Friday, December 09, 2016
facebook

google plus
FLASH
  • Parliament House filming row: LS adopts resolution suspending AAP MP Bhagwant Mann for ongoing session
How PM Modi kept demonetisation a closely guarded secretIt was a secret affair

How PM Modi kept demonetisation a closely guarded secret

09 Dec 2016 | 11:35 AM

NEW DELHI: Prime Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India’s financial circles, to spearhead a radical move to abolish 86 per cent of the country’s cash overnight and take aim at the huge shadow economy.

[ + read story ]

New Delhi, December 9

Prime Minister Narendra Modi handpicked a trusted bureaucrat, little known outside India’s financial circles, to spearhead a radical move to abolish 86 per cent of the country’s cash overnight and take aim at the huge shadow economy.

Hasmukh Adhia, the bureaucrat, and five others privy to the plan were sworn to utmost secrecy, say sources with knowledge of the matter. They were supported by a young team of researchers working in two rooms at Modi’s New Delhi residence, as he plotted his boldest reform since coming to power in 2014.

When announced, the abolition of high-value bank notes of Rs 500 and 1,000 ($7.50 and $15) came as a bolt from the blue.

(Follow The Tribune on Facebook; and Twitter @thetribunechd)

The secrecy was aimed at outflanking those who might profit from prior knowledge, by pouring cash into gold, property and other assets and hide illicit wealth.

Previously unreported details of Modi’s handling of the so-called “demonetization” open a window onto the hands-on role he played in implementing a key policy, and how he was willing to act quickly even when the risks were high.

While some advocates say the scrapping of the bank notes will bring more money into the banking system and raise tax revenues, millions of Indians are furious at having to queue for hours outside banks to exchange or deposit their old money.

Labourers have also been unpaid and produce has rotted in markets as cash stopped changing hands. Not enough replacement notes were printed in preparation for the upheaval, and it could take months for things to return to normal.

With India’s most populous state, Uttar Pradesh, holding an election in early 2017 that could decide Modi’s chances of a second term in office, there is little time for the hoped-for benefits of his cash swap to outweigh short-term pain.

Modi has staked his reputation and popularity on the move.

“I have done all the research and, if it fails, then I am to blame,” Modi told a cabinet meeting on November 8 shortly before the move was announced, according to three ministers who attended.

Direct line to Modi

Overseeing the campaign, with support from the backroom team camped out at Modi’s sprawling bungalow in the capital, was Adhia, a top finance ministry official.

The 58-year-old served as principal secretary to Modi from 2003-06 when he was chief minister of Gujarat, establishing a relationship of trust with his boss and introducing him to yoga.

Colleagues interviewed by Reuters said he had a reputation for integrity and discretion.

Adhia was named revenue secretary in September 2015, reporting formally to Finance Minister Arun Jaitley. In reality, he had a direct line to Modi and they would speak in their native Gujarati when they met to discuss issues in depth.

In the world’s largest democracy the demonetisation was revolutionary: it called into question the state’s promise to “pay the bearer” the face value on every bank note.

At a stroke, Modi scrapped money worth 15.4 trillion rupees ($220 billion), equal to 86 per cent of cash in Asia’s third-largest economy.

The idea is backed by some economists, although the speed of its implementation is widely seen as radical.

“One is never ready for this kind of disruption, but it is a constructive disruption," said Narendra Jadhav, a 31-year veteran and former chief economist of India's central bank who now represents Modi's party in the Upper House of Parliament.

Modi, in his TV address to the nation, cautioned that people could face temporary hardship as replacement Rs 500 and 2,000 notes were introduced. Calling for an act of collective sacrifice, he promised steps to soften the blow for the nine in 10 Indians who live in the cash economy.

‘Biggest, boldest step’

Immediately after the address, Adhia sent a tweet: "This is the biggest and the boldest step by the Government for containing black money."

The boast harked back to Modi's election vow to recover black money from abroad that had resonated with voters fed up with the corruption scandals that plagued the last Congress government. Yet in office, he struggled to keep his promise.

Over more than a year, Modi commissioned research from officials at the finance ministry, the central bank and think-tanks on how to advance his fight against black money, a close aide said.

He demanded answers to questions such as: How quickly India could print new bank notes; how to distribute them; would state banks benefit if they received a rush of new deposits; and who would gain from demonetisation?

The topics were broken up to prevent anyone from joining the dots and concluding that a cash swap was in the offing.

"We didn't want to let the cat out of the bag," said a senior official directly involved. "Had people got a whiff of the decision, the whole exercise would have been meaningless." Under Adhia's oversight, the team of researchers assembled and modelled the findings in what was, for it, a theoretical exercise.

It was made up of young experts in data and financial analysis; some ran Modi's social media accounts and a smartphone app that he used to solicit public feedback.

Yet for all the planning, Modi and Adhia knew they could not foresee every eventuality, and were willing to move swiftly.

The announcement caused chaos, with huge queues forming at banks when they reopened after a short holiday.

New Rs 2,000 notes were hard to come by and barely any new Rs 500 notes had been printed. India's 200,000 cash dispensers could not handle the new, smaller, notes and it would take weeks to reconfigure them.

Filling ATMs with the 8 trillion rupees ($117 billion) in new bank notes that the finance ministry reckons are needed to restore liquidity to the economy is even trickier.

In a best-case scenario, in which India's four bank note presses churned out new Rs 500 and 2,000 notes designed to replace the abolished ones, it would take at least three months to hit that target.

Secrecy paramount

Secrecy was paramount, but clues had been left.

Back in April, analysts at State Bank of India said that demonetisation of large-denomination notes was possible.

The Reserve Bank of India, the central bank, also disclosed in May that it was making preparations for a new series of bank notes that were confirmed in August when it announced it had approved a design for a new Rs 2,000 note.

The printing presses had only just started turning when the media finally started to run with the story in late October.

"The plan was to introduce it around November 18, but there was a clear sign that it could get leaked," said one person with direct knowledge who, like others interviewed by Reuters, asked not to be named due to the sensitivity of the matter.

Some officials in the finance ministry had expressed doubts about scrapping high-value notes when the idea came up for discussion. They now feel resentment at the secrecy in which Adhia rammed through the plan on Modi's orders.

They also say the plan was flawed because of a failure to ramp up printing of new notes ahead of time.

Other critics say the Adhia team fell prey to a form of "group think" that ignored outside advice.

In the words of one former top official who has worked at the finance ministry and central bank: "They don't know what's happening in the real world." Reuters

13 govt school teachers killed in road accident near Fazilka

13 govt school teachers killed in road accident near Fazilka

09 Dec 2016 | 12:05 PM

FAZILKA: Thirteen government school teachers, including five women, were killed in a road accident near Chandipur village, 9 km from here, on Friday morning.

There will be a quake when I’ll speak in Parliament, thunders Rahul Gandhi

There will be a quake when I’ll speak in Parliament, thunders Rahul Gandhi

09 Dec 2016 | 12:45 PM

NEW DELHI: Congress vice president Rahul Gandhi on Friday said demonetisation is the biggest scam in the Indian history.

Govt slashes import duty on wheat to zero; Oppn calls it 'anti-farmer'

Govt slashes import duty on wheat to zero; Oppn calls it 'anti-farmer'

09 Dec 2016 | 12:31 PM

NEW DELHI: The Rajya Sabha was adjourned twice on Friday following uproar by the Opposition over slashing of import duty on wheat to zero per cent.

Navy helicopter makes emergency landing in Goa after oil leakage

Navy helicopter makes emergency landing in Goa after oil leakage

09 Dec 2016 | 12:54 PM

PANAJI: An Indian Navy helicopter on Friday made an emergency landing after oil leakage was detected, officials said. All the persons aboard are safe.

Pained at allegations; army is apolitical, Parrikar tells Mamata

Pained at allegations; army is apolitical, Parrikar tells Mamata

09 Dec 2016 | 11:34 AM

NEW DELHI: Defence Minister Manohar Parrikar has sent a letter to West Bengal CM Mamata Banerjee saying he is “deeply pained” at the allegations against the Army.

Twitter account hacked, says Vijay Mallya

Twitter account hacked, says Vijay Mallya

09 Dec 2016 | 11:35 AM

NEW DELHI: Embattled liquor baron Vijay Mallya on Friday said his twitter and e-mail accounts have been hacked and some of his personal and financial details, including passwords, addresses and phone number, were posted.

American Congress clears decks for India to become key defence partner

American Congress clears decks for India to become key defence partner

09 Dec 2016 | 11:23 AM

WASHINGTON: The US Congress has cleared the decks for India to become a "major defence partner", with the Senate passing the 2017 National Defence Authorisation Act.

Sikh-American praises Obama for standing with the community

Sikh-American praises Obama for standing with the community

09 Dec 2016 | 11:50 AM

WASHINGTON: A leading member of the Sikh-American community has praised President Barack Obama and wife Michelle for standing with the Sikh community during a challenging time

Encounter between militants, security forces in Anantnag enters day 2

Encounter between militants, security forces in Anantnag enters day 2

09 Dec 2016 | 11:21 AM

SRINAGAR: An encounter between militants and security forces in Anantnag district entered the second day on Friday as a search operation to trace the ultras continued.

Over 2 lakh Indians studying in American universities: Report

Over 2 lakh Indians studying in American universities: Report

09 Dec 2016 | 11:49 AM

WASHINGTON: As many as 2,06,582 Indians are currently enrolled in American universities and institutes of higher education, registering a growth of over 14 per cent.


Another session lost?

A timely rebuke from a marg darshak


Questionable actions

PM, people must have similar benchmarks

A real number cruncher


A razaiwalla & Mr Mahesh ShahSTATECRAFT

A razaiwalla & Mr Mahesh Shah

Harish Khare

Invocation of janshakti against rajya shakti dangerous

Why burn schools in Kashmir?

Vinod Adhikari

The act of separatists burning schools in Kashmir raises a point: Is it not unfair to allow the disruption of education and stake the future of the youth of the Valley? The only way forward is exemplary governance that will ensure education, safety and employability to the future generation which is the real resource of any nation.

more Opinion...
Supreme Court to hear petitions challenging demonetisation policy

Supreme Court to hear petitions challenging demonetisation policy

09 Dec 2016 | 12:47 PM

NEW DELHI: The Supreme Court will on Friday hear a batch of petitions and public interest litigations (PILs) challenging the demonetisation policy of the Central Government.

CITY FOCUS

30 days of suffering, and counting

30 days of suffering, and counting

09 Dec 2016 | 2:18 AM

CHANDIGARH: It was this day last month that Prime Minister Narendra Modi dropped the bombshell of demonetising currency notes of Rs 500 and Rs 1,000 denomination.

NoDeputy CM Sukhbir Badal helps his father and CM Parkash Singh Badal take seat at the rally in Moga on Thursday. Tribune photo: Pawan Sharma

Polls ahead, SAD, BJP leaders sing in one voice

09 Dec 2016 | 1:09 AM

MOGA:Eying the Assembly elections, SAD and BJP leaders spoke in one voice over the riverwaters issue at the mega rally here today.

No

Meanwhile, another queue death

09 Dec 2016 | 12:47 PM

LUDHIANA:A 48-year-old woman died after she was allegedly pushed by a guard outside a Punjab National Bank branch on the Shingar Cinema road today.

No

Panel wants Mann out for rest of session

09 Dec 2016 | 11:28 AM

NEW DELHI:The parliamentary panel probing the alleged security breach by AAP’s Sangrur MP Bhagwant Mann today recommended his suspension for the remaining period of the current Lok Sabha session.

collapse stories
Narrow escape for Abhay Chautala as vehicle stuck in pile-up due to fog

Narrow escape for Abhay Chautala as vehicle stuck in pile-up due to fog

09 Dec 2016 | 12:57 PM

KARNAL: Haryana Opposition leader Abhay Chautala had a narrow escape as several vehicles piled up near Nilokheri on National Highway-1 owing to dense fog. Abhay, who was on his way from Chandigarh to Bhiwani, and his staff are safe.

Electric buses worry cab owners

Electric buses worry cab owners

09 Dec 2016 | 1:02 AM

KULLU: The successful electric bus trial on the Manali-Rohtang route this year has left taxi operators worried for their livelihood.

Nursing crunch at Valley hospitals hits healthcare

09 Dec 2016 | 12:46 AM

SRINAGAR: Kashmir hospitals are facing acute shortage of nurses as tertiary and secondary care hospitals have just a single nurse for at least 30 patients, which is adversely affecting the healthcare and increasing the mortality rate.

CM promises moon to all unemployed by 2022

CM promises moon to all unemployed by 2022

09 Dec 2016 | 12:37 AM

HARIDWAR: The state government is committed to providing employment to up to 2022. Chief Minister Harish Rawat said this after inaugurating a Ganga ghat after Sant Ravi Das and renaming the Jwalapur Kumbh Setu as Bhagwan Vishwarkarma bridge here last evening.

S Korea parliament impeaches Prez Park

S Korea parliament impeaches Prez Park

09 Dec 2016 | 1:09 PM

SEOUL: South Korean lawmakers today passed an impeachment motion against President Park Geun-Hye, stripping away her sweeping executive powers over a corruption scandal that paralysed her administration and triggered massive street protests.

Andhra CM panel meets top bankers

Andhra CM panel meets top bankers

09 Dec 2016 | 12:36 AM

NEW DELHI: The first meeting of the sub-committee on demonetisation and its related issues headed by Andhra Pradesh Chief Minister Chandrababu Naidu met in Mumbai today, where the members of the panel interacted with senior RBI officials and top bankers of the country with an aim to address the issues concerning the supply side of digital transactions.

NoKeaton Jennings celebrates after scoring a ton on his debut in Mumbai on Thursday. afp

Keaton sets up England

09 Dec 2016 | 2:20 AM

MUMBAI:England must be really thankful to Karun Nair, for he dropped debutant opener Keaton Jennings for 0 early in the first day of the fourth Test.

No

Bhuvi’s throw takes down umpire Reiffel

09 Dec 2016 | 2:21 AM

MUMBAI:In a freak incident, umpire Paul Reiffel was accidentally hit on the back of his head by a throw from Bhuvneshwar Kumar today.

Punjab gain upper hand

09 Dec 2016 | 2:16 AM

RAJKOT:Mumbai were in trouble at 8/2 after Punjab rode on Mayank Sidhana’s century and skipper Gurkeerat Mann's 93 to notch up 468 in the Ranji Trophy match here today.

collapse stories
LIFE+STYLE
  • Princess’ diary

    Princess’ diary

    It could well be one of her well-presented BBC shows. As Anita Anand a political journalist, TV presenter and author, delivers a talk on her first book Sophia: Princess, Suffragette, Revolutionary, she doesn’t falter for a minute.

  • Star Track
  • Celebrations continue

    Celebrations continue

    Yuvraj Singh and Hazel Keech’s marriage celebrations seem like a never-ending affair.

  • SpectrumMy uncle Balwant

    My uncle Balwant

    I have known Uncle Balwant (my father’s elder brother) since my childhood days in Bathinda. His occasional visits and long letters from exotic-sounding places in foreign countries during the 1950s and 1960s were special events as he brought to the family a whole new world —much larger and exciting — peopled by artistic and literary names, compared to what our small-town life of Bathinda offered.

  • 920 File Nominations For 102 Punjab Assembly Seats

    CHANDIGARH:Nine hundred and twenty candidates have filed their nomination from the 102 constituencies of the Punjab Vidhan Sabha, according to information reaching here tonight.

  • Sant Assails Cong- CPI-G.S. Dal Alliance

    AMRITSAR:Sant Fateh Singh, President of the Shiromani Akali Dal, today ridiculed the Congress, the Gurnam Singh Akali Dal and the Communist Party for their “unholy” alliance.

more Spectrum...

YOUR WORLD AND YOU

  • Jobs and creerThe best bet

    The best bet

    While people may raise hue and cry over the demonetisation, it is opportunity knocking at the door of E commerce giants. Digital wallet companies are reporting that demand for their services has seen a whopping increase in the past few weeks

  • more Jobs Careers...