“Why did God create astrology?” “So that economics would appear a more accurate science!”
This is a joke doing the rounds in certain circles these days. There’s another on two economists stranded on an island who made millions of dollars selling their hats to each other. Of course, both the dollars and the hats are imaginary!
Humour in the grim days of demonetisation is possibly because it’s been one month and economists are still to provide us with anything accurate on the topic. And the millions of rupees they keep talking about could be more fiction than real. Worse, as if demonetisation was not complex enough for the layman’s comprehension, we have a whole army of wannabe economists dabbling in faux punditry to bring about even more confusion.
So where are we four weeks after demonetisation by way of understanding what exactly it is? There is no clear answer, but here are some takeaways from the intense debate over it:
Never trust economists to agree on anything: The basic facts about demonetisation are clear to everyone: That 86 percent of currency, amounting to somewhere around Rs 15 lakh crore, is sucked out of the system; the money that does not come back to the banking system before 30 December is taken as purged; that swelling bank deposits would make available more funds with banks for use; that the organised sector in the Indian economy would get bigger; that there’s pain to ordinary people and disruption of their normal lives from the move; and so on.
Beyond this, it’s all creative thinking. Demonetisation has produced a great deal of literature. Read through all of them and you find economists of repute almost equally divided in their opinion on its benefits. You have dire predictions for the economy as well as those dripping optimism, and contradictory views on how much the GDP would contract or how much money would enter the system. Perhaps you would be swayed one way or the other given your political leaning. But in the end, you realise you are no wiser than when you started; beyond the original facts, everything else is gas. Economists confuse more than they clarify.
The rise of the inner economist: Before Prime Minister Narendra Modi‘s government undertook the demonetisation exercise, the ordinary people to economist ratio was in grave imbalance, perhaps in the range of 10,000,000:1. Now it is certainly better. We have a whole lot of simple people writing complex prose that only economists can produce. With Google as source of instant enlightenment, the tribe has expanded, nay exploded. But the arousal of the inner economist is not confined to this section only. Speak to auto-rickshaw drivers, maids at home, your regular milkman. They talk black money, notebandi and counterfeits with the conviction of experts. Demonetisation has certainly made economics more democratic.
Black money is something the other person has: The demonetisation debate was all about black money till the government decided to shift the focus to cashless transactions. No one is sure how much black money is lying around or what exactly constitutes such money — economists are still struggling to find a definitive number — but almost everyone in the queues outside banks are happy that those with black money have been dealt a nasty blow by Narendra Modi. Try to convince them that all hoarded money is not necessarily black money, or that clever people don’t make mattresses of their illicit money and they invest it elsewhere, you are likely to get a cold, hard stare. The blanket conclusion is the rich are rich because of black money. Demonetisation may have been hard on ordinary people but they won’t mind so long as the “rich” suffer too.
Indians can take a good deal of suffering: Call it Gandhian influence if you please: Indians have great tolerance for inconvenience if they are convinced that it serves a noble purpose. A month after they were made to stand in interminable queues and made to accept rationed cash there is still no harsh public reaction to demonetisation. Although there are signs of frustration, explosive anger outburst has been limited. A wicked interpretation would be to ask what else can they do but suffer. After every big incident in Mumbai — bomb blasts, the great flood, and terror attack — glowing tributes are paid to the never-say-die spirit of Mumbaikars. But does he have any option other than getting back to routine? That could be the case with all people at the queues. They would lose money if they lose patience. Thus the latter is certainly a bad idea.
Rest assured, after 50 days – the period Prime Minister Narendra Modi has sought from people – we would be exactly where we are now. One economist would be contradicting the other. Ordinary people would find themselves saddled with knowledge they don’t need. Economics would continue to be as inaccurate as astrology. Let’s wait and watch.
First Published On : Dec 9, 2016 15:51 IST
Continue reading –