Economy

Turns Out, India's Cash Ban Was All For Nothing

A woman and a bank in Kolkata
A woman and a bank in Kolkata
T.K. Jayaraman and Bhanu Prakash

-Analysis-

BENGALURU — The patient was the Indian economy.

Among the 176 countries that have been ranked by Transparency International on a scale from 100 (very clean) to zero (highly corrupt), India ranks in the second half of the list at 79, with illegal money of sizeable proportions.

The central government, which was elected on the promise of a cleaner government, is worried about coming to power again. With the impending election two years away, it had to do something drastic: a much-dreaded surgery with uncertain consequences.

That was the November 2016 decision of removing Rs 500 and Rs 1000 currency notes from circulation, known as "demonetization", in order to curb black money.

No doubt, the demonetization exercise had to be kept a secret for its full effect to be realized, ruling out any possibility of wide discussions and weighing of pros and cons. It is reported that even India's chief economic adviser was caught unaware, though the top management at India's central bank, the Reserve Bank of India, was prepared for it.

Unrealized windfall

Demonetization was clearly aimed at eliminating black money. It was thought that some Rs 5 trillion would be declared illegal; RBI's liabilities would be extinguished, giving rise to larger than usual annual profits and they would be turned over to the government as dividend for funding planned social welfare schemes and infrastructure projects.

This windfall did not materialize.

Early this week, it was announced that, of the estimated Rs 15.44 trillion of currency that was rendered invalid due to demonetization, Rs 15.28 trillion has come back into the Indian banking system. Does it mean that the so-called "illegitimate money" that has now been legitimized was, in fact, a close 99%? The unreturned money of about Rs 0.16 trillion is just 1%.

The question is: was the team of surgeons, minimum in number for secrecy purposes, competent enough? Or if a member expressed a contrary view, was it given due consideration?

That will remain a secret for some time.

For every fait accompli decision, there are always two views — one in support, the another opposed — whether one likes it or not.

Is the achievement worth the effort?

The price of "achievement" following the November 2016 demonetization has now been measured. Economic growth rates have been falling. These aren't big falls and, of course, the growth rates are positive.

In the April-June 2017 quarter, the gross domestic product (GDP) grew at 5.7% – a three-year low, much below the 7.9% GDP growth in the corresponding quarter of 2016 and lower than 6.1% recorded in the January-March quarter of 2017.

It is a clear downward trend.

GDP growth can always be attributed to not one but a combination of factors in a developing economy. The government's chief statistician was in a hurry to point out that it would be incorrect to attribute the downward spiral to the ‘demonetization effect". He laid the blame on the impact of a new Goods and Services Tax reform rolled out.

The government should have accepted the failure.

All along, ever since the November decision was announced, the growth momentum has been halted. The fears of economic doom have gripped the nation. The middle class has been rudely shaken.

The International Monetary Fund (IMF) in January 2017 lowered its estimate of India's growth. It said India would grow only at 6.6% as against its earlier estimate of 7.6% on account of the "temporary negative consumption shock, induced by cash shortages and payment disruptions associated with the currency note withdrawal and exchange initiative."

The IMF hoped demonetization would strengthen India's institutional framework by reducing tax avoidance and corruption and would support efficiency gains.

The World Bank, while echoing the IMF's view, made it clear that the reason behind the move was "to curb corruption, tax evasion and counterfeiting". It added the move would "broaden the tax base" and help revenues which will "eventually go up, besides reducing the size of the informal economy."

India"s finance minister, Arun Jaitley, is now keen to highlight tax avoidance, broadening the tax base and reducing the size of the informal sector and other likely gains, and continues to downplay the main purpose behind the demonetization decision. "People with inadequate understanding of how to tackle black money linked note ban with money returned to system," said Jaitley, adding "deposits in banks don't legitimize" black money.

Instead of such explanations, the government should resume good governance. It has to raise investor confidence once again.

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Geopolitics

How Thailand's Lèse-Majesté Law Is Used To Stifle All Protest

Once meant to protect the royal family, the century-old law has become a tool for the military-led government in Bangkok to stamp out all dissent. A new report outlines the abuses.

Pro-Democracy protest at The Criminal Court in Bangkok, Thailand

"We need to reform the institution of the monarchy in Thailand. It is the root of the problem." Those words, from Thai student activist Juthatip Sirikan, are a clear expression of the growing youth-led movement that is challenging the legitimacy of the government and demanding deep political changes in the Southeast Asian nation. Yet those very same words could also send Sirikan to jail.

Thailand's Criminal Code 'Lèse-Majesté' Article 112 imposes jail terms for defaming, insulting, or threatening the monarchy, with sentences of three to 15 years. This law has been present in Thai politics since 1908, though applied sparingly, only when direct verbal or written attacks against members of the royal family.


But after the May 2014 military coup d'état, Thailand experienced the first wave of lèse-majesté arrests, prosecutions, and detentions of at least 127 individuals arrested in a much wider interpretation of the law.

The recent report 'Second Wave: The Return of Lèse-Majesté in Thailand', documents how the Thai government has "used and abused Article 112 of the Criminal Code to target pro-democracy activists and protesters in relation to their online political expression and participation in peaceful pro-democracy demonstrations."

Criticism of any 'royal project'

The investigation shows 124 individuals, including at least eight minors, have been charged with lèse-majesté between November 2020 and August 2021. Nineteen of them served jail time. The new wave of charges is cited as a response to the rising pro-democracy protests across Thailand over the past year.

Juthatip Sirikan explains that the law is now being applied in such a broad way that people are not allowed to question government budgets and expenditure if they have any relationship with the royal family, which stifles criticism of the most basic government decision-making since there are an estimated 5,000 ongoing "royal" projects. "Article 112 of lèse-majesté could be the key (factor) in Thailand's political problems" the young activist argues.

In 2020 the Move Forward opposition party questioned royal spending paid by government departments, including nearly 3 billion baht (89,874,174 USD) from the Defense Ministry and Thai police for royal security, and 7 billion baht budgeted for royal development projects, as well as 38 planes and helicopters for the monarchy. Previously, on June 16, 2018, it was revealed that Thailand's Crown Property Bureau transferred its entire portfolio to the new King Maha Vajiralongkorn.

photo of graffiti of 112 crossed out on sidewalk

Protestors In Bangkok Call For Political Prisoner Release

Peerapon Boonyakiat/SOPA Images via ZUMA Wire

Freedom of speech at stake

"Article 112 shuts down all freedom of speech in this country", says Sirikan. "Even the political parties fear to touch the subject, so it blocks most things. This country cannot move anywhere if we still have this law."

The student activist herself was charged with lèse-majesté in September 2020, after simply citing a list of public documents that refer to royal family expenditure. Sirikan comes from a family that has faced the consequences of decades of political repression. Her grandfather, Tiang Sirikhan was a journalist and politician who openly protested against Thailand's involvement in World War II. He was accused of being a Communist and abducted in 1952. According to Sirikhan's family, he was killed by the state.

The new report was conducted by The International Federation for Human Rights (FIDH), Thai Lawyer for Human Rights (TLHR), and Internet Law Reform Dialogue (iLaw). It accuses Thai authorities of an increasingly broad interpretation of Article 112, to the point of "absurdity," including charges against people for criticizing the government's COVID-19 vaccine management, wearing crop tops, insulting the previous monarch, or quoting a United Nations statement about Article 112.

Activist in front of democracy monument in Thailand.

Shift to social media

While in the past the Article was only used against people who spoke about the royals, it's now being used as an alibi for more general political repression — which has also spurred more open campaigning to abolish it. Sirikan recounts recent cases of police charging people for spreading paint near the picture of the king during a protest, or even just for having a picture of the king as phone wallpaper.

The more than a century-old law is now largely playing out online, where much of today's protest takes place in Thailand. Sirikan says people are willing to go further on social media to expose information such as how the king intervenes in politics and the monarchy's accumulation of wealth, information the mainstream media rarely reports on them.

Not surprisingly, however, social media is heavily monitored and the military is involved in Intelligence operations and cyber attacks against human rights defenders and critics of any kind. In October 2020, Twitter took down 926 accounts, linked to the army and the government, which promoted themselves and attacked political opposition, and this June, Google removed two Maps with pictures, names, and addresses, of more than 400 people who were accused of insulting the Thai monarchy. "They are trying to control the internet as well," Sirikan says. "They are trying to censor every content that they find a threat".

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