A surgical
strike is a military attack which results in, was intended to result in,
or is claimed to have resulted in only damage to the intended legitimate
military target, and no or minimal collateral damage to surrounding structures,
vehicles, buildings, or the general public infrastructure and utilities.
On November 8, 2016, Mr.
Modi Government announced that he is conducting a “surgical strike” in the
government’s war against black money by demonetising Rs. 500 and Rs. 1000 notes
worth Rs 15.4 lakh crore. (An allusion to the "surgical strikes"
conducted by the Indian army against suspected militants in
Pakistani-administered Kashmir on 29th September 2016, eleven days after the
Uri attack.)
The deputy RBI
governor, Mr. Gandhi, on December 13, said Rs 12.44 lakh crore of the old
Rs 500 and Rs 1000 notes had been received by the RBI or in currency chests as
of 10th December. Since then, the RBI has been silent on the issue and has
put out no figures on the deposits of invalid notes made with banks or the
value of such notes returned to the RBI. It could mean that the government’s
aim of extinguishing black money has fallen flat.
According to reports,
not confirmed by any official authority, 94% of the demonetised currency has
returned to the banks, i.e. Rs 14.5 lakh crore out of 15.44 lakh crore. So, there
is not going to be any quick Rs 2 lakh crore to Rs 3.5 lakh crore windfall for
the government (as some experts estimated). The maximum the government can hope
to gain from the mass suffering is a measly Rs 1 lakh – Rs 1.5 lakh crore.
The Centre for
Monitoring Indian Economy (CMIE) has estimated Rs 1.28 lakh crore as the cost
to the economy during the 50-day period from November 9th to December 30. This
does not include many indirect costs, such as those from disturbing the supply
chain. These 50 days are a little more than half of the 3rd quarter of the
current financial year. Gross Domestic Product (GDP) was Rs 34.8 lakh crore in
the same quarter of 2015-16.
Many people struggled
to meet their needs with the Rs 2,000 - Rs 2,500 ATM withdrawal limit imposed
by RBI. That’s if you managed to get your hands on the money in the first
place! "Carpenters, maids, vegetable sellers are dependent on cash. Are
you capable of reducing their trauma? Your aim is to wipe out black money but
people are traumatised standing in queues for hours doing nothing," the
bench comprising Chief Justice T S Thakur and Justice D Y Chandrachud said,
pointing to the long queues at banks and ATMs.
A lot of people, esp.
in rural areas spent days trying to exchange their hard-earned money instead of
working, such that they lost their wages. Many farmers had no cash to pay the
labourers and as a result those on daily wages lost their livelihood. The fact
that co-operative banks were not allowed to exchange notes added to the trauma
because most of the last mile banking in rural areas is done by co-operative
banks as scheduled banks just don’t have the wherewithal to service far flung
areas.
Post 8th November,
around 100 people have been reported dead in incidents directly or indirectly
linked to demonetisation. While it can be argued that a few of the deaths
reported could have taken place even if demonetisation did not take place, the
fact remains that most of the reported deaths could have been avoided in the
absence of the currency ban.
What was really
upsetting was the government's response to the Opposition on the issue of
demonetisation-related deaths which was raised by prominent politicians during
a six-hour debate in the Upper House of the Parliament. Nothing. Or next to
nothing.
On 16th Nov 2016, Union
ministers Piyush Goyal and Venkaiah Naidu responded to the Opposition on
demonetisation but avoided talking about the deaths (At that time, the death
toll was 33). Naidu compared the
"difficulties" faced by people to, of all things, child birth. Goyal also
acted as if no death had taken place and painted a rosy picture of the country.
Bankers themselves struggled
to keep abreast of the government's announcements and amendments in connection
with the note-ban since 8th November. There were about 60 RBI circulars
from 8th November to 31st December. That’s more than one per day!
On the economic front, FMCG
bellwether HUL cut its advertising expenditure on TV in December, estimated at
Rs 300 crore, by half for the month of December 2016. Other corporates in
various sectors have also reported lower revenues due to demonetisation. But
demonetisation has hurt agriculture and informal sector workers the most.
Demonetisation has also
hit the PR sector… by hitting the clients of PR companies. There has been a
definite slowdown in the PR business especially among clients in the real
estate, building-material suppliers, consumer goods, tourism, two-wheelers,
jewellery and banks. Most of these clients will be having a credit crunch at
this time and will affect payments to their PR and Ad agencies.
However, there is a
flip side to everything! In the aftermath of Demonitisation, there will also be
need for companies to manage reputation and create demand. Life and business go
on! Most client managements will put in money if it helps their brand recover
faster than competition. Agencies will have to make that extra effort to build
and strengthen ‘trust’.
Currently, the
government is in a great hurry to promote digital transactions and the digital
ecosystem in general. Not only have mobile wallets like PayTM received a great
fillip but the Bharat Interface for Money (BHIM) app launched on December 30,
2016, has witnessed 15 million+ downloads since. Hopefully, the government will
do what it actually needs to do… stop the generation of black income.
While the effects of
which are still unfolding, it is clear that a shift to digital money and hence
digitisation has abruptly happened. As consumers start making the shift to
digital money in ever growing numbers, all brands will need to communicate to
be relevant to get a pie of the digital money pie. More so, in the rural areas
that were ignored by marketers so far. With the allotment of funds in the
current budget to rural infrastructure and development, there will be increase
in purchasing power of the rural population. Brands will need to begin, build
and strengthen customer engagement with this customer base.
(This is a modified
version of an article that has appeared previously in the PRCI Journal, Chanakya)
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