Meera Sanyal has always spoken her mind and spoken it loud. As the CEO and Chairperson of RBS India, she chose to step down from her professional role to enter the hurly-burly of public service to stand as the Aam Aadmi Party candidate in South Mumbai in the 2014 Lok Sabha election. She lost the election. This was her second stint in attempting to enter politics, her earlier attempt contesting as an independent candidate in the 2009 Lok Sabha elections from Mumbai South constituency also saw her lose. Her commitment towards public service remains undaunted. She serves as a non-executive Director on the board of Pradan an Indian NGO that works to empower women through entrepreneurship and on the International Board of Right to Play, a global organisation that has helped over one million children through the transformative power of play. She is also on the Board of Jaihind College and the Indian Liberal Group. She is a member of various national Committees at the CII and FICCI. She is the former Chairperson of the Indian Advisory Board of AIESEC, the world’s largest student organisation.

Coming up on the second anniversary of demonetization, SheThePeople.TV’s Ideas Editor Kiran Manral spoke with her about her book, The Big Reverse: How Demonetization Knocked India Out, where she examines the doomed exercise from all angles from the economic to the human element.

As a banker, what were your first thoughts on the night of November 8, 2016, when the Prime Minister announced demonetization?

As a banker, I was quite astonished. It seemed like a very big step to wipe out 85 % of the currency in circulation (the final actual numbers were 86.9%) of an economy where large sections of people were dependent on cash. It was clear that farmers, daily wage workers, the entire informal economy and micro, small and medium businesses would suffer terribly if liquidity in the form of sufficient new notes were not pumped in almost immediately. My overwhelming thought was “I hope they’ve printed lots of notes and have capacitised banks and ATMs to dispense these swiftly across the country.”

As a country, we have had demonetizations before, and you’ve written about those in your book. They have also been fairly contentious. But the human impact of the demonetization of earlier times was nothing compared to the impact and suffering this time round.  Would you agree?

You are absolutely right. Though India’s previous demonetizations in 1946 and 1978 also failed completely in tackling black money and corruption, they had a very limited impact on the common citizen. In both 1946 and 1978 only notes of ₹1,000, ₹5,000, and ₹10,000 were demonetized. As you can imagine only the very rich had such high value notes – remember that in 1946 the price of 10 grams of gold was only ₹84 and even in 1978 only ₹685, compared to ₹32,090 at present!

In 1946 the total value of these high-denomination notes totalled ₹143.97 crore or 11.6 % of the currency in circulation and in 1978 only ₹180 crore. Contrast this with ₹15.41 lakh crores of ₹500 and ₹1000 notes demonetized in 2016 – which amounted to 86.9% of the currency in circulation. Even the poorest daily wage worker in India had her meagre savings in ₹500 and ₹1000 notes – and so this note ban affected every single person in the country, causing great inconvenience and suffering.

In 1946 the total value of these high-denomination notes totalled ₹143.97 crore or 11.6 % of the currency in circulation and in 1978 only ₹180 crore. Contrast this with ₹15.41 lakh crores of ₹500 and ₹1000 notes demonetized in 2016 – which amounted to 86.9% of the currency in circulation.

Why did we not learn from the lessons of the past or the lessons from other countries who have attempted this before? What are the lessons we should have hopefully learnt now?

Demonetization has failed as a policy measure to tackle black money and corruption, in every country it has been attempted. In The Big Reverse I have shared how economies have been ruined and citizens have suffered, every single time such demonetizations have been attempted, in countries as disparate as Sri Lanka, Ghana, Nigeria, Zaire, Myanmar, North Korea and the erstwhile Soviet Union/ Russia.

It’s hard to say why we did not heed these lessons – perhaps because those who made the 2016 Demonetization decision were simply not aware of them. Hopefully future decision makers will understand that demonetization is merely a tool, well-suited in certain specific circumstances, (such as to tackle hyperinflation, or to replace currencies such as during the introduction of the Euro), and most effective if planned meticulously, and executed efficiently.

It is not suitable as a means to tackle problems such as endemic corruption or black money, as India has tried to do. Not once, but thrice! It does not address the root causes of the problem. Moreover, it is also a disastrous measure, if poorly planned and hastily executed, as India’s 2016 Demonetization was.

It is not suitable as a means to tackle problems such as endemic corruption or black money, as India has tried to do. Not once, but thrice! It does not address the root causes of the problem.

What did the entire exercise of demonetization do to the image and credibility of the RBI? Do you think the RBI could have played a more decisive role in managing the exercise better?

One of the most regrettable consequences of the 2016 Demonetization has been its impact on the reputation of bankers and the loss of respect and credibility that the Reserve Bank of India has had to suffer. India’s central bank has been one of the most highly-regarded institutions in the country. Widely respected by their peers globally, successive governors of the RBI had been credited with taking a firm and autonomous stance on numerous issues, notwithstanding pressure from the Ministry of Finance and the Central government.

It is clear from what he has said, that Governor Rajan had raised red flags about the note ban and cautioned the government about proceeding without adequate preparation. Despite these clear warnings, it is hard to understand why no mitigating actions were taken in the 10 month-planning period to avoid inconvenience to people and to prevent grievous damage to the economy.

Governor Patel should definitely have played a more decisive role in managing the exercise better. By passively agreeing to a step that extinguished 86.9% of the Currency in Circulation, without any clear plan or preparation for remonetizing the system, the Governor and the Board of RBI abdicated their duty to the people of India. If they did so under pressure from the government, then, as a nation, we should reflect on the dire consequences that occur when the autonomy and independence of critically important institutions like the RBI are eroded.

By passively agreeing to a step that extinguished 86.9% of the Currency in Circulation, without any clear plan or preparation for remonetizing the system, the Governor and the Board of RBI abdicated their duty to the people of India.

The human stories of suffering caused by demonetization are the ones that we’ve heard and empathised with, you have dedicated an entire chapter to the human impact of demonetization. Do you feel that decisions taken without considering the human cost of implementation are inherently flawed?

The human impact of the 2016 Note ban was devastating. The accounts reproduced in The Big Reverse are a small fraction of the thousands of stories that appeared in the press, on the human impact of Demonetization. The common thread running through all of the stories shared in the book, is the sheer despair and desperation that both individuals and business owners, had to suffer.

Demonetization did not just destroy incomes and wealth — it destroyed lives. Middle-class Indians faced tremendous inconvenience as their hard-earned cash was impounded in banks and they had to spend hours trying to withdraw minor amounts. But it was the poorest Indians who suffered the most. Daily wageworkers and casual contract labour lost their jobs overnight. Their pitifully meagre savings were forcibly impounded. Farmers and sellers of perishable products such as vegetables, fish, and milk products were forced to watch their life’s savings waste away before their eyes. Small businesses across the country went bankrupt and were forced to lay off their employees. Mahatma Gandhi had said “Before you do anything, stop, and recall the face of the poorest, most helpless, destitute person you have seen, and ask yourself “Is what I am about to do, going to help him?” If the architects of Demonetization had heeded this simple and sensible advice, and paused to take the human impact of their decision into account, they would not have gone ahead.

Demonetization did not just destroy incomes and wealth — it destroyed lives.

While it is now common consensus that demonetization was a failed exercise, what was it that compelled you to write a book about it? What are the takeaways from your book that you hope forthcoming governments and students of economics would pay heed to?

India’s 2016 Demonetization has had, and will have major economic consequences for many years to come. We live in an era of instant opinions and ‘Post truth facts’, where actual events and objective data tend to get obscured with the passage of time. In writing this book, I wanted to capture both the story of the Noteban and the stories of those who suffered its consequences as accurately as possible, as also to present an objective analysis of the 2016 Demonetization, based on data from verifiable sources. At the very least the book is a fun read – capturing the drama, intrigue, twists and turns and often bizarrely funny decisions that accompanied this momentous step. But I also hope that it will appeal to young Indians, who will be the future policy makers of this country, demonstrating to them that Demonetization is a blunt tool which has proved to be totally ineffective in tackling the problems of black money and corruption not just in India but everywhere else in the world, whenever and wherever it has been tried.

Demonetization is a blunt tool which has proved to be totally ineffective in tackling the problems of black money and corruption not just in India but everywhere else in the world, whenever and wherever it has been tried.

 Do you think the popular perception of demonetization being an exercise to remove black money from the economy still holds good, or have the public changed their opinion?

There is no doubt that in its initial days, the public supported the move notwithstanding the inconvenience they were subjected to, because they felt that the intentions behind the Demonetization were good. However, as the 50 days of Demonetization progressed people started to see a big gap between what was being said and was being done – while the average Indian spent in hours in queues to get a little usable cash to live, the rich and famous were flashing bundles of new ₹ 2000 notes; while parents struggled to meet the wedding expenses of their children, crony barons and senior politicians of the ruling party hosted vulgarly ostentatious weddings…these days, in popular perception, Notebandi seems to be parked with Nasbandi as a failed policy measure – a bad idea which in addition was really badly implemented.

Back in 2016 itself you had said that demonetization will affect small businesses and farmers, when you sat down to write this book how much did you find your concerns had been validated?

Unfortunately, as data emerged on the Demonetization disaster, my concerns were entirely validated. Farmers and the entire food chain of people dependent on agriculture – from traders and transporters, to agricultural labour and daily wageworkers, right down to small vegetable vendors – everyone suffered terribly as a result of Demonetization. After two consecutive years of drought in 2014-15 and 2015-16, most of India had been blessed with plentiful rainfall and a bumper summer kharif harvest. The timing of the note ban could not have come at a worse time. Farmers who had sold their produce were stuck with worthless ₹1,000 and ₹500 notes as district co-operative banks were prohibited from accepting or changing old notes. Farmers who had not yet sold their crop were stuck as traders at the mandis and Agricultural Produce Market Committees (APMCs) had no cash to pay them. The worst hit were farmers with perishable produce — fruits and vegetables, many of whom were forced to sell their produce for a pittance or watch it rot before their eyes.

Farmers and the entire food chain of people dependent on agriculture – from traders and transporters, to agricultural labour and daily wageworkers, right down to small vegetable vendors – everyone suffered terribly as a result of Demonetization.

As a consequence, despite a bumper harvest, farmers across the country were unable to pay their farm labour or repay their loans. They could not buy agricultural seeds or fertilisers for the sowing season of the winter rabi crop. Not just land-owning farmers but also landless agricultural labour and migrant workers, dependent on agriculture, were rendered destitute. The farmers protests that we are now witnessing, are in no small measure due to the havoc wreaked by Demonetization on the agrarian economy.

The farmers protests that we are now witnessing, are in no small measure due to the havoc wreaked by Demonetization on the agrarian economy.

Small businesses suffered as badly. A survey in January 2017, conducted by the All India Manufacturers Organisation (AIMO), representing more than 300,000 industries engaged in manufacturing and export activities, showed that post- Demonetization there was 35 per cent drop in employment and 50 per cent drop in revenues. AIMO stated that almost all industrial activities had stopped, with the small and medium-sized enterprises being worst affected.

Micro Small and Medium businesses across the country went bankrupt and had to shut down, even though they had full order books, employees at work and money in the bank. They went bankrupt, not because they were incompetent businesspeople, but simply because they were deprived of their own money and had no liquidity to pay their employees and their suppliers.

The experience of small businesses, be they tiny micro-entrepreneurs or medium scale businesses, was multiplied millions of times across the economy. As cash was sucked out of the system, individuals started losing their jobs, faced losses in their farms, and had to shut down businesses, howsoever tiny. They became increasingly more fearful of the future, and in an attempt to conserve cash and preserve savings, they and their families reduced consumption. As demand fell and people started to buy less, firms cut back on production, which led to lower capacity utilization. Confronted with falling demand and overcapacity, business people in the private sector postponed or reduced their investment plans.

As cash was sucked out of the system, individuals started losing their jobs, faced losses in their farms, and had to shut down businesses, howsoever tiny.

Unwittingly or otherwise, the architects of India’s 2016 Demonetization had accelerated the downward spiral in investment in the formal sector, mortally wounded those in the agriculture and informal sector, caused innumerable job losses, and seriously impacted GDP growth. By thoughtlessly sucking the liquidity out of a well-functioning economy, the 2016 Demonetization left our entire nation, gasping for breath.

As one of the women who broke the glass ceiling in banking, what do you think we need to be doing to do away with the glass ceiling permanently? Also, as a powerful woman in banking who stepped away to enter politics, do you think our citizenry needs to be more proactive than reactive?

We will only be able to do away with the glass ceiling permanently, when our mindsets change. At home we must give our daughters the same freedom and opportunity to pursue their dreams and fulfill their potential as we give our sons. At work, employers must genuinely start believing that women can contribute as much as men to the workplace. And organisations must recognize that families are important, both for men and women, and design policies that enable flexible working, so that all employees – not just women, are able to balance home and career. I strongly believe that merit not gender (or religion, caste, community or influence) should be the criteria to hire and promote individuals. All that women need is an equal opportunity and a fair chance – and they will succeed on merit.

I strongly believe that merit not gender (or religion, caste, community or influence) should be the criteria to hire and promote individuals.

Regarding your second question, I do believe we need more citizens to get actively involved in improving the governance of our country. This does not mean that everyone needs to stand for election – but simply that each one of us should take the steps that she can to make our community, locality, city, state or country a better place. The citizens groups cleaning up the beaches of Mumbai is an excellent example of this.

Also Read: Sriya Iyer’s Latest Brings Economics & Religion Under The Same Lens

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