New Delhi: "Despotic and authoritarian" is how Nobel Laureate and Bharat Ratna Amartya Sen describes the decision to abruptly ban 500- and 1000-rupee notes. "The alleged objective of dealing with black money is something all Indians would laud. But we have to ask whether this is the good way to do it? This decision is about minimal achievement and maximal suffering," Dr Sen said, appearing from Harvard University on NDTV's The Buck Stops Here.
- Nobel laureate Sen says notes ban is "small fry" in fighting black money
- My criticism not influenced by ideological differences with PM: Sen
- Notes ban violates basic tenet of trust, is "despotic": Sen
On November 8, in an unscheduled television address, Prime Minister Narendra Modi announced that just hours later, high-denomination notes would be illegal. 86% of the cash in circulation was benched in one stroke, creating a cash crisis that the PM said would take "50 days" to resolve as he asked people to bear with short-term hardship in the national interest of warring on corruption and tax evasion.
Making the case that only a very small percent of black money is held in cash "about six percent and certainly less than ten percent," Dr Sen said that demonetisation is "small fry in terms of achievement but a big disruptor to the Indian economy." Like other critics of the PM's initiative, he said he backs the intent but faults the execution of the reform, "We all want something to be done about black money. But surely, it also has to be intelligent and humane. That has not happened."
With new bills in short supply, banks run dry early in the morning. ATMs are still being reconfigured to be able to stock the new notes which are of a larger size. Rural India, cut off from formal banking, is especially short-changed, though many say they support the PM's new scheme.
Asked why he used a sweeping adjective like "despotic" to describe an economic policy which is drawing both positive and negative reviews, Dr Sen explained "Despotic in the sense that it breaks down trust in the currency." Making the argument that the rupee is a promissory note, the noted economist said that for the any government to not honour it is to renege on a basic promise. "If suddenly a government says we won't pay you, that is despotic. I am not a fan of capitalism but...trust is key to capitalism; this goes against trust altogether. There is a potential danger of undermining the economy and the very basis of capitalism. Tomorrow the government could do the same with bank accounts and not allow anything above a certain amount unless people prove they are not racketeers."
Dr Sen who has been a trenchant critic of Narendra Modi (his most recent run-in with the government has been over its removal of board members like him from the prestigious Nalanda University in Bihar), rubbished the suggestion that his ideological disagreements with the Prime Minister are guiding his criticism of demonetisation. "I would never criticise Modi for wanting to get rid of black money. If he did it successfully, I would be full of admiration and applause. My worry is that with this move, the lives of law-abiding citizens and white money-holding people will be that much harder. My differences with Modi are over our view of India... and I would like to say the BJP does not have license based on 31 percent of the vote to declare some people anti national just because they happen to disagree with the government."
Dr Sen was honoured with the Bharat Ratna during the NDA tenure of Atal Bihari Vajapyee.