The devastating effects of the sudden banning of 500 and 1000 rupee notes, announced by Prime Minister Modi one year back on November 8, 2016, are still being felt by the people of the country, though people were asked to suffer “temporary pain” only in exchange for “long-term gain”. In a country where the majority of people relied heavily on cash, the withdrawal of 86% of the currency in circulation caused havoc in the lives of workers, peasants, small and medium size producers and traders.
More than 15 lakh jobs were lost between January and April 2017 due to the Note Ban, as per a study by the Centre for Monitoring Indian Economy. Bhartiya Mazdoor Sangh, a trade union affiliate of BJP, estimated a much higher loss of four crore jobs and closure of over three lakh industrial units, mainly of small and medium size. Farmers have not been able to overcome the losses suffered by them when they were forced to resort to distress sales after the Note Ban. The GDP growth for the April-June quarter has fallen to the lowest level in the last three years.
Bank workers were among the worst victims of the Note Ban, as they were made to work overtime day after day for months together. In many cases, bank employees worked 14 hours at a stretch and their leaves were cancelled as banks struggled to deal with the unprecedented chaos created by the sudden ban of 500 and 1000 rupee notes. However, they have not been paid overtime salaries even after nearly one year. This has affected nearly 4 lakh bank workers. In addition, they had to face the brunt of public frustration as well as slanderous propaganda that they were responsible for the leakage and black market sales of new rupee notes. Unions of PSU bank workers have threatened to launch a strike if the banks do not clear overtime dues from the time they worked long hours to handle the Note Ban rush.
While the Note ban has led to “prolonged pain” for the majority of people, it has led to both short term and long term gain for a class of people. A prolonged cash crunch has been deliberately created, so as to compel people to shift from cash to digital transactions.
The Reserve Bank of India's (RBI) annual report for 2016-17 revealed that bank notes in circulation have been brought down by over 20 per cent from Rs 16.41 lakh crore a year ago to Rs 13.10 lakh crore. The bank notes in circulation were on the rise in the domestic economy – an increase of 15 per cent in 2015-16 and of 11 per cent in 2014-15.
Subsequently, further measure have been taken to discourage the use of cash. Cash transactions of above Rs 2 lakh have been banned from April 2017. From April 2017, SBI charges a fee for every cash deposit beyond three deposits a month. HDFC Bank permits only four free cash transactions (withdrawals or deposits) per month and charges Rs 150 for every transaction after that.
Indian and foreign monopoly capitalists see an untapped opportunity for huge profits by forcing people to be a part of digital payment systems. For the monopoly capitalists to tap the potential profits from digital payments, at least 50 crore Indians would have to abandon cash as the preferred mode of daily transactions and start using some form of non-cash payment. Persuading the majority of Indian people to change their behaviour would take too long. Hence the monopoly houses decided that the best way to accelerate this process was to deprive people of cash.
The new mantra of the Finance Minister and his associates is ‘cashless economy’ which is an agenda of Indian and international financial institutions for the benefit of the monopoly capitalist billionaires. Cashless economy is presented as a progressive agenda for the benefit of all, while in truth, the principal beneficiaries are the capitalist billionaires.
For this reason, ‘Better Than Cash Alliance’ was launched in September 2012 to provide “strategic advocacy, research and guidance” on digitizing cash payments. It is an alliance of governments, private sector and development organizations, committed to accelerating the shift from cash to electronic payments.
The UN Capital Development Fund serves as the secretariat for the Better Than Cash Alliance, which is funded by the Bill & Melinda Gates Foundation, Citibank, Ford Foundation, MasterCard, Omidyar Network, the United States Agency for International Development (USAID) and Visa Inc. No wonder, the CEO of Europe's the largest bank, Deutsche Bank has predicted that cash won't exist in 10 years.
It is believed that on 14 October 2016, USAID and Modi government entered into a partnership agreement, “Catalyst: Inclusive Cashless Payment Partnership”. USAID will fund this project for 3 years. The members of Catalyst include HDFC Bank, ICICI Bank, the Gates Foundation (Microsoft), Omidyar Network (eBay), the Dell Foundation, Mastercard, Visa, Metlife Foundation, etc. Catalyst is a part of ‘Better Than Cash Alliance’. The World Bank is fully backing the Alliance. A World Bank Press Release approvingly quoted the CEO of Bill and Melinda Gates Foundation:
“Governments have to take the lead and drive digital financial development forward…We need governments to establish the vision, the digital platforms and the regulatory assurance to pull the hundreds of millions of currently excluded people into full participation in the modern economy.”
Bill Gates personally endorsed the Note Ban. India director of Bill and Melinda Gates Foundation is a member of the Board of Directors of RBI which approved the Note Ban on November 8, 2016 at its Board Meeting before it was announced by the Prime Minister.
In a truly cashless society, the State would be able to track where everybody is and what everybody is doing all the time. In order to have access to the cashless system, people would have to comply with whatever requirements the State imposes on them. If all or majority of economic transactions are recorded, it expands the potential base for taxing the public and for levying service fees. Large databases with detailed information on every individual are used for targeted advertising and political propaganda.
Another real aim of the Note Ban was to force people to put all their savings into banks and move from cash to digital payment mechanisms. This is the reason why people were not allowed to exchange banned notes with new notes but were asked to deposit all the banned notes into their bank accounts. Excess deposits in the range of Rs 2.8-4.3 lakh crore came into the banking system during the Note Ban period, according to a study conducted by the Reserve Bank of India. This measure was aimed at strengthening the hands of monopoly finance capital to more effectively and extensively rob the people of their savings.
Prime Minister Modi presented the Note Ban as a crusade against corruption and terrorism. He claimed that the aim was to unearth black money hoarded by corrupt persons and deploy it for the benefit of poor hardworking people. He appealed to all Indians to bear with hardship for 50 days for the sake of achieving these noble goals. His government claimed that the Note Ban would wipe out huge amounts of “black money”. Many in his government suggested that as much as one-third of India’s outstanding currency would be purged from the economy — as the wealthy abandoned or destroyed it, rather than admit to their hoardings.
The Reserve Bank of India (RBI)’s annual report, released on August 30, however, demolished this myth, deliberately created to win the support of people. The Report revealed that as much as Rs 15.28 lakh crore, that is, 98.96 per cent of banned currency has come back into the banks. So, just Rs 16,000 crore of the banned notes did not return to the banking system. Further, RBI spent Rs 7,965 crore, nearly half of the Rs 16,000 crore gain, for printing new notes between July 2016 and June 2017.
When RBI’s annual report exposed the government propaganda for the Note Ban, Finance Minister Jaitley withdrew the old justifications. He said the Note Ban exercise last year was not an exercise to confiscate (black) money. He finally gave out the ‘real aims’ of the Note Ban. “More taxpayers, a bigger tax base, more digitisation, and lesser cash in the system, integration of the formal and informal economy – these were the principal objectives of demonetisation. We do believe that in each of these areas the effect of demonetisation has been extremely positive.”
BJP chief Amit Shah on September 9, while addressing a meeting of FICCI, supported the ‘new’ objectives of the Note Ban when he said, “I definitely believe that the formal economy has increased due to demonetisation. Money lying at various places is now part of the economy.”
Confiscating black money and eradicating corruption was never the agenda of the Note Ban. Corruption is so deeply and widely entrenched within the Indian State that any anti-corruption drive claimed by this State is a big fraud. In reply to a question in Lok Sabha, it was reported that between November 8 and December 30, 1.48 lakh people deposited Rs. 80 lakh or more of banned notes into bank accounts. The total money deposited by them was Rs. 4.9 lakh crore, i.e., nearly one third of total money deposited. If the government was serious about black money and corruption, all that it had to do was to investigate the source of money deposited by just these 1.5 lakh people.
Far from being a crusade against corruption, the Note Ban itself was a case of mega-corruption because a major public decision was taken in narrow private interests. The decision was well planned and executed suddenly to achieve the real aims. It was carried out at the insistence of influential big Indian and foreign capitalists and their institutions, but presented as a pro-people crusade.
Another justification given by the Prime Minister was that the Note Ban was aimed at eliminating counterfeit rupee notes which were being used by external powers to finance terrorist acts in India. This justification, too, was only meant to garner support for the Note Ban as according to the government’s own estimate, the total value of counterfeit rupee notes in circulation, was only Rs. 400 crores, out of more than Rs. 15,00,000 crore of old notes which were banned. The hollowness of this argument was further confirmed when the RBI reported that the value of the fake demonetised 500 and 1000 rupee notes in 2016-17 was just Rs 41 crore.
The real aim of the Note Ban was never to fight against terrorism or corruption. The real aim was to force people to put all their savings into banks and switch to digital transactions, for the benefit of the richest and biggest capitalists of the country. As was pointed out in the publication of the Communist Ghadar Party of India, “On the Note Ban: Real Aims and False Claims” released in January 2017, the root of corruption is the Indian State, a legacy of British colonial rule. All arms of authority are corrupt from top to bottom. The publication also points out that any claim of combatting terrorism in our country is a total fraud unless it is targeted at the main and most powerful states which sponsor terrorist activities in this region – the United States and its intelligent agencies are the biggest sponsor and financier of armed terrorist groups in many countries, including South Asia.