A new RTI reply by the Reserve Bank of India on Prime Minister Narendra Modi’s demonetisation announcement has posed more questions around fixing the liability of the decision.
India’s federal bank, in its RTI reply to Bloomberg said that its board approved the move to ban high-denomination notes less than just three hours before Prime Minister Narendra Modi announced the decision in a televised address to the nation.
This sharply contradicts the statement made by the RBI Governor, Urjit Patel, who, on 7 December, had claimed that the decision to ban high denomination notes was not taken in haste.
While announcing the status quo on interest rate, he had said, “The decision has not been taken in haste but after detailed deliberations. There had to be a high level of secrecy surrounding this decision and the fact is that such a large country was indeed taken by surprise when the decision was announced.”
Union minister, Piyush Goel, too had told Rajya Sabha on 16 November, had credited Patel and his 10-member RBI board for the note ban decision.
However, analysts find it difficult to believe that the decision to ban Rs 500 and Rs 1,000 notes were not political as it will be impossible for a prime minister to respond to the RBI board’s recommendation on a matter as significant as removing 86% of currency from the market with such lightening speed.
The appointment of Patel as the successor of Raghuram Rajan, votary of the RBI’s autonomy, has also been seen as a move by the central government to easily manipulate the fiscal policy to suit its political agenda.
The note ban decision has adversely impacted a large swathe of Indian population with more than 100 having already lost their lives due to demonetisation related stress. Million continue to struggle for access to their hard-earned money because of what many have termed ‘draconian’ restrictions on their ability to withdraw money.
Many international agencies have downgraded India’s economic growth outlook while reputed business foreign media outlets such as Wall Street Journal and Forbes have condemned the government’s demonetisation plan.
Modi’s demonetisation plan was expected to last only for 50 days, as ‘promised’ by the prime minister. However, it appears that the financial pain caused by the abrupt note ban is likely to last longer in the absence of adequate supply of new notes to the banks.