After demonetisation, many new economic theories have propped up in TV debates and news reports about its merits and demerits. Majority of them propose that it’s a futile exercise as it’ll not help curb black money or counterfeit notes in circulation. Many even blame demonetisation for death of 60 people standing in queue. Political parties opposed to the move are trying to divert people’s attention from black money to the grievances caused by standing in long queues for no fault of theirs.
Sun Tzu in his seminal work ‘The Art of War’ remarks that “Every battle is won or lost before it is ever fought.” He referred to the preparation, positioning and planning that ensures success in the war. The warrior thinks through all possible scenarios, including how the opponent is likely to act before he engages in a pitched battle.
From the events preceding 8th November when the banning of Rs 500 and Rs 1000 notes were announced and the clear admonition given by PM Narendra Modi in this “Mann Ki Baat”, it was clear he was well prepared for the war with all possible outcomes. Therefore, opposition parties reaction to the move was well expected. They just can’t do anything more than that.
Sun Tzu further clarifies that the war is more about creating perception rather than display of strength and at the same time, instilling a sense of fear in the opposition camps. So, what the government, the opposition parties and the media are involved in is a war of perception. Opponents are creating a perception among common masses that demonetisation is demonic and it has caused death of close to 60 people. But they are not telling about the several hundreds of deaths caused by terrorists who use counterfeit currency for their operation. They are telling people how demonetisation have hurt their livelihood but they are not telling how black money have holed their pocket of their hard earned money in the form of higher borrowing costs, higher inflation, poor infrastructure and multiple taxes.
Central to the problem is how two people view the same object or an issue differently? Or how two people are made to view the same object or an issue differently?
It happens because of asymmetry of information available or differences in the individual’s capability to process the same information. Lack of knowledge or awareness causes differences in perception, and that’s the armour used by politicians to fight a perception war.
A recent TOI report says, “fake notes worth Rs 400 crores will definitely become unusable as a result of demonetisation. But that will last only till the counterfeiters don’t print fresh fake currency based on the new notes. Then the whole cycle may start again. In short, the ongoing disruption of daily life across the country is highly unlikely to finish the scourge of either black money or terror funding. May be all this pain was in vain.”
The last sentence “May be all this pain was in vain” is a dangerous conclusion. It reflects the mind-set of status-quo. It also reflects how uninformed or intentionally uninformed (to create a favourable perception) the author is about economics. According to some estimates, fake currency in circulation at any time is about Rs 400 crores. If we consider the current reserve ratio, Rs 400 crore would multiply to a whopping Rs 2000 crores. Ok, so what? How does this impact us? Fake currency in circulation causes artificial inflation which makes your living costly, dents investor’s confidence in the currency and in the country and ultimately loss of real production. What happens if you get paid in fake currency for your work or your product? Just imagine! It has been happening to someone or the other for so long!
Yesterday, a very close friend angrily complained that demonetisation is a nonsense concept and that it is only causing pain to the common people like him. He questioned how this move is going to benefit him, will there be any reduction in tax slabs, or increase in his salary? My straight answer was “NO” and told him that he deserved lower salary and is liable to pay more taxes if he enjoys funding for the comfort of those who illicitly earn much more than him but doesn’t pay taxes. An honest tax payer funds for the poor, various subsidy programmes, for infrastructure, for security and defence and also for the luxury of the rich, and then ends up paying higher prices for milk, eggs and higher interest rates on car or home loans and ultimately compromises with his living standard.
But, who will make people understand these little things that economists are not telling about economics? I am talking about our peers, colleagues, relatives and all well educated professionals ! These people have buried their head in sand but are afraid to come out because they can’t confront reality. Politicians will keep doing politics, economists will keep talking everything that’s not economics and media will keep telling you stories of deaths in queues because they know people’s differential capability to process the same information, their personal prejudices and biases. They will keep harping on our weakness to communicate clearly among each other and our inability to agreeing to a point that’s not influenced by individual’s personal interests but keeping the interest of the society and the nation at large first. In a nutshell, stop just being a tool for political manoeuverism.
Thanks,
- Nirmal Kumar
