Why November 8 is a black day for India’s democratic institutions, writes a DMK MLA

Demonetisation and its aftermath have badly hurt the painstakingly built-up reputations of the RBI, the judiciary and the established media.
Why November 8 is a black day for India’s democratic institutions, writes a DMK MLA
Why November 8 is a black day for India’s democratic institutions, writes a DMK MLA
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By Dr Palanivel Thiaga Rajan

In a rare instance of near-universal political agreement, November 8 was marked as a Black Day across India by almost all political parties other than the BJP, who celebrated it as Anti-Black Money Day. Is either stand justified by the actual events that have unfolded in the past year?

To put this question in the right context, refer to this essay I wrote on November 15, 2016 – roughly a week after the momentous announcement, and a day after the first set of concessions were announced. At that time, I pointed out that a lot of risk had been induced for the sole motivation of “Secrecy” during the conception and development of the whole program. I noted that such risk fell on both sides – the risk of failing to achieve intended goals (such as “capturing Black Money”), and the risk of realising many unintended consequences (such as damaging the economy).

A year later, my fears have been proven to be well-founded. Noted economists such as the former Prime Minister Dr Manmohan Singh, policy analysts such as Praveen Chakravarthy, and social media stars such as James Wilson, among so many others, have detailed the entire gamut of consequences of this ill-fated policy – ranging from macro- & micro-economic costs, through humanitarian tragedies.

Despite the hyper-dynamic goal-posts, moved frequently and over great distances by various Central ministers and officials, the hard data (from official sources) such as GDP and money-in-circulation prove beyond any reasonable doubt that this program was an unmitigated economic policy disaster.

But in this essay, I would like to focus on a different aspect altogether to argue why India must always see November 8 as a Black Day – a Black Day for democracy and the rule of law, beyond any, or all, other considerations. The widely-reported sequence of events on November 7 and 8 raise serious concerns about the entire decision-making process leading up to the declaration, and whether it fell within the scope of the roles of elected and unelected officials at various levels as envisioned in, and therefore legitimized by, the Constitution of India.

For example, it has been stated that only a handful of people (of the order of 5) were aware of the Prime Minister’s intent to enact such a far-reaching move, and therefore involved in its development and execution. In fact, the reported details of how the evening of November 8 unfolded – for example the alleged temporary loss of Cabinet Ministers’ mobile phones for the short duration between when they were informed of the program and when it was broadcast to the Nation by the Prime Minister – seem to come right out of a movie like The Godfather, as opposed to a functional democracy.

It is hard to think of another instance – except possibly for the introduction of the MISA Ordinance in 1971 – where such a profound policy decision was made by so few people, and unknown to most of the Cabinet of Ministers and Senior Civil Servants. Such concentration of power (irrespective of the nature of the issue) is surely antithetical to both the Constitution and the true spirit of democracy.

It is a broadly accepted tenet across both left- and right-leaning policy analysts that independent, strong public institutions are crucial components of a healthy democracy. Some scholars (including those of a conservative bent such as Niall Ferguson of Jesus College, Oxford) go further and argue that the overall quality of such institutions is the best indicator of whether a democratic country is functioning in a way that will allow for growth and prosperity.

Prior to Demonetisation, the Reserve Bank of India was perhaps the most highly respected public institution in India. This standing has been developed through decades of painstaking efforts of many within the RBI, as well as the broad discipline of several generations of political leaders to refrain from interfering with its functioning.

The last year has seen the complete eradication of the RBI’s standing, to the extent that it is now the subject of dozens of jokes of the “How long does it take the RBI to count…” variety.

The RBI’s downfall started with the murky events which purportedly led to the initiation of the Demonetisation program. Though there have been many conjectures, it is still not clear exactly why and how the decision to demonetise was taken, and with the informed participation and consent of how many of the “independent” Board Members of the RBI. A simple way of clearing up these doubts would have been for the RBI to publish all the relevant documents to the public domain. The RBI has neither done this voluntarily, nor even acceded to a request for such information made under the Right-to-Information Act, using hollow excuses.

The loss of standing which started with this lack of transparency around the initiation, was greatly accelerated by the systematic dismantling of any pretense of separation between the Finance Ministry and the RBI during the 50 days following the announcement. The silence of the RBI Governor during most of this period was deafening – as an indicator of the total abdication of its responsibility to make policy decisions.

The other side of this counterfeit coin was the almost daily announcement of policy modifications (which should by law and precedent have originated from the RBI) from senior civil servants such as the Revenue Secretary. All semblance of RBI independence was dead and buried then.

Just when one thought it couldn’t get any worse, the RBI inexplicably stopped releasing statistics on the value of demonetised notes tendered – which it had been doing since the start of the program. In fact, the RBI has not released a comprehensive assessment even till today – a year later.

It is worth highlighting that the surreptitiously released measure (contained in its Annual Report at the end of August, as opposed to a separate announcement) of Rs 15.28 lakh crore (or roughly 99% of the Rs 15.44 crores stated as outstanding on Nov. 8, 2016) as the value of notes tendered is clearly stated as not being comprehensive. The RBI itself states it does not include the notes tendered at District Central Cooperative Banks, and is “subject to future corrections.”

The last remains of the RBI’s former standing were cremated in early January 2017, when it refused to honor the oft-repeated promise to accept notes from all citizens directly at RBI Branches till March 31, 2017. Though mythology suggests that a phoenix may yet arise from the ashes of the RBI’s former standing, it seems unlikely that the RBI can return to any semblance of its former glory in the foreseeable future. The profound tragedy is that it took less than one year to obliterate the entire respect and standing of the RBI, which it had built over more than 80 years of its existence. It is an irreparable loss to India’s democracy.

But what of the role of the other pillar of democracy? In any democracy, the judicial system serves as the last resort to hold people accountable, and to enforce the safeguards against the breakdown of democracy built into the Constitution. An excellent example of the actualisation of this constitutional role for the courts in India is the 1974 “Basic Structure” judgement delivered in the Kesavananda Bharati vs State of Kerala case – a judgement sometimes stated as the “case that saved democracy.”

In the case of Demonetisation, many fundamental legal and constitutional questions still linger. For example, under what law does the RBI have the right to limit the amount an individual can withdraw from her own account at any bank? Also, under what law can the RBI make certain notes legal tender in some establishments (petrol bunks) but not at others (grocery stores) at the same time?

Though these and many other issues are still unresolved till today, the courts refused to grant any interim relief, and instead allowed the program to go ahead unfettered. It is possible that after consideration, the courts may eventually declare one or more of the actions taken to be outside the scope of the constitution. But if that happens, it will surely be a massive case of “Justice Delayed is Justice Denied”, with respect to the many lives and livelihoods that were lost during Demonetisation.

And what of the role of the press – which has the unique responsibility of safeguarding democracy by holding the powers to account for their actions? With the notable exception of the online media, one can argue that the domestic press fell far short of holding anyone accountable for anything. The whole exercise will forever serve as a case-study for the alarming absence of any semblance of accountability in a contemporary democracy.

Many in the government, the civil service, and the RBI have engaged in a near-constant shifting of goalposts in a futile attempt to justify an indefensible program, leaving aside the many shattered promises such as the exchange period. Common citizens have done far more to expose these futile attempts at post-hoc rationalization than the established media institutions.

What makes this indictment of inadequacy damning is that people like James Wilson are neither professional economists, nor have they used any confidential or proprietary data. If adequate data for such analysis exists within published government sources alone, why have professional journalists and established media houses not done many similar analyses that would expose the government’s claims?

In summary, Demonetisation and its aftermath have negatively impacted the reputation and standing of every pillar of democracy, as well as of the established domestic media, and eviscerated the credibility of the Reserve Bank of India – formerly one of India’s most respected public Institutions. If November 8, the date of the declaration of this disastrous policy, does not justify categorization as one of the blackest days for democracy in independent India’s history, then what does?

Dr Palanivel Thiaga Rajan is the MLA from the Madurai Central Constituency and Secretary of the DMK IT Wing.

The views expressed in this article are the author’s own. 

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