Where is the promised windfall from demonetisation?

The Economic Survey 2016/17 was striking not only for its literary references, but also for its circumspect nature. One of major the drivers of this circumspection (which is not a trait one associates with the Narendra Modi government) was the yet-to-be-ascertained impact of demonetisation. The Economic Survey was cautious in saying that it would take long for us to accurately calculate the gains and losses from demonetisation, but ventured to claim that it would result in at most, a 0.5 percentage point fall in the GDP growth rate.

Of all the benefits of demonetisation that the government has been at great pains to sell, the simplest one is a spike in direct tax collections in the form of both taxes and penalties (on black money declared). The second, is an assurance that banks that are now flush with deposits will significantly lower lending rates to spur consumption. Both these do find mention in the Finance Minister’s budget speech, along with a host of benefits that have repeatedly been promised to us — a war on black money, corruption, counterfeit currency and terror funding.

But the government failed to make good these promises in its own budget, and at the moment, we are forced to conclude that the promised gains from demonetisation have just not materialised. Total Tax Revenue of the government in 2016–17 increased by 17% over the previous year. Next year, the government anticipates a 12% increase. Similarly, income tax receipts in 2016–17 went up by 23% over the previous year, and is budgeted to increase by a further 25% next year.

Chief Economic Advisor the Government of India, Arvind Subramanian in an interview yesterday named service tax receipts as one of the four measures of the impact of demonetisation. He did also admit that because of the impending Goods and Services Tax regime, it would be hard to isolate the impact of demonetisation. Here too, the numbers suggest that the Finance Minister is not expecting a great deal of change. Service tax receipts, after having increased by 17% this year, are expected to go up by only 11% next year.

In none of these collections, or projections, can one see a tangible increase in tax receipts as a result of demonetisation. An important caveat is that for the current year, the figures are based on the government’s Revised Estimates, which may well change by the time the Actual figures are recorded once data from the last two months are accounted for. But the surge that one expected from demonetisation is missing — especially when you consider that the difference in Total Tax Revenue between the Revised Estimates and the Budget Estimates for 2016–17 is only 4%. It does appear that on the revenue side, the government was lucky to receive an unexpected additional Rs. 23,167 crores of non-tax revenue in the form of dividends public sector enterprises.

It is not surprising then, that the Finance Minister has little to no room to give away post-demonetisation bonanzas. Neither are there any significant increase in allocations to welfare schemes, nor are there any big bang announcements that would help the government actually implement some of its high-decibel rhetoric. For instance, the allocation for Smart Cities of Rs. 9,000 crore is actually lower than the Revised Estimates of this year at Rs. 9,559 crore. The record allocation of Rs. 48,000 crores for MGNREGS is impressive only until you realise that the estimated expenditure this year is Rs. 47,499 crore. To take another example, the Start-up India Aspiration Fund, after having used Rs. 100 crore out of its allocation of Rs. 600 crore this year has disappeared from next year’s budget.

In many ways, today’s union budget was Finance Minister Arun Jaitley’s moment of truth. With a budget speech that had to shun rhetoric, Jaitley was forced to admit — in deeds, if not just through words — that several glamorous schemes announced by the government have struggled to match up to their rhetoric. In a way, Finance Minister Arun Jaitley may have presented his most honest budget so far. As they say, numbers don’t lie.

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This column first appeared on Catch News

India’s threats to Amazon serve to only expose our own insecurities

India’s External Affairs Minister (EAM), Sushma Swaraj recently broke new ground. Amazon Canada was selling a doormat that was designed to look like India’s national flag. As soon as a Twitter user pointed this out to her, Sushma Swaraj responded with three tweets.

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Screenshot from Twitter account: @SushmaSwaraj

With these three tweets, India’s EAM lived up to her reputation of being extremely pro-active on Twitter, responding to people online in real-time. Her critics have often pointed out how the Swaraj has been reduced to resolving personal queries and visa/passport issues. But what is not clear is if this was the Minister herself, or one of her staff members who handled regular affairs on Twitter, that had lost his/her cool. If it was indeed. Ms. Swaraj (and not someone’s newphew), it is reminiscent of her “Ek ke badle dus sar” avatar, when speaking on Pakistan’s killing Indian soldiers on the border. I wonder what prompts these unexplained bouts of violent rhetoric.

But the broader issue is that of political remit. Prime Minister Narendra Modi’s vice like grip of foreign affairs – with the aid of the tall talking Ajit Doval – is there for all to see. Given that, the EAM has been reduced to running an online grievance and counseling cell. In any form of government, with a self-respecting minister, this is an unsustainable arrangement.

The other issue of course is that of the appropriate level of response to incidents such as this. Amazon is a marketplace and not a seller. At best, one can request, citing Indian laws, that they take down the offensive materials from their website. But that is hardly the main issue here.

Of utmost importance is the question of what this means for our global reputation and dignity. We have seen on several issues that successive Indian governments are extremely thin-skinned and resort to indignant outrage at perceived insults to the nation. India is a young country and perhaps, issues such as respecting national symbols are still very potent politically. But we have traditionally demonstrated a maturity beyond our years at the global stage, and that has been our calling card for a large part of India’s independent existence. This kind of boorishness therefore behoves neither the country, nor its people and if anything, only runs contrary to the image of an emerging power that we seek to project.

Several of the BJP’s perennially insecure supporters were joyful that Amazon had been told off. Any criticism of this was met with “you are used to 1200 years of slavery” kinds of nonsense. Our national pride, which should be vested in what our people achieve, is instead threatened by the unsuspecting actions of some who inadvertently misuse our national symbols. This is not how India will own the twenty first century.

What affects our national pride are other important issues: of how free and fair our society is; whether our justice system helps the poor; whether there is space for dissent; of how we treat the weak and vulnerable in our societies; of the political culture that our leaders seek to propagate; etc. If we strengthen these vitals, our external image wil improve automatically. And if we don’t, no amount of showmanship can help us.

Notebandi & its woes: Why we must protest the narrative of ‘normalisation’

A slightly different version of this column appeared first on Catch News on 13/1/17

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It is now well over fifty days after Prime Minister Narendra Modi announced that 500 and 1000 rupee notes were no longer legal tender – a policy popularly known as ‘demonetisation’. In the new year, economists, bankers and accountants are busy tallying currency and estimating the impact of this policy on key indices. Alongside, the government’s official and unofficial propaganda machineries are hard at work, spinning out narratives of how things have returned to normal.

Herein lies the risk: people’s daily lives may well have returned to ‘normal’. But do not for a moment, mistake that to mean that the demonetisation was an acceptable policy. It absolutely was not. This ‘normalisation’ narrative is problematic. It is that which asks us to get over a trauma without questioning it, and carry on with life. But collectively as citizens, and on a matter of public policy gone wrong, it is ridiculous to not question, and not demand that those responsible be held accountable.

Demonetisation has been one such policy. Post the fifty days that the government asked of us, we are still trying to estimate the cost that the economy would have to bear. While the government can announce Gross Domestic Product estimates (7.1% for 2016-17) on the basis of the first seven months of the fiscal year, the consequences of an economic downturn will be severe. We already know the costs have disproportionately fallen on the poor – those who do not have the means to go cashless – as opposed to, say, the middle class. Reports of workers losing jobs, and a spike in demand for MNREGA work is evidence enough that the hardships are real, and will not go away anytime soon. As this report on the website Scroll indicates, the impact may not be known accurately for a year or so.

Amidst all of this, the government and economists who favour them have not deemed it necessary to explain how they are factoring in these costs when they analyse the impact of demonetisation. How is their analysis comparing the benefits (if any) of demonetisation with the human, financial and institutional costs that have been incurred?

A narrative that seeks to establish that all is normal is essentially designed to paper over the pain, and to subvert critical questions on who should be held accountable. Also, that all is normal now will also be sought to be presented as evidence that demonetisation was, in fact, good policy. The narrative will also suggest that there are no negative consequences to the erosion of institutional autonomy of the regulator, Reserve Bank of India.

This is the reason one feels that demonetisation was just an experiment to test the tensile strength of the Indian citizen. These tests started with the invasion of impropriety and excesses on campuses, communal incitement, harassment of artists, academics and thinkers, etc., and have now emboldened the government enough to be extended to the entire populace. A normalisation narrative is a strategy to wilfully erode any sense of public accountability, and to hoist upon the people, the concept of a saviour to counter all (real and imaginary) ills of society.

It is this kind of normalisation that also holds the threat of politically expedient escalation by not just lowering the level of scrutiny at present, but also for the future. For example, if domestic politics so demands, a cross-border skirmish may not be out of the question. The same dose of patriotism will be fed to people and exhortations will be made to bear the pain while we embark on a project to uphold the nation’s dignity.

We must, therefore, resist this narrative of normalisation. Ask why our government thinks they can restrict how much cash we can keep, and how we can spend. Even if one agrees that we should move towards a higher proportion of cashless transactions, demand to know why the government thinks it is okay to coerce us to do so. Contest the smugness at the highest levels of the government that assumes that issuing daily notifications – where one contradicts a previously issued one – should be acceptable. Because, if you do not protest, you will be smothered.

In the seventieth year of independent India, we have been reduced from talking about progress, to deliberating how we can protect our right to ask questions, which is at the core of our democracy. More people have access to greater information these days, but this is information powered by propaganda, and shaped into easy-to-digest narratives. These narratives, in turn, leave us with no space to step back and ask questions that matter. We must reclaim that space.

Non-authoritarian states can practise ‘everyday authoritarianism’ too

Cornell University’s Tom Pepinsky has a terrific post on how everyday authoritarianism can be boring and even tolerable. He uses the example of Malaysia and draws lessons for the US. Pepinsky concludes with this:

“The fantasy of authoritarianism distracts Americans from the mundane ways in which the mechanisms of political competition and checks and balances can erode. Democracy has not survived because the alternatives are acutely horrible, and if it ends, it will not end in a bang. It is more likely that democracy ends, with a whimper, when the case for supporting it—the case, that is, for everyday democracy—is no longer compelling.”

The point he makes is that while people see ‘authoritarianism’ in apocalyptic terms, it is often the small changes in day-to-day governance that we need to really watch out for. When we are not cognisant of these small changes, the risk of complacency is high, where we take certain rights and privileges for granted. Pepinsky fears that when people don’t muster the will to fight the creeping expansion of authority, democracy itself will die.

This is a compelling argument and one that is borne out by several experiences in authoritarian states. Many of these states, much like Malaysia, look very much like a democracy from the outside. Sub-Saharan African states such as Uganda and Ethiopia arguably fall under this category too. These are states where power has remained concentrated in the same political formation (or in the worst cases, the same individual) for extended periods of time.

Let’s now ask if there can be instances of authoritarianism in states where there is a track record of power changing hands. Given competition between opposing political parties, one might imagine that this is unlikely. However, consider states where the balance of power is so fine that competing political parties often function in accordance with a high-level consensus regarding how to operate the levers of power. This implies that acts of everyday authoritarianism become part of the routine exercise of power by a state.

India is a great example. Several acts of commission for which we blame the current ruling party, BJP, are in fact embedded in the very nature of the state that the party currently commands. And who is responsible for setting the template for a lot of these issues? The Indian National Congress, of course. No doubt, one’s political convictions and moral judgments result in them pointing fingers in the direction of a particular political party for excesses committed by the state. But as the Centre for Civil Society’s Repeal 100 Laws Project also reveals, a state that has, over time, embraced powers that enable it to commit these excesses is inherently dangerous. In this scenario, holding one political party responsible will not solve the problem.

Everyday authoritarianism 

This is why I hold that an authoritarian state and regular elections where power changes hands are not necessarily mutually exclusive. I agree India cannot be classified as an authoritarian state, but a non-authoritarian state can practise everyday acts of authoritarianism.

Here are some examples: the abuse of law to curb free speech, wielding regulations to harass NGOs, seizing private property, curbing free access to the internet, restrictions on what we can eat or drink and how we have sex – all of these are tried and tested tools in the hands of every government. These are treated as routine. We get used to the state’s ways and adopt a variety of coping mechanisms. At the same time, we also function under the assumption that the state will not take any notice of individuals, and more often than not, this is indeed the case.

Now take some other examples – ones of the ‘outrageous’ kind. Consider the experience of the weak and marginalised sections of society. In states like Chattisgarh and Odisha, the scheduled tribes experience an authoritarian state that comes down on them with its full might. The erosion of the Forest Rights Act and the state’s encroachment of the tribes’ lands too, are examples of a state’s authoritarian powers being exercised. The northeastern states and Jammu and Kashmir, where the Armed Forces Special Powers Act rules and where paramilitary forces have a free reign, who would agree among the natives there, that the Indian state is not an authoritarian one? These incidents too, are ‘boring and tolerable’, but only for those of us who do not have to personally witness or suffer the state’s excesses.

Creeping authoritarianism is a curse. The first step to resisting is to identify its signs. When the argument over an authoritarian state gets entangled in a political debate, this resistance fragments. What we need urgently is a broad consensus to reform the state’s authoritarian tendencies. The future of our democracy depends on it.

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This column was first published by The Wire

When I stopped being a Dhoni fan

Update 6 January 2017:

By now, the Supreme Court has basically dismantled BCCI and it remains to be seen how things play out. Srinivasan is no longer in the news; no one even seems to have asked him for his views on the latest development. BJP princelings Arun Jaitley and Anurag Thakur wielded extraordinary powers up until the court order.

And then, Dhoni stepped down from captaincy, something I wish he had done two years back. He is yet to retire, which too, I think is at least a year too late. In the last four years, Dhoni was a compromised man – either in an attempt to secure his own future, or in trying to payback to those he owed.

Read on…

Update 21 October 2015:

N. Srinivasan was shown the door, and two IPL teams, Chennai Super Kings and Rajasthan Royals were suspended. Dhoni is still around, fighting loss of personal form. It is now clear that he had lied to the Mudgal Committee, but we have seen no consequence, nor any sign of contrition from the man himself. The least he can do is to retire from the IPL. Srinivasan himself continues as ICC Chairman, representing the Indian board on the global stage.

After Jagmohan Dalmiya’s short tenure, Shashank Manohar has taken over as the BCCI President. He has put out a three-page document with proposals on how to get rid of conflict of interest in Indian cricket, which contains:

The proposed rules state that coaches and national selectors will “not be associated with a player management company or a player agent, either honorary or paid,” and “cricketers on the managing committee of an affiliated unit of BCCI shall not be considered for appointment as a national selector.” It also stated that cricketers appointed as national coaches or selectors cannot run “private academies during their tenure”.

This should force Dhoni to exit Rhiti; and interrogate Shastri and Kohli on the nature of their relationship outside cricket, for a start. Sharda Ugra lists a few other cases that should come under the scanner immediately.

Meanwhile, Pepsi exited the IPL and Vivo stepped in as the title sponsor.

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Update: 27 March 2014: The Supreme Court has suggested that N Srinivasan step down. Dhoni’s name was dragged in court and damning things said about him. Comes back to what I have said before – these top cricketers dont have to fight corruption in construction of stadiums or BCCI elections. But it is their responsibility to ensure that on the field, the game is played with integrity. Also, we should be able to expect them not to be part of a cover-up.

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Update: 11 February 2014: Three action points:

  1. N. Srinivasan needs to be sacked from the BCCI without any delay.
  2. Dhoni should be sacked as the captain of the Indian cricket team
  3. India Cements and its associates should be banned from the IPL
  4. Chennai Super Kings should be banned from the IPL; fresh auctions should be ordered for a Chennai-based franchise

This is the least we can do for a start

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May 26, 2013: I admire sportstars, I admire those who play hardball, but reserve respect for those who I think rise above merely winning and losing, and show admirable character in life off the field.

It is therefore that I am disappointed that none of our top cricketers have spoken or reacted to the recent spate of allegations that have shrouded Indian cricket. Yes, the IPL is not an official ICC tournament – but no one can deny that the IPL is India’s show-piece cricketing event on the global stage. It is the one stage where we invite skilled cricketers and ancillary professionals from all over the cricketing world (except Pakistan of course…and oh, also Sri Lankans who are not allowed in Chennai) to participate in a two-month extravaganza.

I expect(ed) no better from N Srinivasan and his cronies in the BCCI. But we expect slightly better from former cricketers irrespective of whether they are on the BCCI payroll in one way or not. And I expect much better from our current superstars – figures like Dhoni and Sachin, who are playing in the IPL 6 final, that is going on as I type this. Yes, these cricketers are contracted by the BCCI. Yes, they may have nothing to do with bookies and may have no idea that anyone in their teams are indulging in any betting or fixing. But having seen their sport tarnished thus, having seen from close quarters, their team management and fellow players bring their sport to disrepute – I expected a reaction. Is this futile idealism? Time will possibly show that it was just that.

But allow me to persist. Sachin and Dhoni represent Indian cricket. Irrespective of whether it is the IPL, ICC competitions or domestic cricket, we expect them to be our conscience-keepers in matters concerning the game, both on and off the field. The moment a CSK official was indicted in this mess, Dhoni should have taken the honourable choice – that of withdrawing his team (or at least himself) from further participation in the IPL, pending enquiry. If Dhoni had taken a public stand to this effect, who is to say that he wouldn’t have the support of the public at large and of powerful stakeholders such as politicians and media?

The moment CSK was found indicted in this mess and was seen to be unwilling to yield to what was their moral responsibility, Sachin should have communicated to his team bosses and to the nation at large, that he would not be willing to participate in a final clash with CSK. Once again, imagine the kind of support he would have drawn and the pressure that would be put on BCCI to put its house in order?

So, I say the fact that our top stars refuse to take a stand on such an issue is a matter of deep shame. Sure, they could be working behind the scenes, in their dressing rooms, ensuring that this rot doesn’t affect their teammates. Sure, they have contracts that gag them. But there is a time and place for honouring contracts – and this is not it. Imagine we had no whistle-blowers anywhere – how would any significant corruption case be uncovered? I do not expect them to have any views on poverty or rape – but cricket is their arena. They own cricket as much as cricket owns them; they own their fans as much as their fans own them.

It doesn’t matter as much if in future, we dismiss all cricket matches as scripted; neither does it matter as much if cricket administrators continue to be corrupt – but if our sporting heroes are shown to be subservient followers unable to take a stand on an issue that affects the game and its passion that they all swear by, it is deeply disappointing. In Indian cricket today, no two players matter more than Sachin and Dhoni. It is sad that they don’t seem to realise their own power and  choose not to use their influence to contribute towards cleansing this game. This is the question of ‘moral responsibility’ – of them shirking the responsibility they have towards the millions that have placed them on a pedestal – that should leave them ashamed of themselves.

In 2016, Narendra Modi expanded the remit of the coercive state

Towards the end of 2015, reflecting on what determines the size of the state, I came up with these three broad categories. At the end of 2016, with a hindsight view of ‘demonetisation gone wrong’, I revisit that concept. These three categories describe the nature of engagement the state seeks with particular areas of policy. They are:

  • Coercive: These comprise areas where the state has the power to mandate and enforce compliance. Security, and law and order are obvious examples; as are taxation, and some kinds of regulatory power, such as determining food safety standards would fall under this category.
  • Prescriptive: There are areas where the state has the power to prescribe remedies. It sets standards and is at times able to employ some of its regulatory powers to enforce compliance. Mostly though, the role of the state here is to encourage the adoption of state-promoted guidelines. Managing education, by prescribing school standards and determining the curriculum, would be a suitable example.
  • Advisory: In this category, are areas where the state’s power to influence real outcomes is limited and the role of the state is mostly ‘advisory’ in nature, with little real power of enforcement. An easy example would be the efforts to inspire hygiene and cleanliness through a nation-wide mission to achieve sanitation. Innovation and flexibility are vital for a successful intervention.

A citizen-friendly state would keep its coercive powers to the bare minimum and expand the last category – the advisory function – through cultivating and strengthening norms that guide individual and public behavior. On the other hand, a state with authoritarian tendencies would be seen to be moving in the reverse direction by steadily expanding the scope of its coercive precepts.

On the 8th of November 2016, when the Government of India embarked on its demonetization exercise, it effectively expanded the realm of its ‘coercive’ powers. In its endeavor to seize currency notes from the hands of citizens and force them to deposit that money in the banks, India demonstrated a willingness to reach into a citizen’s private space and dictate what one could do with their money. By further restricting (indefinitely, it appears at the moment) the amount of money that one can withdraw, the state further compromised basic rights that were hitherto, guaranteed.

This is in line with Prime Minister Narendra Modi’s favoured development model. As a nation, we have been taught to want progress, modernity and comforts, but within the framework of a statist model, as opposed to that of a liberal democracy. In other words, we want to be a China, and not a Denmark. The government is continuously seeking ways to preserve and expand their power over the lives of people. That is the reason why an increasingly coercive state is their delivery mechanism of choice.

The latest spin in the demonetization narrative is the goal of going cashless – again, using essentially coercive power by inhibiting the size and nature of transactions one can carry out in costs, or by imposing costs to penalize cash transactions. This too, is one that would best fit within the state’s ‘advisory’ remit, but instead, has now moved into the ‘coercive’ category. The mode of payment one chooses for a transaction should be a matter of personal choice. We cannot claim to be a modern society if we are literally coercing people to adopt cashless methods. Technological advances are great, and they matter. But they are no substitute for state capability and intent, which must seek to deploy that technology to expand the choices available to people, not to constrain them.

Narendra Modi’s government has demonstrated its statist streak all along – from increasing the extent to which they meddled in universities and higher education and research institutes of repute, to launching government schemes to encourage start-ups. And with this final blow of seizing currency notes en masse, Modi has outdone himself.

A coercive state also fits a model of chauvinistic nationalism that the RSS seeks to promote. Attributes such as discipline (defined as not questioning the state) are essential building blocks of this project. No surprise then that in his New Year’s Eve speech, Modi repeatedly invoked the apparent sacrifice of citizens in complying with the rules and standing in queues during this demonetization drive. The attempt all along, is to turn the perceived inconvenience of citizens into a contribution towards a greater common cause.

2016 was thus the year when Narendra Modi’s statist tendencies were thoroughly exposed as he expanded the coercive nature of the state he controlled. In this narrative, critics are turned into caricatures who are against the nation’s progress. Patriotism too has become something that has to be coerced out of citizens. In the new year, this demands of us – citizens – to be ever so more vigilant, and willing to fight to preserve our rights. Our ability to resist the creeping expansion of the coercive state will determine the health of our democracy in 2017.

How is the government estimating India’s paper currency requirement?

As the government goes about printing new currency notes to replace the invalidated 500/1000 rupee notes, one wonders how this is being done. On one hand, the Reserve Bank of India (RBI) claims that there is “enough” currency in the system. On the other hand, government spokespersons claim that not all currency notes would be replenished because they expect people to adopt cashless payment modes. Several other commentators have pointed out that if the value of all currency notes withdrawn from the economy are to be replenished, it would take a minimum of six months given the capacity of the currency printing presses.

All of the above cannot be true at the same time. The starting point for any discussion on the time required to replenish currency notes has to be an estimate of how much of the Rs.15 lakh crore is going to be put back in the economy in cash. A few different theories are floating around. Many of these theories are in fact just arguments crafted to help see the government through another day (or evening of prime time news), and not the result of any robust research. Most figures put out by the government have crumbled when exposed to sunlight. The magnanimous estimates of the proportion of currency notes being held illegally (unaccounted cash savings) have proven to be false, with the mountain the deposits landing up with the banking system in the last forty-odd days. The estimates of counterfeit currency too, seem to have fallen by the wayside. The latest I heard was that the Ministry of Finance suspected the RBI’s ‘bank deposits since 8th November’ to be wrong. Well then…

One prominent theory seems to be that the government can just print lesser cash since a lot of cash was held in mattresses and not really required in the economy, right? This is theoretically plausible, but only in a world where there is reasonably accurate information on what that proportion of cash is. As with much else related to demonetisation, it is quite apparent that the RBI and the government have no clue if the idle savings in cash is 5% or 35%.

First of all though, it is inaccurate to term these savings ‘idle’, since for those who store away cash, these deposits serve very specific purposes. For instance, the oft-quoted case of the wife who keeps deposits away from the prying eyes of an alcoholic husband, or vice versa. People who like to feel secure (like my parents do) about having some cash kept away for times of need, or when there is a sudden urge to splurge on something the monthly budget doesn’t allow for. There are probably a whole host of social and cultural reasons behind why money was saved in this manner – but quite obviously in India, that is the norm. Yes, these monies are less productive than they would be in bank accounts, but that transition cannot be rushed through, let alone be forced on people.

Before we destroy that stock of money by eroding confidence in the currency as a whole, did anyone look into what impact it would have on the ‘confidence’ of, say, a poor woman who is used to saving money for a rainy day? What would it mean to know that her emergency stockpile no longer exists? What about health emergencies, which can be devastating for those who have no means to access insurance or bank deposits? In the absence of any specific intelligence on how much cash would be enough to restore the economy to its earlier normal state, the government will obviously do what it is doing now – which is to release money as they print it and watch for cues on the ground.

The other factor is the pattern of distribution of this household saving, and the manner in which that might change, say, next year. Consider this thought experiment, where a million families have hoarded about 50% of their monies in mattresses and never used them. Another million families have no such reserves. If in this country of two million families, the government decides to reduce the supply of currency notes by say 20%, it will not impact the former group, but will have harsh negative consequences on the latter group.

Another frequently mentioned theory, currently finding favour with assorted government spokespersons, is that as more people go cashless, the need for paper currency will go down and so the government just will not have to print as many currency notes as before. But by how much? I am not sure anyone has a clue. Those who are using cashless transaction options out of compulsion now may revert back to using cash.

In the midst of all this, the RBI has other urgent priorities too that cannot be ignored. When the Prime Minister decides to go speak at a public meeting some place, the RBI would have no factor that into their plans to ensure there is adequate supply of cash there. Just so there aren’t any unexpected protests which might result in the speaker having to cancel or alternately, address people through a mobile phone, perched away somewhere in safety. As the RBI does all of this, and goes about the unfinished task of reconfiguring ATMs and importing paper to print currency notes, they are fervently hoping they wouldn’t have to replenish currency notes to the same extent as before. I am not sure we can run on hope alone.