such big, bold move would have been made without adequate preparation.
My view now: Good intention, poorly thought through, badly executed.
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Dear Friends,
With regards to demonetization, secrecy and efficiency are in direct conflict. In order to achieve demonetization with complete secrecy, the government had to forego some efficiency. I think that is acceptable. The good thing is that many people who never used a bank account are doing so now. If we now as a society replace credit cards by RuPay or something like that, then that would be a bonus.
I saw an item on Twitter about a “new” circular regarding the possession of gold. It turned out that the circular was from 1994! I recall that days after the surgical strike the Finance Ministry circulated a (deliberately?) badly worded note about reducing disability pension for soldiers.
By now it is abundantly clear that the Finance Ministry comes out with mischief-mongering, poorly worded, and deliberately poorly worded announcements whenever the public is particularly pleased with the Modi government. This is happening far too often to be a coincidence. My guess is that Jaitley is behind this. But even if he is not deliberately sabotaging the government, it still speaks very poorly of him that he cannot control his babus.
This is why I feel 100% certain that Jaitley knew nothing about demonetization, just as he knew nothing about the first surgical strike (as confirmed Minhaz Merchant).
As for whether things could have been handled better, let us remember that Modi & Co. are using a system of governance invented by the British to frustrate and suffocate the natives, then further improved by Nehru to serve his own interests. The government as it is currently structured is simply not meant to be able to “deliver” anything to society at large. If we take that into account, I feel that the performance of the government has not been bad so far. But going forward NaMo needs to think how to rework the government itself.
In short, I fully agree with the contents of this post. Instead of sitting on the sidelines and allowing others to carp (or worse, carp ourselves like Madhu Kishwar), we need to engage actively with the enemies of the government, for ultimately they are enemies of India.
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I agree with you regarding Madhu Kishwar I have been following her on twitter, she sometimes in order to show her superiority over natives she blabbers a lot with riders.
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I am not convinced on assessment about Madhu Kishwar. She has been quite straight forward and her tweets are thoughts of quite substantial section of population. Just because she tweets against Modi, let us not disregard her. Let us atleast be objective unlike left liberals.
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Dear Venu,
Have you been following her series of tweets on “why are our Army bases so vulnerable?” Earlier when there was an avalanche on the Siachen glacier and seven brave soldiers died, she tweeted out that it was stupid to risk soldiers’ lives when satellites could do just as good a job. So, while her heart is generally in the right place, she definitely suffers from “Rajan-itis,” that is, shooting off her mouth on topics about which she knows nothing. I think she, like Shourie, was expecting some important position because she feels that she rehabilitated NaMo with her book. During the last 2.5 years I have lost a great deal of respect for her.
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“concretest” suggestion was from Begum and RTed by Khujli…..”Ban this draconian move” …..HA HA HA HA
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There is a single test for any move of the government.
If Begum and Khujli are protesting at the top of their voice with Left and Congress lending their support, it means the move is a good move aimed at improving India.
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