Six Years After Demonetization

THE Supreme Court on Monday backed Prime Minister Narendra Modi’s 2016 notes ban today in a landmark 4-1 majority judgment saying it was “not relevant” whether the objective of the overnight ban was achieved. One judge, Justice BV Nagarathna disagreed, terming the move “unlawful”. In a strong dissenting judgment, Justice Nagarathna called the notes ban “vitiated and unlawful”. He, however, agreed that the status quo could not be restored now. The judge noted that the entire exercise was carried out in 24 hours. Some 58 petitions challenged the Centre’s decision to ban Rs 1,000 and Rs 500 currency notes overnight that instantly wiped  Rs 10 lakh crore out of circulation. The government had argued that the court cannot rule on a case when there is no tangible relief available, saying it was tantamount to “putting the clock back” or “unscrambling a scrambled egg.”

While supreme court decision on demonetization makes no real impact on the ground, it has momentarily jogged public memory on this issue. The demonetization disrupted the economy for some time, especially the small businesses. It took time for these businesses to find their footing again. There was also chaos on the streets for a few months.

In Kashmir, however, the demonetization didn’t make much of a difference to the routine. One of the overriding rationales of the demonetization was that it will deal a mortal blow to terrorism and bring peace to Kashmir. The opinion on whether it actually did so remains debatable.  For until after the abrogation of Article 370 in August 2019, the militancy and the public unrests continued unchanged in the Valley.  In the last three years, the direct control of Jammu and Kashmir by the centre has made some visible difference in the ground situation. Public unrests have ended and stone-throwing has disappeared. But militancy is still far from over as the killings of innocent civilians in Jammu underlines yet again.

Coming back to impact of demonetization in Kashmir, there wasn’t much. In fact, a week after Rs 500 and Rs 1000 notes being declared illegal tender in 2016, the Kashmir Valley was more or less back to normal. In Srinagar, the rush at the banks and the ATMs drastically moderated. This turn of events was surprising considering it was at variance with the official narrative about Kashmir being a hub of the unaccounted terror money. Why was it so? Economists in Valley had a more undramatic, common sense explanation. The demonetization had followed immediately after the Valley had observed an uninterrupted shutdown in the the preceding four months. Businesses were shut. Little money was in circulation. Most people thus didn’t need to deposit money. Six years after the disruptive move, the Indian economy and with it, that of Kashmir has recovered from its debilitating impact. Whether demonetizations’ objectives were served or not is immaterial now.

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