Posted by: John Elliott | November 21, 2016

India is governed with “post-truth” – a new word that buries facts and blurs reality

Arun Jaitley says demonetisation will lead to India’s “new normal”

Ministers use post-truths on bank notes crisis and train crash

The publishers of the Oxford English Dictionary last week made post-truth their new word of the year.

A few days later Arun Jaitley, India’s finance minister, produced one when he declared that a cashless “new normal” was being introduced by the demonetisation of Rs500 and Rs1000 bank notes, and brushed aside the severe currency shortages and mass hardship it has caused over the past two weeks.

There was another yesterday (Nov 20) when Suresh Prabhu, the railway minister, tried to obliterate public criticism of a disastrous train crash that killed over 140 people by announcing that “enhanced amount of ex-gratia compensation to the victims of this unfortunate accident: Rs 3.5 lakh in case of death” (about $5,000 or £4,000).

ox-dictThe Oxford Dictionaries website says that post-truth is an adjective (though it also works as a noun). It defines it as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”.

All governments of course rule with such announcements that are intended to fudge reality and stem criticism. In Britain, Theresa May’s “hard Brexit” may turn out to be a post-truth if, as some people suspect and many hope, it eventually emerges as a precursor to something softer.

India however goes further than most supposedly open democracies in the way that the government expects public opinion to be easily diverted from objective facts.

Narendra Modi, the prime minister, who set the tone for Jaitley and Prabhu on both demonetisation and the train crash, excels. “Mr Modi is a master in evoking the emotional reasoning that is the essence of post-truth – as indeed is Donald Trump. Don’t confuse me with facts, what I feel is the reality”, wrote T.N.Ninan, a veteran columnist and publisher, in his Business Standard newspaper over the weekend.

derailment-kanpur-169-copyThe “objective fact”, to use the Oxford Dictionaries words, in the train crash (left) is that India has more disastrous railway disasters than maybe any other country, and seems to do little to stop them. Their appalling frequency was underlined by The Times of India headlining this one as the worst “in 6 years” – not ten or 20 years, just six!

Every time there is a crash, railway ministers rush to the site, as Prabhu and his deputy did, and immediately deal with emotions by announcing large cash hand-outs to the families of those killed and injured. An inquiry is ordered that leads to broad-brush reports of what happened, but no report of any subsequent action being taken.

It is a test of how much Modi has fulfilled his general election promise of changing the way the government operates to see whether the hand-outs and promises of action remain post-truths this time or not.

The “objective fact” on demonetisation is that there has been country-wide disruption of the economy and business, plus widespread personal inconvenience and hardship especially in rural areas, following Modi unexpectedly on the evening of November 8 withdrawing from circulation the Rs500 (about $7.50, £6) and Rs1000 bank notes that accounted for 86% of the currency – as I described on this blog on November 14.

The move has been described as the “most sweeping change in currency policy that has occurred anywhere in the world in decades” by Larry Summers, former US Treasury Secretary and Harvard president, writing in the Financial Times. He is sceptical about the prospects for curbing corruption and says that the “ongoing chaos in India and the resulting loss of trust in government” fortifies his view that the costs of withdrawing notes from circulation exceed the benefits. The last time there was a big withdrawal of high value currency in India was in 1978, but people then were given a week to exchange the notes, which softened the blow.

The Reserve Bank of India said today that banks had received Rs5.45 trillion rupees ($80bn) in the old Rs500 and Rs1000 notes by the end of last week out of $220bn in circulation. Banks have issued $15bn in new Rs2000 notes.

People standing in long queues

Queues of people at ATM and bank – PTI photo Nov 21

The disruption has ranged from farmers’ shortage of money to buy seeds (they can now use the old notes) and markets closing because of lack of cash to families wondering what to do with substantial quantities of cash they routinely keep at home. People have not been able to use old notes to pay for wedding arrangements, doctors’ fees and other routine expenses without using old notes illegally. Those who got new Rs2000 notes have found most shops do not have enough Rs100 notes and smaller currency to give change. People have even been reported dying from heart attacks and other health problems in bank and ATM queues.

While the situation has eased in some areas, there are still long queues at closely guarded banks and at ATMs that have to be mechanically reconfigured for new smaller-sized Rs2000 notes that are in short supply. The ATMs also quickly run out of Rs100 notes that everyone wants. The Supreme Court asked the government why it was not doing more to fend off a crisis.

The post-truth came from Jaitley who talked at an Economic Times conference in Delhi on November 19 (below) about just “initial inconvenience”, claiming without any basis in reality that the money queues were now “extremely small” – see November 1 photo above.

a-fireside-chat-between-arun-jaitley-minister-of-finance-jeff-immelt-chairman-ceo-ge-and-anand-mahindra-chairman-mahindra-group-at-the-india-economic-conclave-in-delhi-on-18th-nov2016

Arun Jaitley with Anand Mahindra of the Mahindra Group (left) and Jeff Immelt of GE (right)

His bigger post-truth was that demonetisation will drastically reduce India’s massive “parallel economy” which has been running outside the banking system for the last 70 years. “Shadow or parallel economy had become a way of life. When you have a large chunk of currency outside banking system, the taxation base is narrow and the shadow economy becomes way of life….Demonetisation will set a new normal for the economy,” he declared.

Taking 86% of currency out of circulation obviously cuts away at the parallel, heavily black, economy. It is also true that many people and businesses are opening bank accounts and switching to credit and debit cards and other forms of e-money. But cash will build up again as new Rs2000 and Rs500 notes come into circulation if for no other reason than that corruption is endemic in India and relies on cash.

Accommodation entries

What the government is not talking about are the corrupt methods that political parties and their leaders, real estate developers and construction companies, traders and market operators, gangsters, lawyers and many others are using to clear at least some of their often massive hordes of old notes without falling foul of official inquiries and tax demands.

I have heard that there has been a surge in accountants and bank managers colluding with clients in a system know as accommodation entries where false loans, names, book entries and accounts are used to launder large quantities of black money. There are also stories of people in bank queues seeing suitcases being carried into banks while everyone else is kept outside. These and other methods will, reports suggest, involve the beneficiary losing perhaps 25- 40% of the notes’ value. Trading is also still taking place using old notes, albeit at a discount.

Despite all this however, there does appear to be widespread support for what Modi and Jaitley are trying to do, even though there is growing criticism and impatience over how it is being done and of insufficient advance preparations. There is also concern that economic growth, and in particular agricultural output, could be hit. Opposition political parties are disrupting parliament in protest.

Modi won the general election 30 months ago partly on the promise of cleaning up the economy and that is why there is a surprising willingness to give him and Jaitley the benefit of the doubt.

The big post-truth questions now are whether Modi will manage to introduce enough further anti-corruption measures to turn all this into Jaitley’s “new normal” reality and, in the shorter term, whether he can make his claim that people’s inconvenience will last no more than 50 days become an objective fact.

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Responses

  1. John Wonderfully done blog as always. The corrupt crooks will not evaporate overnight, but might become cautious to a fault, Indeed, hoi polloi is suffering including yours truly, nonetheless a shock treatment like this was urgently needed. The implementation/execution decidedly should have been better planned than what is in the realm of affairs. This aggravation/unrest a political tool to the opposition could have been avoided. This is a classic case of good job badly executed.

    railways would continue to be in shambles as long as politicians interfere. prabhu is no better. new trains without applying mind and commercial rationale is the root cause. The demise of railways began the day gauge conversion stared in the 90s by a corrupt stupid man called jaffer Sharrife when he sold scrap for a song consisting of teak sleepers and rails aided by a pliant bureaucrat Ananad . . Regards, BK


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