VOLUME 33

NUMBER 24

NOVEMBER 26- DECEMBER 09, 2016

ISSN 0970-1710

WWW.FRONTLINE.IN

ESSAY
Balochistan vs Kashmir

51

LAB OUR I S S UE S
S.C. ruling on equal
pay for equal work

59

E N VI R ON M E N T
Delhis air pollution
explained

62

C ULTUR E

COVE R S T O R Y

Politics at its cynical worst

As people queue up to gain access to cash, the politics of the demonetisation move reveals the cynicism of the ruling dispensation. 4
Impact on informal sector 32

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Interview:
Thomas Franco, AIBOC 12
Wrecking the system 14
Black money in a new hue 18

67
92
96

99
102

U. S . E LE CTI ON S

One more blow to rural India 34

Cash bombs in rural U.P. 37
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Tamil Nadu: Farmers in despair 42
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Kerala: Assault on cooperative banks 47
West Bengal:
BJPs deposits revealed 49
Datacard: Digital pipe dream 126
Lack of preparedness 128

All pain for the majority 21

African experience 25
Interview: Pronab Sen 26
Bank staff at breaking point 28
Mumbai business world:
After the shock 29

Trumps election:
Politics of refusal
Questions for Europe
Why the U.S. media
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Far Right captures
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Letter to friends
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BOOKS

On the Cover
In Punjab, people queue up at a bank at Khasa village, 20 km from Amritsar, to exchange the demonitised notes.

LE TTE R S

105
109
113
116
123
86
130

COVER DESIGN: T.S. VIJAYANANDAN

PHOTOGRAPHS:NARINDER NANU/AFP

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DECEMBER 9, 2016 .

FRONTLINE

CO VE R S TO RY

POLITICS AT ITS

As people across the country queue up to gain access to cash, the

politics of the demonetisation move reveals the utter cynicism of the
ruling dispensation. B Y V E N K I T E S H R A M A K R I S H N A N
KEHTHE THE KAALA DHAN PAR SURGICAL
strike ho raha hain. Par yeh tho aam janta ke uper
surgical strike ban gaya. Samajh nahi aa raha hain ki
yeh surgical strike kab tak jaari rahega ( It was said that
black money was being targeted in a surgical strike. But,
it has turned out to be a surgical strike on the common
people. Have no clue how long this surgical strike is going
to continue.) This was what someone said aloud in a
serpentine queue outside a bank at Mehrauli in south
FRONTLINE .

DECEMBER 9, 2016

Delhi. A chorus of responses dominated by curses on the

leaders of the government and the bank staff followed.
This was on November 17, eight days after Prime
Minister Narendra Modis late-evening announcement
demonetising currency notes of 1,000 and 500
denominations.
Modis dramatic announcement was accompanied by
assurances from his government that banking would get
regularised in a matter of three days; some of them were
4

R.V. MOORTHY

CYNICAL WORST

with the hundreds of thousands of popular responses

that came up in relation to the move and its stated
objectives. A sizable number of these responses
highlighted the most tangible result of the movethe
palpable inconvenience and suffering faced by common
people. They also reected the widespread
disenchantment triggered by the government
machinerys obvious unpreparedness in dealing with the
situation.
The widespread distress and the governments
ineffectual strategies to mitigate the suffering raised
questions about the intent and rationale of the measure.
These questions were not unexpectedly reected in the
mainstream political space and the judiciary. Seeking a
report from the Union government, the Calcutta High
Court said that the government had gone ahead with the

P E OPL E W A I T I N G I N Q U EU E to exchange money

at the Chandni Chowk area in New Delhi on
November 16.

from Finance Minister Arun Jaitley and senior officials

such as Economic Affairs Secretary Shaktikanta Das. Not
only did that not happen, the government itself
repeatedly complicated reinstatement of normalcy by
coming up with different and contradictory directives
during the week following the announcement. As many
as 10 modications were made to the schemes
procedures in a matter of seven days. These changes were
brought, professedly, to ease the difficulties faced by
people in depositing and withdrawing cash and to curb
manipulation of the scheme by dishonest people. The
comment heard at the queue in Mehrauli was of a piece
5

FRONTLINE .

DECEMBER 9, 2016

PTI

R.V. MOORTHY

partners have contradicted the BJPs position. An

analysis of the circumstances leading to the
announcement of the scheme as well as its
implementation lends credence to the questions that
have been raised. Ironically, the stated objective of
unearthing massive amounts of black money has
emerged as the weakest argument in its favour. The
ip-ops in deciding the procedures to be adopted and
the confusions they created only exposed the weakness of
the governments claims. By all indications, these ipops represent the lack of cohesion within the
governance system on the path and direction to be
adopted on the move. Signicant segments of the
bureaucracy are apprehensive that the net impact of all
this will be so debilitating that it may set the economy
back by a couple of years. Amid the growing panic, Modi
seems to have fallen back on his individualistic political
practice: raising rhetorical positions before the people,
while refusing to address constitutional institutions,
including Parliament. The BJPs official position is that
the timing was dictated by the condential schedule of
the action plan drawn up by the Prime Minister to

P R IM E M I N I S T E R N AREN D RA M O D I at a function in
New Delhi on November 16. (Right) Finance Minister Arun
Jaitley and Economic Affairs Secretary Shaktikanta Das at a
press conference on demonetisation on November 12.

scheme without doing its homework. The Supreme Court

also criticised the government for not fullling its
promise of bringing relief to the people. It pointed out
that the hardships caused by the move could even lead to
riots. The responses in the mainstream political space not
only highlighted the schemes flawed implementation
and the sufferings it caused but also raised questions
about its legality and the challenges it posed to the
principles of Indian federalism. The issue rocked
Parliaments winter session and shook up businesses,
including wholesale markets and big commercial
establishments.
The question of timing was central to the debates on
the move. Why did the Union government choose the
moment that it did to make the move? Why this hurried
plunge without having built up the required
infrastructural support? Was the unseemly haste
dictated by political considerations such as the Assembly
elections due in early 2017 in Uttar Pradesh and Punjab?
Or was it a piece of realpolitik to cover up for the Modi
regimes governance failures, especially the recent
worsening of the security situation on the India-Pakistan
border that forced people in the region to ee to other
areas? Were there other motivations of a personal nature,
including apprehensions about the presentation of a
corruption case in the Supreme Court involving Modi
among others? Was some kind of advance indication of
the scheme given to some big corporate and political
entities so that they could legitimise their huge cash
compilations before the launch?
These questions have been raised in different public
forums and evoked varying answers, some of them from
the ruling National Democratic Alliance (NDA) led by
the Bharatiya Janata Party (BJP). The NDA has not
spoken with one voice on the issue, and some of its
FRONTLINE .

DECEMBER 9, 2016

AJAY VERMA/REUTERS

A N OTI CE displayed on an
V. SREENIVASA MURTHY

ATM machine which is no

longer dispensing cash in
Chandigarh on November 14.
P E OP LE AT A B AN K in

Bengaluru on November 19
to withdraw and deposit cash.

combat black money in the economy. Combating black

money was in fact one of the main propaganda planks of
Modis hugely successful campaign in the general
elections of 2014.
The BJP leadership asserts that he has been
consistently working on it after becoming Prime
Minister. Frontline spoke to BJP leaders, including party
spokesperson Mukthar Abbas Naqvi, on the issue. This
was what they said: A decision to constitute a special
investigation team (SIT) headed by a retired Supreme
Court judge to unearth black money was taken at Modis
rst Cabinet meeting. The task before the SIT was
primarily to unearth Indian black money stored abroad.
This was followed by the income disclosure scheme (IDS)
this year, which was open for four months, from June 1 to
September 30. After it was over, Jaitley claimed
Rs.65,000 crore had been declared as unaccounted
income and assets.
A number of BJP leaders who spoke informally to
Frontline said that the Prime Minister was not fully
satised with the achievements of the IDS, though his
Finance Ministry rated it as a success. Also, the SITs

an ATM in Mumbai
on November 16.

SHIV SENA OPPOSES MOVE

Shiv Sena, the NDAs ally, however, contested these

claims. It asserted that this was just a political gambit in
view of the forthcoming Assembly elections. Shiv Sena
leader Harshul told Frontline: Narendra Modi had
made a poll promise about bringing back black money
stashed abroad and depositing Rs.15 lakh in the bank
accounts of Indians. At that time, he had stated on record
that the Indian black money was predominantly stashed
abroad. People are asking about that promise now. Modi
knew he needed to do something to stop these questions.
His answer, in his own style, is to turn around to India
from abroad and demonetise Rs.500 and Rs.1,000 notes.
We do not know how this will ultimately play out in the
Indian economy, but the one clear fact is that the distress
of the people is mounting day by day. An abject exhibition
as to how political games are causing hardships to society
at large. The Sena has joined hands with the Trinamool
Congress (TMC) and the Aam Aadmi Party (AAP) to
demand a rollback.
Even some senior BJP leaders such as Defence
Minister Manohar Parrikar have said on record that it
might impact the forthcoming Assembly elections.
According to Parrikar, it will bring such benets to the

PAUL NORONHA

Q U EU E O U T S I D E

work in unearthing offshore black money was not

producing the kind of results he had expected. He wanted
to do more to dig out black money, and hence the
demonetisation scheme, which was planned for over six
months. These leaders, however, were not able to explain
why the implementation of the scheme turned out to be
so messy when it had been planned for over six months.
According to the BJP spokesperson G.V.L. Narsimha
Rao, there could have been some glitches since the
scheme had to be planned retaining its secrecy. Both Rao
and Naqvi claimed that this element of secrecy was
crucial and that it had effectively struck at cash-driven
terrorist operations of the Islamist jehad variety in
Jammu and Kashmir and other areas and the activities of
Maoists in eastern and central India.

FRONTLINE .

DECEMBER 9, 2016

people in general that they will rally behind the BJP in

large numbers. Informally, a number of BJP leaders
admit that the move is likely to create a cash crunch for all
parties in the forthcoming elections. They foresaw the
most severe impact in Uttar Pradesh and believed that
the Bahujan Samaj Party (BSP), a major political
adversary in the State, would be hit the hardest. A senior
Rashtriya Swayamsewak Sangh (RSS) activist based in
Lucknow told Frontline: All political organisations have
a huge quantum of cash-intensive operations, but the
BSP is traditionally known to be a party more dependent
on cash-based operations. Given this background,
demonetisation should hamper the partys preparations
for the Assembly elections in a big way. Already, there are
whispers in Uttar Pradesh political circles that the core
leadership of the party, including its topmost leader
Mayawati, are goading district and regional workers of
the BSP to take urgent measures to tackle the
organisational and operational problems inicted by
Modis political master stroke.
The BSP leaderships answer to these suggestions is
that Modi and his party have played a sleight of hand
with the people and with their political adversaries. The
BSP leader Naseem Uddin Siddiqui alleged that the BJP
outdid all other parties in its use of black money in all
periods of political activity, including in elections, and
that demonetisation was a mere camouage for devious
political games. There are indications from places as
disparate as West Bengal and Rajasthan that the BJP had
taken care to boost its own cash reserves before the
announcement of the scheme. If it is the exposure of bank
transactions that has put the BJP in a spot in West
Bengal, Bhavani Singh, a BJP MLA, has stated that the
Ambanis and Adanis were given prior information of the
scheme, he said. Siddiqui added that the BSP would not
be cowed down by these stratagems and would expose
Modi and the BJP conclusively before the people.
Several incidents preceding the move have indeed
fuelled suspicions that certain people and entities got
advance notice of the move. And it is not just about the
deposit of large amounts of cash by the BJP in West
Bengal and Bhavani Singhs allegations. The sudden rise
in cash deposits in all major banks over the last quarter,
which bucked existing trends in the sector, has been seen
as dubious.

PTI

group in November 2014. The entries in the Sahara

diaries listed payments made to several politicians
between October 30, 2013, and February 21, 2014. The
list contained several names, including that of Modi Ji,
Chief Minister of Gujarat. The Income Tax Departments
appraisal report on the diary mentioned that at least
eight payments were made to Modi ji in Ahmedabad
through one Jaiswal ji during the period under
consideration. These payments totalled Rs.40.10 crore.
Incidentally, this was the period in which Modi
cemented his claim as the BJPs prime ministerial
candidate for the 2014 general elections. Bhushans
representation also showed that there were other entries
regarding payments made to CM MP, CM
Chhattisgarh and CM Delhi.
Bhushans representation also highlighted records
unearthed during a raid in
October 2013 at Aditya Birla
Group
companies,
again
pointing to illegal pecuniary
benets to the tune of Rs.25
crore given to then CM
Gujarat. In the months
following these raids, the tax
authorities investigated the
details that had come up before
them. The Birla group official
AR VI N D KE J R I W A L,
who had made the noting on
Delhi Chief Minister.
CM Gujarat said his reference
was to a company called
Gujarat Alkalies and Chemicals
Ltd, though the authors of the
Sahara entries came up with no
such explanation. However,
Bhushan says, it was evident
that neither the IT Department
nor the CBI initiated concrete
action that could lead to judicial
processes or punitive measures
in these cases. Then, in June
THE ACTI VI S T
2015, the man leading the tax
lawyer Prashant
probe, K.B. Chowdary, was
Bushan.
made the head of the Chief
Vigilance Commission. Bhushan challenged this
appointment. The representation of October 25, 2016,
was in continuation of the legal activism that the senior
lawyer had undertaken. During the day on November 8,
Bhushan wrote again to the Income-tax Settlement
Commission underscoring the gravity of the revelations
in the Sahara diaries and asserting that the commission
should not grant any immunity in the matter. The
demonetisation announcement came that night.

NEEDLES OF SUSPICION

These intriguing transactions have again drawn

attention to personal factors vis-a-vis Modi. These
factors came up before various constitutional bodies,
including the Central Bureau of Investigation (CBI), the
Central Board of Direct Taxes ( CBDT), the Central
Vigilance Commission and the SIT on black money,
barely
a
fortnight
before
Modis
dramatic
announcement. This was through a representation made
by the social activist lawyer Prashant Bhushan, president
of Swaraj Abhiyan, on October 25, 2016. Bhushan drew
attention to certain diaries seized by the Income Tax
authorities during a raid at the offices of the Sahara
FRONTLINE .

DECEMBER 9, 2016

A COVER-UP ATTEMPT?

Bhushan is of the view that his October 25 representation

and the follow-up that he made in November could have
been tracked and notied at the highest levels of the
Finance Ministry and other government institutions.
This, he feels, may have triggered a high-level gambit that
8

SHANKER CHAKRAVARTY

turning out to be yet another jumla, but a more painful

and harassing one for the common people. The 2014
jumla was essentially about failed expectations. But the
2016 demonetisation drive has led to the kind of
harassment that has even caused deaths in tortuous
queues across the country. As many as 50 deaths have
been reported in the rst 10 days of the demonetisation
process.
The repeated changes in procedure and the
intermittent stoppage of services, say senior officials in
the Finance Ministry, are reective of the manifold and
conicting approaches being advanced by different
sections of the official machinery. The talk among senior
officials also revolves around a strange yoga inuence
on the administrative ip-ops. While Shaktikanta Das
is the one who appears before the media with
announcements of changing decisions, most of them are
apparently inuenced and guided by Revenue Secretary
Hasmukh Adhia, a condant of the Prime Minister who
has a PhD in yoga.
A sizable number of Finance Ministry officials admit
that the drive is not contributing anything at all to
unearthing black money. Reports reaching government
agencies from across the country talk about various
methods and machinations employed by the rich and the
powerful to convert black money into white. Senior
bankers and corporate players have joined hands to
undertake this operation, says a senior official on
condition of anonymity. The cumulative effect of all this,
these officials apprehend, may break the backbone of the
essentially cash-driven rural economy so seriously that
recovery may take considerable time.
As these forebodings loom large, the politicking of the
BJP leadership as well as its rank and le continues apace
with two distinctive streaks. One is being advanced by
Modi himself with rhetorical calls and theatrical,
maudlin shows seeking to showcase his love for the
country and its people. He asserts that demonetisation is
not an end of his projects and that he has many more in
mind to make India corruption-free. He invokes
unspecied threats against him and asserts that he will
face all that for the poor people of the country.
The narrative in this stream is clear: it is about Modi
the saviour of the poor facing the rest of the political class,
all of them apologists for the rich and the elite. The
second stream, being advanced at the ground level by the
BJP rank and le, is once again about the possible
deposits to bank accounts of those registered as below the
poverty line. Across Uttar Pradesh, the campaign goes on
asking people to be prepared for the bonanza transfer
that the Modi government will effect once it rounds up a
fair sum of money. Expectations are growing on account
of this campaign even as it prevents eruption of riots
amid the harassed people. Indeed, it is politics at its
cynical worst.

WE ST B E N G A L C H I E F M I N I S T ER Mamata Banerjee
with National Conference leader Omar Abdullah, AAP MP
Bhagwant Mann, Shiv Sena leaders and other opposition
MPs, marching to Rashtrapati Bhavan to present
a memorandum to the President, on November 16.

could overshadow all charges being raised against the

Prime Minister. Ram Jethmalani, veteran lawyer and
Rajya Sabha member, formerly associated with the BJP,
also told Frontline that the demonetisation move had all
the makings of a huge cover-up. Writing to the Finance
Minister on November 15, a week after demonetisation
drive was announced, Jethmalani stressed that the BJP
and its government had failed in fullling the promise of
unearthing black money and that he was planning to
initiate legal proceedings against the party for civil and
criminal breach of trust. Though the letter did not make
any direct reference to the demonetisation drive and the
claims being made on it, Jethmalani suggested the
partys track record on this front was marked by
chicanery. He quoted from the BJP manifesto and stated
that the promise was to initiate the process of tracking
down and bringing back black money stashed in foreign
banks and offshore accounts.
The party had also promised not only to set up a Task
Force for this purpose but also to recommend
amendments to existing laws or enact new laws as also
proactively engage with foreign governments to facilitate
information sharing on black money. But the track
record of the past two and a half years was one where the
BJP was also merely following the path adopted by the
Congress during the 2008-14 period. The German
government as well as the Swiss Association of Banks
were ready to pass on the names of Indians holding black
money in their banks, but both the Congress and the BJP
have manoeuvred in such a manner that the names do
not come out and reach India. This only highlights what
Amit Shah later stated: that the talk on bringing back
black money was only a chunaavi jumla [election trick],
Jethmalani told Frontline.
By all indications, the demonetisation drive is

Datacard: Digital pipe dream, page 126

Deadly disruption, page 128
9

FRONTLINE .

DECEMBER 9, 2016

Banks have
suspended all
normal operations
Interview with Thomas Franco, senior
vice president, All India Bank Officers
Confederation. B Y V . S R I D H A R

S. KRISHNAMOORTHY

ON the night of November 9, a day after Prime Minister Narendra Modi unleashed his surgical strike
against black money, eight employees of State Bank
of India (SBI) were killed in an accident. The eightfour officers, including a branch manager, three
staff members and the driverwere killed while returning late in the night after making arrangements to
meet the ood of customers expected at the bank the
following morning. Since then, reports of more casualties of bank employees have come from other parts
of the country, indicating the extent to which this
section of the workforce has been subjected to hardship in the wake of the unprecedented crisis in Indian
banking. Thomas Franco, senior vice president, All
India Bank Officers Confederation (AIBOC), who is
also an officer with SBI, spoke to Frontline about how
bank employees have borne the brunt of the chaos that
has hit banking operations in the country. Excerpts:

THOM AS FR A N C O.

of the value of currency in the nancial system, should

there not have been a plan to print the new notes that are
to replace them? If they could print the Rs.2,000 note,
which was not even in existence earlier, why did they not
show any urgency in quickly getting the Rs.500 note into
the system? Even now the new Rs.500 note has not
reached most parts of the country, especially the south.
Bank employees had no clue about how to deal with
the situation when the banks opened two days after
Modis announcement. The forms required for exchanging the old notes were not ready and the software to
ensure compliance (while surrendering old notes) was
delayed. But worst of all, the new currency had not
reached most branches. The entire burden of making
payments to customers fell on the poor hundred-rupee
note.
The currency management in banks is centralised.
For instance, in the case of SBI there are three currency
administration cells catering to the entire Chennai Circle. These are coordinated by a centralised Currency
Administration Branch, which is the nodal point for
receiving remittances from the Reserve Bank of India
[RBI]. This was the bottleneck in the emergency that
was unfolding on November 10. This meant that although queues were building up from 7 in the morning,
the cash did not reach most branches (even in urban
centres) till about noon. Meanwhile, the crowds were
naturally getting restive. The result was that on the 10th,

As an insider, what is the scale of the problem as you

see it? We can see the long queues at banks and
ATMs, but what has it been like from the inside?
What does it mean to be a bank employee in these
times?
I am not even going into the issue of whether the
move will eliminate black money. But one thing is
clear: the decision was taken without proper planning. It is said that this was because things had to be
kept secret. Compare this episode with what happened at the time of bank nationalisation in 1969. On
July 18, 1969, Morarji Desai resigned as Deputy Prime
Minister. Even as this was happening, a small group
was working on how to go about the business of
nationalisation, including drafting the ordinance to
enable it. Morarji Desai was not in favour, so Indira
Gandhi wanted him to quit; she created a situation in
which his continuation became untenable. The point I
am making is that the move was prepared so well and
with great political and administrative cleverness.
But, in this case, some basics have been forgotten.
When the government was planning to withdraw currencies that account for the overwhelming proportion

FRONTLINE .

DECEMBER 9, 2016

12

almost all branches of SBI worked up to 9 or 10 p.m.

just to disburse cash.
But did you have cash until then?
Another funny thing: even the RBI did not have
fresh 100-rupee notes, so when we ran out of notes, we
went to the RBI asking for remittances. Faced with the
massive shortage, the RBI gave back to us the soiled
notes we had surrendered earlier. We had to spend
even more time sorting the soiled notes, using what was
reusable. All this took even more time. And, these notes
cannot be put in ATMs because they would get
jammed. This is one reason why so many ATMs went
out of order so quickly.
But the ATMs need to be recalibrated so that they can
dispense the new notes
The new notes cannot sit in the existing cassettes in
the ATM. Recalibration started only a week after Modis announcement. The irony is that we had not got the
notes but started the recalibration process. Most ATMs
can accommodate currency worth Rs.2.1 lakh if they
are dispensing only 100-rupee notes. This means that
an ATM can cater to only 105 persons if each draws the
maximum allowed value of Rs.2,000. But there were at
least 300-400 people at most ATMs.
Some years ago, the RBI allowed the outsourcing of
ATM-loading operations, which are conducted by vesix agencies. Soon after Modis announcement, the
agencies had to rst evacuate the currency that had
become invalid. For the rst three-four days the
amount of cash in ATMs and that reected in the
system were not tallying. This had to be escalated to the
currency administration cells of banks; in many places
there were disputes about how much cash ought to be
in the ATMs when they were emptied. This could be
because of glitches in the ATM. But what I have gathered is that since these agencies cater to several banks,
they maintain their own currency chests. They may
have taken currency from one banks ATM and moved
it into anothers. Most of these agencies do not allow us
to verify their currency chests to ensure compliance.
And, in any case, our ATM nodal officers were overburdenedmost of them are handling 100 ATMsto

If they could print the

Rs.2,000 note, why did they
not show any urgency in
quickly getting the Rs.500
note into the system?

do anything about this anyway. In effect, most ATMs

started working after ve days, that too dispensing only
100-rupee notes. Only by November 15 did some of our
ATMs start dispensing Rs.2,000 notes. Each ATM has
to be visited by two engineers and two joint custodians
of the outsourced agencies. The reports I get suggest
that it takes about one hour to recalibrate an ATM.
What has been the feedback you have got from staff
working in rural areas?
I have heard from colleagues that the worst affected
are NREGA [National Rural Employment Guarantee
Act] workers, agricultural workers and pension holders. Bank staff have done a marvellous job in these
adverse circumstances thousands of bank employees
worked almost through the night on November 9 and
10.
As the crisis unfolded and assumed serious
proportions, Modi announced that business
correspondents would ll the void. What are your
views on this?
This ought to have been announced on the rst
dayit would have helped people. Although I am opposed, in principle, to the concept of such correspondents, such a move would have made sense. I know that
in many places these correspondents charge commission from account holders, but that is not so rampant in
the south. I know that these correspondents are charging commission to open accounts, and in some places
they have even disappeared with cash that belongs to
the banks. There are also agents operating under the
umbrella of a national correspondent: a company of the
Anil Ambani Group, for instance, is a national correspondent for SBI.
What is the extent of cooperation between banks, the
Income Tax Department and law enforcement
agencies?
The software in the system in banks is such that any
deposit of more than Rs.2.5 lakh, even if made in multiple transactions, ensures that a report is automatically
generated. But this is possible only within a single bank.
The problem is that there is no mechanism to match
such transactions in other banks. That is a loophole. In
any case, most of the huge transactions must be taking
place in private banks.
What price is the banking system paying for this
exercise?
Banks have suspended all normal operations. All
attention is on dispensing and collecting cash; all other
operations have come to a standstill. We are all doing
work in which there is no revenue earned for the bank.
Lending, which is our main business, is just not happening.

13

FRONTLINE .

DECEMBER 9, 2016

VI D YA R AM , a
farmer, exits a
bank holding a
new Rs.2,000 note
in Dadri, Uttar
Pradesh, on
November 15.

Wrecking the
system
The liquidity crisis of unprecedented dimensions that the Modi
government has unleashed shocks the economy, drives people to despair
and ruin and threatens consequences that have not been fully
fathomed yet. B Y V. SRIDHAR
FRONTLINE .

DECEMBER 9, 2016

14

ANINDITO MUKHERJEE/BLOOMBERG

C OVER STO R Y

PRIME MINISTER NARENDRA MODI

surprised the nation on November 8 with his master
stroke of demonetising the two central pillars of the
Indian currency systemthe Rs.500 and Rs.1,000 notes
in his war on the black economy. But within a couple of
days even he must have been surprised by the utter lack of
preparedness that pushed the country into a crisis of a
kind the world has rarely seen.
As those at the helm dithered, revised, reviewed and
modied the scheme, almost on a daily basischanging
the terms on which millions of Indians could exchange
the dud currency they were saddled with or to simply
draw cash to meet their everyday needsit became evident that there simply was no plan. By the tenth day it
became clear that those responsible for the massive selfinicted upheavalthe Prime Minister, the Finance
Ministry and the Reserve Bank of India (RBI)were
witless and clueless about how the exercise was unravelling. Above all, the government was shown to be callous,
having utter disregard for either the nature of the Indian
economy or how the people earn their livelihoods. The
simple truth that cash is not the last refuge of the Indian
scoundrel but the lubricant that drives the vast swathes of
the Indian economy has been lost on the policy pundits,
the bhakts seeking a techno-utopian x to weighty and
long-standing problems and the elite who see India in
their own image.

India and elsewhere. Carrying dud notes in their walletshaving received their salaries in these very notes just a
few days earlierand not sure whether they would get
paid that day, there was no reason for them to travel
anywhere that day.
The timing was horribly wrong for those in rural
India too. In many places the kharif crop had just been
harvested; elsewhere harvesting was just about to commence when demonetisation hit them like a tsunami. In
Hassan (about 180 kilometres from Bengaluru), for instance, ginger growers, many of them migrants from
Kerala a generation or two ago, are postponing their
harvest in the hope that they can ride out the crisis. But
they have to pay a price for this wait because the roots will
dry up and weigh less. Those unable to wait found that in
the eight days since the demonetisation announcement,
ginger prices had fallen from Rs.1,200 a bag (62 kg) to
Rs.900 a bag.
Maize growers with small holdings, whose harvest is
too small even in normal times to justify the costs of
moving the produce to the local mandi, nd that the local
merchants simply do not have the cash to bail them out.
The collapse in demand has resulted in the price of maize
dropping from Rs.1,700 a quintal two weeks ago to
Rs.1,350 a quintal, says Rajaiah, a maize grower in Boovanahalli, a village near Hassan town. Those waiting to
commence the harvest have no cash to pay wages to
workers. And meanwhile, if it rains, they will lose everything. Those who have harvested their crop and need to
quickly prepare for the rabi season cannot buy inputs
because no one is willing to accept the money they have.
Modis announcement, made with much fanfare, that
banking correspondents (going by the nice-sounding
name of bank mitra (friend) would extend the reach of
the banks by delivering cash and enable exchange of the
invalid notes in rural areas appears hollow. It has had no
impact on the ground as they refuse to accept the justoutlawed currency even from womens self-help groups.
Hassan is also coffee country, with a predominance of
small growers. But with the picking season just around
the corner, growers are restive because they are unable to
access cash to pay their workers. Although some workers
do have bank accounts, B.A. Jagannath, a planter at
Ballupete in Sakaleshpur taluk, asks: What is the point
in having the money in the bank if the worker is unable to
purchase vegetables or groceries?
As queues lengthened at the nearly two lakh bank
branches and half of the countrys 2.25 lakh ATMsthe
other half simply did not work in the rst week anywayreports of more than 50 deaths poured in from
across the country. The simple question people were
asking was, why should someone have to die in a queue to
draw money that belongs to them?

LIVELIHOODS AT A STANDSTILL

It was evident from the start that the prime victims of the
demonetisation exercise were ordinary people even if the
move was portrayed as a war on black money. Vehicular
movement in Bengaluru, famed for its traffic snarls, was
smooth on the morning after the announcement. It was
not difficult to comprehend why. In the medias imagination the city may be seen as the IT capital of the
country, but it is also home to a large migrant populationcarpenters from Rajasthan and Bihar; plumbers and cooks from Odisha; domestic labour from West
Bengal, Tamil Nadu and many other parts of the country;
and security personnel from Nepal, Bihar, north-eastern

A CURRENCY CRISIS OF ANOTHER KIND

Faced with the massive unrest across the country, those

holding the levers of power did what clueless administrators do all the time: plead for more time. After initially
insisting that all was well and that every citizen would be
15

FRONTLINE .

DECEMBER 9, 2016

M. PERIASAMY

A R OA D S I D E S T A L L near VOC Park in Coimbatore offers customers the option to pay by paytm. Immediately after the

announcement, companies offering nancial services, especially e-wallet service providers, launched a media blitzkrieg.
less than half the entire value of the currency in circulation in India; add the 1,000-rupee note, and the two
together account for 86.4 per cent of the value of all bank
notes in circulation (see table). Add the 100-rupee note,
and the three notes together account for 96 per cent of all
the currency moving aroundpractically all of it.
A currencys primary purpose is to provide liquidity;
the various denominations are structured in such a way
that they maximise this by providing options to citizens
and other economic agents, which depend on the nature
of the activity in the economy. The central pivot of the
Indian currency system was clearly the 500-rupee note,
much like the role played by the 100-rupee note a decade
or two ago. In this currency scheme, the 500-rupee note
played a central role by providing not only liquidity but a
store of value that was available on call. The notion
among armchair bhakts that the 500-rupee is a just a safe
haven for ill-gotten wealth demonstrates an utter lack of
empathy for those who have suffered most from ination,
especially of the basic necessities of life. A 500-rupee note
is not even one and a half days wage for a casual worker in
an Indian city. Or put another way, gure out how long it
would last for a family of four to merely buy rice and dal.

able to withdraw his or her money, it took a full four days

for Finance Minister Arun Jaitley to acknowledge that
the new notes, including the new colourful one in the
Rs.2,000 denomination, would not t into the ATMs
across the country. He promised that ATMs would dispense the new notes in the next two to three weeks. Modi,
who was away in Japan soon after setting off the restorm, surfaced in Goa and Belgavi to plead for 50 days
time to restore a semblance of normalcy. But it is quickly
becoming clear that normalcy will take a long time coming. The ever-narrowing scope for exchange of the dud
currency and the difficulties in getting valid bank notes
clearly show that a solution is not in sight. And, the
phenomenon of people scurrying across to get their
hands on the good old 100-rupee notebecause they do
not want to hold the 2,000-rupee note, and the 500rupee note is nowhere to be seenis indicative of a crisis
that promises to fester for long. Here is why.
When Modi decidedit is very clear that the buck of
the demonetisation asco stops with himto unleash his
magic sword, he was in effect pulling out of circulation
denominations that were at the heart of the Indian currency system. The 500-rupee note accounts for a little
FRONTLINE .

DECEMBER 9, 2016

16

Seen from this perspective, the 500-rupee note is the

pivot because it serves the requirement of conveniencea single note instead of many, but which is also fairly
easily convertiblewhile also acting as a store of reasonable value in the context of income levels in India.
What was the role of the other relatively smaller cog
in the currency system, the 1,000-rupee note? That bank
note served the purpose of making relatively high-value
transactions. In an economy in which at least half the
national income is generated in informal activities, relatively high values do not necessarily mean high incomes.
For instance, a small-scale cement trader in a semi-rural
setting selling about 50 bags a day may have a turnover of
Rs.15,000 a day, but his prot would be a mere fraction of
this turnover. The 1,000-rupee note would be a convenient option for transactions such as these. The simplemindedand now dangerousnotion that dealings in
all such denominations are suspicious shows an utter
lack of understanding of the nature of the economy; such
pitifully inadequate understanding cannot even begin to
fathom the role of the currency in a system like ours.
If the decision to replace the 500-rupee note with a
fresh one was silly, the move to abandon the 1,000-rupee
note and replace it with the new 2,000-rupee note was
nothing short of foolish. Here is why. The distance in
monetary value between the old 500-rupee note and
1,000-rupee note was much shorter; the introduction of
the 2,000-rupee doubles that distance. This means that
while the 2,000-rupee note may act as a store of higher
value, its liquidity is drastically diminished. This is especially important when viewed in the context of prevailing
income levels and average transaction values in the Indian economy. In any case, the new pink note with a higher
value defeats the very purpose for which the Modi government has supposedly undertaken the traumatic exercise. Not for nothing is pink now termed the new black! It
is not difficult to understand why most Indians who are
now saddled with the new note want to get rid of it at the
earliest opportunity.
While that is the problem with the 2,000-rupee note,
10 days after Modis announcement most Indians have
not yet seen their most-favoured currency denomination,

the 500-rupee note, in its new avatar. Meanwhile, the

humble workhorse, the 100-rupee note, has borne the
brunt of the escalating demand. Anecdotal evidence from
bank employees and customers indicate that the demand
has been so great that banks have put back in circulation
even badly soiled 100-rupee notes that they had surrendered earlier to the RBI. In fact, the soiled notes have
been responsible for jammed precision-engineered
ATMs in many places across the country.
The mysterious absence of the 500-rupee note and
the emergence of the 2,000-rupee note, which nobody
wants (we want change is the common refrain), resulted
in the 100-rupee note being pushed to plug in the gap.
That turned out to be an impossibility as ATMs, now
stacked with these notes, ran out much faster than they
were meant to. Common sense ought to have instructed
the mandarins in the Finance Ministry that asking a
currency that accounted for less than 10 per cent of the
value of currency in circulation to ll the huge void
caused by the withdrawal of a denomination that accounted for one half of the value of all currency in circulation was like trying to arrest the ow of water gushing
from a broken reservoir with a little nger. This is what
explains the desperate, almost daily, announcements by
the Union Finance Secretary of ever-increasing restrictions on withdrawals and exchanges, including the classic one that marks the nger of every exchanger queueing
up at bank counters across the country. Thus, while the
government had mud on its face, citizens had ink on their
hands.
A LONG ROAD AHEAD

Modis plea that he be given 50 days to sort things out is a

desperate act of buying time in the face of criticism that
the massive bungling at the helm, utter lack of preparedness and a complete disregard for the mechanics of a
currency system are responsible for the ongoing crisis.
Here is why the 50-day window sought by Modi is going
to prove grossly inadequate. For that let us turn to the
magnitude of the task at hand and the tools he has to
address it. The simple replacement of the just-banned
500-rupee notenot accounting for the larger numbers

17

FRONTLINE .

DECEMBER 9, 2016

just 3.17 billion, goes the logic of this bizarre move! In any
case, the total now adds up to 18.88 billion new notes. But
the numbers do not stop there because the introduction
of the 2,000-rupee note implies that both 100s and 500s
have to be printed in greater quantities because there is a
huge gap created between the 500- and the 2,000-rupee
notes. Extrapolating from the gures of notes printed in
2015-16 (available in the Annual Report of the RBI
Board, which was submitted by Raghuram Rajan a week

that would be needed to accommodate the growth of

national income in the current yearwould mean the
issue of 15.71 billion new notes.
The master stroke, that is, the introduction of the
new 2,000-rupee note, implies that even though nobody
wants to hold itat least for nowthe government needs
to print just half the number of 1,000-rupee notes to
replace them with the new currency. Since there were
6.33 billion such notes, the government needs to print

Black in a new hue

The notion that replacing high-denomination currency will end the menace of black
money only points to an unwillingness to tackle its truly menacing forms. B Y V . S R I D H A R
THE underlying assumption of the Narendra Modi
government that the ushing out of high-value denomination notes will wipe out the scourge of black money is
not only misplaced but positively and dangerously misleading. The two denominations that were outlawed on
November 8 account for about Rs.14 lakh crore circulating as cash in the Indian currency system. By the governments own admission, it is expected to ush out a
maximum of Rs.2 to 3 lakh crore as a result of the
exercise that has paralysed the entire economy. Given
that the GDP (at current prices) in 2015-16 was about
Rs.136 lakh crore, the share of black money that would
be impounded after the massive exercise would be a
minuscule 2.2 per cent (assuming a haul of Rs.3 lakh
crore from the ongoing exercise). That does not sit well
with all other studies that have estimated the size of the
Indian black economy.
A study by the National Institute of Public Finance
and Policy in 2014 estimated the black economy to be
about 70 per cent of national GDP. Prof Arun Kumar,
who taught at Jawaharlal Nehru University and did a
pioneering study in 1999 (The Black Economy in India),
reckons that black money in cash form accounts for a
mere 3 per cent of the black income generated annually.
Black money basically arises from two kinds of activity. Activities such as gun-running, smuggling, and
child- and drug-trafficking fall in a category of crimes
that are illegal by the very nature of the enterprise. This
implies that gains made from them are categorically
illegal. Money made from such activities is black because the activities they result from are beyond the pale
of the law. But this is a relatively minor part of the
problem of the black economy. As the former Chief
Statistician Pronab Sen observed recently, the black
money generated from such activities constitutes a tiny
fraction of the black economy.
The much bigger problem arises from activities that
may in themselves be perfectly legal but that generate
incomes at least a part of which is hidden from the eyes
FRONTLINE .

DECEMBER 9, 2016

18

of the state. Incomes arising from any activity that is

beyond the cognisance of the state would thus be recognised as black money. This notion arises from the fact
that any economic activity, or a portion of activity, that
is not reported to the state constitutes evasion. In fact, if
the state were to abolish all taxes without exception
such a scourge would simply cease to exist, except in the
form of political corruption.
Tax evasion is the prime source of black money. But
it is not as if black and white are in two separate
compartments. Tax evasion can assume myriad forms.
It could arise from under-declaration of production, as
is known to be widespread in the case of the pharmaceutical industry. Thus, if a company produces 100 units of
a medicine but declares that it produced only 80, it
would conceal the income arising from the undeclared
output, pay lower taxes and thus evade taxes. Note that
in this case its entire operation is not generating black
money and that black and white money is generated by
the same activity. Another widespread method adopted
by companies, including many large ones, is by understating incomes and overstating costs. They benet at
both ends because lower incomes means lower taxes
and overstating costs enables them to set off a higher
portion of their operating income in order to boost their
prots. In fact, this is rampant in international trading
operations and generates other pernicious effects. A
company that imports from overseas can overstate the
cost of imports and/or understate the price of its exports
so that it paves the way for capital ight in the guise of a
genuine transaction.
Protagonists of economic liberalisation, who claim
to be in the ght against the pernicious inuence of
black money, do not realise that the hands off business
liberal logic does not sit well with a no-nonsense regime
that brooks no evasion. In fact, rules governing the
terms on which Foreign Direct Investment (FDI) enter
the country have been continuously eased. FDIhas
been a major conduit for the re-entry of funds that have

before he left as RBI Governor in early September), and

assuming that the growth in number of currency notes
would be the same as in 2015-16, at least 22.36 billion
new 500- and 2,000-rupee notes would have to be printed. Similar projections of the quantities of 100-rupee
notes, based on the assumption of a similar order of
magnitude of growth in the current year, imply that 16.57
billion such notes need to be printed.
Apart from this, there is the issue of soiled notes,
some of which can perhaps be squeezed into the nancial

system as a desperate measure but is surely unworkable

for a self-respecting currency (ATMs can get jammed, for
example). Soiled notes are no small matter; the RBI
disposed of 16 billion such notes in 2015-16, of which
almost half were in the now-prized 100- and 500-rupee
denominations. Even if one were to assume the disposal
of the same number of notes as in 2015-16, it would mean
printing at least eight billion notes of these denominations. Meanwhile, the introduction of the 2,000-rupee note, which can only be justied in terms of the
convenience (for quick printing) of the monetary authorities, causes a vacuum that requires to be lled by even
more 500- and 100-rupee notes. In effect, the share of the
new 500-rupee note is likely to increase further. But even
without taking that into account, it is clear that at least
46.93 billion new notes have to be printed
(22.36+8+16.57).
Now let us turn to what the system can produce, or, at
the very least, what has been achieved in the last few
years. The indent that the RBI placed for the current year
was for 24.55 billion notes, inclusive of all denominations. This is not much higher than in previous years and
can be seen as a capacity constraint. Bharat Reserve Bank
Note Mudran Private Ltd, established as a wholly owned
subsidiary of the RBI in 1995, manages two presses, one
in Mysuru and the other at Salboni in West Bengal.
According to the companys website, the combined production capacity of the two units is 16 billion note pieces
per annum working on a 2-shift basis. Even if this
capacity, which accounts for the more modern noteprinting capacities in the country, increases by a third by
adding an additional shift, it would still only amount to
24 billion pieces of currency in a full year. Security Printing and Minting Corporation of India Ltd, the oldest
currency printing unit in the country, has two units that
print currency notesone at Nashik in Maharashtra and
the other at Dewas in Madhya Pradesh. But these have
much smaller capacities. Thus, the total capacity, working full steam, can print about 32.5 billion notesabout
2.7 billion notes a month. This implies that feeding the
currency system to restore normalcy is going to take
much longer than a year.
Effectively, the 50-day period that Modi has sought to
restore a semblance of normalcy appears to be a pipe
dream when set against these severe capacity constraints.
Even more damagingly, the introduction of the 2,000rupee note demonstrates an utter lack of respect for
elementary principles that govern currency management
in a large, poor and diverse economy like India. In short,
it appears that the only reason for its introduction was
the late realisation, after Modi decided to rush headlong,
that this was a quicker way to overcome a capacity constraint.
In the absence of any information from the central
bank and the virtual disappearance of the RBI Governor
from public gaze after November 8 (even on that day, at
the press conference, the Finance Secretary called the
shots), it is evident that RBI Governor Urjit Patel has
failed to bring to the notice of the government the scale of

own out of the country but return masquerading as

foreign investment. This is termed as round-tripping. The fact that Mauritius and Singapore are the
primary sources of FDI gives credence to this method of recycling black money, which, ironically, enjoys
a double-benetrst because it arises from evasion
and therefore involves unpaid taxes and, secondly,
because when such funds re-enter they enjoy the
special concessions and privileges that a liberal regime extends to foreign investment. Seen from this
perspective, the notion that black money is a pot of
cash stashed away somewhere appears woodenheaded. As the eminent economist Prabhat Patnaik
explained recently, it is not a stock but a ow that is
constantly circulating, seeking returns and expanding in scale and size, just as capital anywhere would
do. It is for this reason that black money does not sit
as unproductive cash but is invested in other assets
such as gold, foreign exchange assets such as dollars
or moves into other lines of business (for instance,
educational institutions, increasingly privatised, offer a lucrative rate of return).
One of the most pernicious effects of black money is the fact that it depresses the tax-GDP ratio
which is the basis of the states claim that it does not
have the money to bear its share of the responsibility
in meeting social sector expenditureseducation,
health, pensions and a host of other welfare measures. It is obvious that a more efficient tax administration, one that combines punitive action with
hard-nosed investigation, would plug the loopholes.
While it is true that the IT revolution has hastened
the speed with which money travels great distances
at a fraction of the time it used to take a few decades
ago, the very same technologies also enable tracking
of these ows. The problem is not the lack of technology, but ideological. If investments are, as a matter of state policy, placed on a pedestal, it also
indicates to investors that the state is ever willing to
accommodate their interests. Far from attacking the
scourge of black money and the liquidation of highvalue denomination notes and their replacement by
at least one that has an even higher value, those
engaged in the generation of black wealth can
breathe easy even as the vast majority of the country
bears the brunt of demonetisation.

19

FRONTLINE .

DECEMBER 9, 2016

But even more amazing is the way the well-heeled are

advising their much poorer compatriots in their hour of
grave crisis to go cashless as if there is no cost to be
incurred. Upper middle class bhakts, egged on by companies such as paytm, urge us all to proceed on this highway
without any warning of the transaction costs that can be a
signicant proportion of the average persons income.
One recent advertisement urges us to pay our domestic
workers using a service providers e-wallet service, without warning us that they would have to incur a transaction cost when they encash what belongs to them.
Although this service provider has slashed service payments from 4 per cent to 1 per cent, it is clearly aimed at
snapping up customers who are desperately seeking relief in the moment of crisis. The point is that it may be free
for the well-heeled but costly for those at the other end of
the transaction. Looking at the transaction from the
workers point of view, the transaction costs for encashing Rs.8,000 (which is what a domestic help in a large
metro may be earning) would amount to a non-trivial
sum of Rs.320. Reports in the wake of the crisis indicate
that the cash-on-delivery option offered by e-commerce
sites has collapsed from 50 per cent of all transactions to
less than one-third. This obviously indicates that even in
online transactions, cash remains king.
There are many reasons why people prefer cash and
this may have nothing to do with sinister motives like
hoarding or amassing ill-gotten wealth. Even those who
are comfortable buying online prefer to do so only within
a range of values; they prefer cash for everyday low-value
purchases, a credit card for higher value purchases and
cheques for making payments that require proof of payment. The point is that forcing a particular choice by
diktat limits options that could actually constrain economic activity severely. For instance, with poor mobile
networks in many parts of rural India, it may not even
work in a predictable and efficient manner.
The nuclear winter that Modi has unleashed points to
the rise of a particular kind of techno-utopian fascination
that has a ready constituency among a tiny section of the
elites, which sees the world in its own image. The relentless implementation of the Aadhaar project, in the face of
reasoned articulation of serious deciencies in its design
and scope, was one warning about the rise of such tendencies. Aadhaar was touted as a magic technical x to rid
the country of poverty. This constituency has no patience
with either the niceties of democratic conduct or the
practicalities of the Indian reality. In a hurry always
appears to be its motto.
Time has been running out for Modi as he reached
the halfway mark of his term. Many promises remain
unfullled and the jumla that he raised in the run-up to
the 2014 elections nally caught up with him. The country is paying a terrible price that has no parallelsin
either scale or similarityanywhere in the world. Even
more scary is the prospect of what may be in store as he
searches for ways to turn attention away from the wreckage he has caused.

With inputs from G.T. Satish in Hassan

Effectively, the 50-day period

that Modi has sought to
restore a semblance of
normalcy appears to be a
pipe dream.
preparation that was required to undertake this mammoth task without destabilising the economy. Instead,
the nation is in the throes of what is in effect a nancial
emergency. In effect, the people have a long and dark
night ahead of them, which is unlikely to end any time
soon.
It is abundantly clear now that Raghuram Rajan had
not played ball with the Modi sarkar. In fact, he had
clearly articulated the view that demonetisation would be
an ineffective step to counter the generation of black
money. Government sources have admitted that the
printing of new notes started only after the new Governor
assumed office in early September. With a Governor that
it found easier to deal with, the Modi government started
printing the new notes only after that, which explains the
inadequate preparation.
But this still does not explain why Modi was in such a
hurry, although market gossip in Mumbai and the chatter in media circles indicate that the government rushed
into the move because it feared that information was on
the verge of leaking out. In fact, when the issue was raised
in the Supreme Court on November 18, Chief Justice T.S.
Thakur asked: What is the problem? Is it printing problem?
PIPE DREAM OF CASHLESS SOCIETY

Immediately after Modi made his announcement, a

range of companies offering nancial services, especially
e-wallet service providers, launched a media blitzkrieg.
The self-serving self-promotion, in the face of an unprecedented crisis that the people found themselves in, urged
people to go cashless. This, they urged, is the way to go,
suggesting that a cash-based society is one that is backward, underdeveloped and mired in corruption. This is
completely untrue for two reasons. First, cash plays a
large part in the Indian economy, but the country is by no
means unique. Cash (currency in circulation) accounted
for about 11 per cent of the Indian gross domestic product
(GDP) in 2015, but in the eurozone as a whole it was
marginally higher, and in Japan and Switzerland it was
signicantly higher. Even Singapore, which is often touted as the way to go for India, had cash levels (relative to
GDP) that were only marginally lower than in India. The
simple point is that arbitrarily plucking a statistic or
variable and aunting it as a sign of development or
progress is simply wrong.
FRONTLINE .

DECEMBER 9, 2016

20

C OVER STO R Y

All pain for the

majority
The impact of the measures on the farming community, the poor and the
lower middle classes was hugely underestimated by the political
establishment, sundry pundits, the media and a large section of the
untutored or sycophantic elite. B Y C. P. CHANDRASEKHAR
AT THE TIME OF WRITING, CHAOS CONTINUED
to prevail at bank branches and ATMs across India,
reecting the larger truth that the government had for no
sensible reason frozen a major part of Indias payments
and settlements system. The government did this by

K. MURALI KUMAR

declaring, for reasons wrong and indefensible, that currency notes of Rs.500 and Rs.1,000 denomination,
which accounted for more than 85 per cent of the value of
notes in circulation (and around 25 per cent in terms of
sheer numbers), would not be legal tender within four

COMM E R C I A L S T R E ET in Bengaluru on November 14. The usually busy area saw very few shoppers in the days after the
demonitisation and the worst hit as a result were street food vendors and hawkers.
21

FRONTLINE .

DECEMBER 9, 2016

hours of a dramatic speech by Prime Minister Narendra

Modi on the evening of November 8.
That speech was lled with a mix of threat and promise: once again the Prime Minster declared that black
money would be sucked out of the system and trashed;
that those earning black incomes, holding black wealth
and involved in counterfeiting currency would be pursued and incarcerated for ruining the economy and oppressing Indias poor; and that the ow of counterfeit
notes from across the border that fed domestic terrorism
would be stopped. In a turn of phrase that began life
under Modi as the label for a secret military operation but
has become a way to describe his aggressive form of
governance, politicians and the media began describing
the policy as a surgical strike on the black economy.
Those who were not the target of this strike were,
however, given limited options. They could exchange the
demonetised notes for new ones up to a maximum of
Rs.4,000 (Rs.4,500 subsequently, and shockingly
Rs.2,000 from November 17), deposit the rest of their
holdings of such notes in their bank accounts, access
limited amounts of cash through ATMs or bank withdrawals, and use debit cards, credit cards and electronic
banking facilities wherever possible, so as not to put too
much pressure on the available supply of notes. These, of
course, were options available to those having access to
electronic banking facilities, an adequate number of
banks and ATMs in their neighbourhood or for that
matter even bank account, which many do not still have.
Besides facilities through which currency being withdrawn could be replaced so that citizens could execute
their normal transactions, there was the sheer problem of
availability of adequate amounts of currency notes. The
number of notes of Rs.500 and Rs.1,000 denomination is
estimated at a combined total of around 22 billion pieces
(17.4 and 7 per cent respectively of all notes in circulation). According to one estimate, the total capacity of all
government printing presses to print notes of all denominations is 23 billion pieces a year. So even if the production of denominations other than Rs.500 and Rs.1,000 is
stopped altogether, which is not feasible, it could take as
much as a year to generate the one-time supply needed to
replace the 22 billion pieces that have been withdrawn
from circulation. So, even if the government started
printing new notes as far back as September, as some
reports would have it, it would take some time to replace
the stock of currency that had been declared illegal tender. The government by issuing new Rs.2,000 rupee
notes sought to cover a part of the gap through a value
adjustment. But that creates its own problems.
Not surprisingly, it soon became clear that this socalled surgical strike was but a minor nuisance for the
rich, who can go cashless to a substantial degree, but a
major blow to Indias poor and lower middle classesits
casual and self-employed workers, peasants, petty producers, small traders and street vendors. Reports from
across the country, especially interior or remote regions
with limited banking reach and a substantial cash economy, made it clear that the initial expectation that the
FRONTLINE .

DECEMBER 9, 2016

TR UC KS I D LE at the Agricultural Produce Market

Committee terminal in Navi Mumbai in mid November
after the slowdown in business activity.

pain inicted on them through the adoption of these

measures would subside quickly had been belied.
One section that has been affected severely is the
farming community, which needs to dispose of a crop
that has been just harvested and spend on seeds and
other inputs to get the next crop growing. Much of these
transactions are settled in cash, and the limited availability or non-availability of legal tender after the demonetisation squeezed the peasantry at both ends. Moreover,
cooperative banks, which constitute an important source
of credit and cash in many parts of the country, have had
to suspend operations as they have not been allowed to
exchange demonetised notes or accept deposits of such
notes. Arguing that poorly organised and managed cooperative banks can be the conduit for converting black or
counterfeit currency, the Reserve Bank of India (RBI)
has ruled that no exchange facility against the specied
bank notes (Rs.500 and Rs.1,000) or deposit of such
notes should be entertained by district central cooperative banks. These banks are also nding it difficult to
convert the reserves of demonetised notes they have into
legal tender. This has added to the woes of the rural
population.
THE VISION AND THE REALITY

Overall, it is clear that the extent to which the measures

would inict pain on these sections was hugely underestimated by the political establishment, sundry pundits,
the media and a large section of the untutored or sycophantic elite of the country. This points to their dis22

the cash economy. When a misinformed government

chose to freeze that economy, their lives froze as well, in
queues that enticed them with access to small doses of
legal tender, at shops that rejected the notes they had
legally earned, and even in hospitals that refused to treat
the ill because they had been economically disenfranchised. Soon patience gave way to frustration and anger
and occasionally to physical violence, even as the Prime
Minister, away in Japan, exhorted Indians to suffer
short-term pain for the greater good of a nation that did
not seem to be theirs and display the fortitude that the
Japanese devastated by the post-tsunami accident at the
Fukushima nuclear plant had shown.
ERRONEOUS, MISDIRECTED

YOGESH MHATRE

Hopefully, rather than feed the belief that this is the

result of their karma, the experience has taught many
ordinary Indians lessons that Indias ruling politicians
and bureaucrats had either not learnt or chose to ignore
in the face of the Prime Ministers erroneous, misdirected
and combined strike on the black economy, counterfeit
currency and terrorism. Prime Minister Modi, after all,
does not suffer those who are not carried away by his hype
and hubris. So none of his advisers was willing to suggest
that the presumptions underlying the demonetisation
initiative designed by the Prime Minister and his team
were wrong.
The rst of these presumptions was that the black
economy consisted of black wealth held and hoarded as
black money that would lose all value and disappear after
demonetisation. The fact is that black wealth either ows
out of the country, only to return through transit routes
such as the stock market and conduits such as participatory notes (the ownership of which is difficult to fathom),
or is soon converted into assets like gold, real estate and
nancial instruments, or is just spent and transformed
into money circulating in the white economy. Only a
small component, which has either been generated in
recent transactions and has as yet not been converted or
is held by those who expect to make a transaction that
needs a large hoard of black money, remains in the form
of currency.
The second presumption was that the cash economy,
in which incomes are earned in cash and spent without
being deposited in a bank, where sales in cash were based
on purchases made in cash (as is true of fruit and vegetable vendors, for example), where purchases and payments were made in cash even if the ow of that cash was
mediated by the banking system, and where electronic
transactions were unknown or absent, was a small part of
the overall economy in current day India.
The third was that at todays prices Rs.500 (or for that
matter even Rs.1,000) was a sum that was not required in
routine transactions so that impounding notes of that
denomination and withdrawing them from circulation
would not affect the cash economy described earlier.
The fourth was that for a considerable period of time
those requiring cash for transactions would be able to
manage with a small volume of 2,000 rupee notes and

connect from a reality that bears little resemblance to the

vision of a dynamic market economy they presume they
inhabit. In that vision India is a developed country with a
digitally savvy and empowered population that does not
depend on cash to make payments and settle transactions. In fact, many implicitly assumed or explicitly
argued that since Modi came to power and leveraged the
Aadhaar programme that the United Progressive Alliance handed his government and introduced the Jan
Dhan Yojana that offered the poor no-frills bank accounts India had become a truly modern, near-cashless
economy. A small push would see electronic transactions, mediated by ATMs, gateways and Internet and
mobile banking replace cash transactions. Even at the
ostensibly ubiquitous PoSs (points of sale) plastic money
would displace cash.
The belief of an elite overcome by hubris was that in
modern economies (including India) since payments and
settlements are supposed to occur largely behind the
backs of people in a banking system increasingly located
in secured cyberspaces rather than brick-and-mortar facilities, cash was, literally speaking, dispensable. So if
anybody needs cash in substantial quantities, it must be
those who inhabit the underworld of black incomes and
wealth, counterfeiting and terrorism. This, they seem to
believe, is true even of the Rs.500 note that can get you at
most three kilos of urad dal or 10 kilos of raw rice or a
portion of tandoori chicken at Karims or a plate of vada
and a masala dosa each for two at Saravana Bhavan in the
capital city.
Unfortunately for the Prime Minister, his government and Indias disconnected elite, they have had to
come to terms with reality the hard way. For Indias poor
and lower middle classes, economic life centres around
23

FRONTLINE .

DECEMBER 9, 2016

V. SREENIVASA MURTHY

IN BE N G A L UR U, outside an ATM soon after the Prime

Ministers announcement on November 8.

100 rupee notes, even when more of the latter would be

needed to provide the change in transactions that lie
between Rs.100 and Rs.2,000 in terms of value.
And, nally, that forcing out counterfeit notes in
circulation would address the problem of counterfeiting,
whether resorted to for prot or to wage war on India.
Rumours of counterfeiting of the new Rs.2,000 notes are
already circulating.
These presumptions are possibly not held with condence even by the Prime Minister. The governments
decision to go ahead with this exercise seems to be motivated more by the need to convey the impression of
uncompromising action on promises to eradicate corruption and abolish black money, which Modi and the BJP
have made but not delivered on, than by the actual
conviction that this would achieve objectives of ushing
out black wealth, ending corruption or closing down
terrorist nancing.
But in this attempt at drama, which resulted in a
decision announced at 8 p.m. to demonetise Rs.500 and
Rs.1,000 notes becoming effective four hours later, the
government seems to have forgotten to assess the nearterm consequences of its move. The result is an impression of poor judgment and incompetence. It is clear that
too much currency was taken out of circulation and that
the rate at which it could be replaced was hugely underestimated. Ceilings set on amounts of the demonetised
currency that can be exchanged for legal tender at bank
branches and other designated locations and on sums
that can be withdrawn from bank accounts proved far too
low. All this resulted in huge queues in front of banks as
people attempted to exchange the demonetised notes for
valid currency and deposit the balance into their accounts, not to meet the end-December deadline for getting rid of the old notes but because that was the only way
to obtain the currency that could be used to defray immediate expenses.
What followed was chaos for a number of reasons. It
soon became clear that ATMs were not the best way to
access money lying in bank accounts. Since the physical
dimensions of the 2,000-rupee notes are different from
those of the now withdrawn 500- and 1,000-rupee notes,
ATMs had to be recalibrated to dispense the new
Rs.2,000 notes. Whatever planning was done before the
FRONTLINE .

DECEMBER 9, 2016

24

measure was announced, it does not seem to have taken

this issue seriously. This meant that only one tray that
could accommodate notes of Rs.100 could be used to
distribute cash through ATMs. That severely limited the
contribution this channel could make to the task of putting enough cash into circulation. It also meant that a
substantial amount of available Rs.100 notes had to be
diverted to the ATMs, so that those approaching the
banks had to accept more than the desired number of
notes of Rs.2,000 denomination. Using that in transactions of lower value and getting change has proved a
headache for many. Moreover, limits on cash that could
be accessed created a host of difficulties among those
needing currency for day-to-day transactions and those
needing it for lump-sum expenditures in hospitals or for
marriages and other ceremonies. Not surprisingly, patience is wearing thin even among those who believe that
this is a worthwhile exercise; frayed nerves are leading to
scuffles; and some most adversely affected have turned
violent against others or even themselves.
Meanwhile, as was to be expected, some of the powerful are using a few of the poor, such as their workers, to
exchange old notes for new ones or to deposit the notes
that have been demonetised into the accounts of the
latter. To prevent this from resulting in a situation where
notes belonging to the same individual are exchanged to
the extent of Rs.4,500 each in multiple banks, the government has instituted a system of marking with indelible ink those exchanging currency. This has meant
that those without a bank account and with savings of
more than Rs.4,500 held in the form of the demonetised
notes, will see a part of their hard-earned and kept savings vanish. Jan Dhan accounts have also been put on
watch for suspicious deposits. The poor have in these
ways, too, been made victims of the governments
strike. Even if one, without adequate reason, believed
that the measures announced on November 8 will badly
hit the rich and the corrupt, the fact that the poor would
also be hit or, as the evidence pouring in suggests, even
devastated would have called for caution in proceeding
with an exercise of this kind. As the Supreme Court bench
looking into the issue pointed out using the military
terminology favoured by the government and the Sangh
Parivar, this was not a surgical strike but akin to carpet
bombing.
But all this is not forcing the government to rethink,
with the Prime Minister, the president of the BJP, and
the supporters they have accumulated trying to brazen it
out saying that some short-term pain is needed to cleanse
the nation of the evils of black money, corruption and
terrorist nancing. In fact, the claim is that anyone criticising or opposing these ruinous measures is supporting
corruption, terrorism and the black economy. But as the
period over which this pain has to be suffered extends
and the conviction that the evils being targeted are being
hit wanes because of evidence to the contrary, there is
every likelihood that much of the population will see this
policy for what it is. Hopefully, that will reect in how
they vote as well in the many elections to come.

African experience
Examples from the continent show that
if demonetisation is not properly
conceptualised and implemented, it can
spell endless suffering for the people.
THE dramatic announcement
by the Prime Minister that more
than 80 per cent of Indias currency in circulation was no
longer valid tender brought
back memories of this correspondents experience in Nigeria way back in 1984. The
civilian government under
President Shehu Shagari was M U H A M M A D U
overthrown in a military coup B U H A RI ,
led by a relatively young officer President of
by the name of Muhammadu Nigeria.
Buhari. The military junta led
by him claimed that Nigeria under civilian rule had
become a highly corrupt country, with a rich elite
gobbling up the countrys enormous oil-generated
wealth and secreting it in secret bank accounts in the
West. After taking power, Buhari launched a War
against Indiscipline, which included raids on corrupt
officials and businessmen, along with the public
shooting of armed robbers and those accused of violent crimes.
When the military took over, the Nigerian currency, known as the naira, was among the strongest
in the African continent. You could get two American
dollars for one naira those days. The Nigerian economy, however, had come under great strain at the time
as international oil prices were plummeting. A country that once had a thriving farm sector had become
almost totally dependent on imports for its food
needs. General Buhari initially resisted the demands
of the World Bank and the International Monetary
Fund to restructure the economy by resorting to devaluation of the currency. Instead, he opted for the
radical measure of demonetising the currency.
Without any warning, the military government
announced the decision over radio and television in
early 1984. The government just changed the colour of
the notes. The countrys borders were sealed and a
wage freeze was implemented. What followed was
utter chaos and confusion as the weak banking system
was not in a position to cope with the anarchy the
decision had unleashed.
This correspondent remembers paying a hefty
bribe to get his money exchanged and to retrieve his
savings from the bank. Those days there were no

JOHN MACDOUGALL

BY J O H N C H E R I A N

25

cards, ATMs or the Internet. Prices shot up and the

living standards of the people fell as a result of the
demonetisation policy. The demonetisation move did
not pay any economic or political dividends either.
The media at the time reported that corruption went
on unabated, with Nigerians leaving the country with
suitcases full of currency to be deposited in Western
banks. By the end of 1984, the Nigerian government
had to admit that the move aimed at eradicating
corruption was a failure. General Buhari himself admitted that the government was to all intent and
purposes become bankrupt. The demonetisation exercise may have been the trigger that led to the longdrawn-out slide of the Nigerian economy.
When the Nigerian media started criticising the
military governments demonetisation move, General
Buhari issued the notorious Decree No.4 to ensure
that journalists reported truthfully and that public
servants were not maligned by the media. Many
prominent media personalities and critics of the regime, including the popular Afrobeat singer Fela Kuti,
were arrested. The demonetisation policy and the
consequent anti-democratic measures that followed
brought down the Buhari government the following
year. General Buhari was ousted by a fellow military
officer, General Ibrahim Babangida, who promised to
expeditiously bring back democratic rule and follow
more prudent scal policies.
The Nigerian economy had revived to some extent
in the last decade because of high oil prices but is in
the doldrums again now. And the man in charge is
once again General Buhari. His campaign slogan during the elections was New broom. His supporters
were shown carrying brooms to clean up the corrupt
Nigerian politics and society. He has, of course,
donned a civilian garb but, evidently, still retains some
of his authoritarianism. He is once again busy trying
to ferret out illicit money from corrupt politicians and
businessmen. Buhari has promised to publish a list of
corrupt Nigerians raided by government agencies.
Meanwhile, if it is of any consolation to the millions of Indians standing patiently in queues, similar
scenes are being replicated in Zimbabwe. People have
been sleeping outside banks to withdraw their money
amid worsening cash shortages. Zimbabwe has adopted the United States dollar, along with a basket of
other international currencies. With dollar reserves in
the banks running out, people are desperate to lay
their hands on their savings. The government has
announced plans to introduce bond notes to replace
the U.S. dollar. The new notes will be interchangeable
with the U.S. dollar and is backed by the African
Export Import Bank. Banks in Zimbabwe are allowing
withdrawals of only $50 per account holder.
Given past experience, Zimbabweans have very
little trust in any currency printed by the government.
FRONTLINE .

DECEMBER 9, 2016

Demonetisation does nothing to stop

Interview with Pronab Sen, Country Director for the India Central Programme,
International Growth Centre. B Y T . K . R A J A L A K S H M I

Black money, corruption and counterfeit notesdoes

the demonetisation under way address any of these
issues? The government certainly seems to think so.
There are two forms of black money, the big onestax evasion and political and bureaucratic corruption. These are recurring activities, not something that
happens once. Demonetisation does absolutely nothing
to stop the generation of black money. It may postpone
it a little bit. So, if I am a bureaucrat and if I were to take
a bribe from you, I would say, dont give me money now,
come back when you have the real cash and then we
talk. What happens is that the corruption gets delayed,
and in the process, work may get delayed. So, what you
could have gotten done today will take three weeks or a
month to do. Thats about the only effect demonetisation will have on the annual generation of black money.
Nothing else happens.
What demonetisation essentially does is that it puts
a penalty on those who have made black money in the
past and are holding it as cash. It is more a penalty
rather than a preventive measure.
There are varying estimates of the extent of black
money in the economy. The government seems to have
some kind of an assessment on the basis of which it
has carried out this surgical strike.
The basis, as far as I can understand, is the studies
that have been carried out over the years; the latest one
is the one by the National Institute of Public Finance
and Policy. It is estimated at 22 per cent [of the GDP].
There are two kinds of things that happen. One is black
money, which is being held in the form of cash because a
person has not been able to convert it into some real
asset. That is a transitory thing. The intention was there
FRONTLINE .

DECEMBER 9, 2016

26

to convert it but the person did not have

the time to do it. The second chunk is
black money which is there in the productive economy. If you look at the informal
nancial
sectorthe
moneylenders, chit funds, nidhis, hundis, etc.some of the money is in fact
black but these are funds that go into
nancing legitimate white activities.
And my sense is that the latter is many
times larger than the former. So, when you check black
money, what ends up happening is freezing the ow of
funds to the informal and the small-scale sector that
depend on these moneylenders. Yes, the moneylenders
get punished, but one has also blocked out an entire
range of perfectly legitimate activities.
V.V. KRISHNAN

LEADING economists in the country are divided over the so-called

benets of the Union governments
move to recall 500- and 1,000-rupee
notes from circulation. There is scepticism over whether the move will
result in the stated objectives of controlling the origin, proliferation and
circulation of black money and counterfeit notes. Pronab Sen, the rst
Chief Statistician of India and former Chairman of the
National Statistical Commission and Secretary to Ministry of Statistics and Implementation, spoke to Frontline on why he thinks it was an ill-advised move.
Excerpts:

Much is being made of unaccounted wealth and wealth

that is not being taxed, that it is not the honest who
stand to be affected by the latest measures as much as
those who have stashed away unaccounted wealth. To
what extent is this understanding correct?
It depends on what one means by unaccounted
wealth. The fact is, under our tax laws there are large
chunks of the economy which are simply not meant to
be taxed. If one looks at agriculture, both on the production and on the income side none of that [income] is
taxed. That takes 18 per cent of your GDP right away
from taxation; estimates of black money are around 22
per cent of the GDP. So we are left with only four per
cent. But more important than that is that the money
that we are talking about is also there in the informal
sector, it is there in informal sector manufacturing and
informal sector services. These are not taxable anyway.
But now, suppose a person has built up savings of one to
two lakh rupees over the years and put that in the bank.
That will catch the attention of the tax guys. The person
has to explain where he or she got the money from. The
harassment potential is very large.
How reliable is the idea being circulated that a lot of
cash is lying with people and that much of it is not
accounted for? The high cash-to-GDP ratio may
indicate that much of the cash in circulation has not
been acquired by legitimate means. But there is
evidence to show that corruption levels can be high in
low cash-to-GDP ratio countries. Japan seems to have
a high cash-to-GDP ratio.
The need for cash depends on the nature of the
economy. If we are a country with a large informal

generation of black money

sector, there will necessarily be a higher amount of cash.
And this is true of most developing countries. In developed countries, where the size of the informal sector is
small, the cash requirement is less. To my mind, the
ratio of cash to GDP is a silly ratio to look at. The ratio
that one should be looking at is the ratio of cash to
informal economy GDP, in which case we are not high;
we are very low. Japan is a complete outlier. That is
because went through this huge period of very expansionary monetary policy to revive the economy. The
central bank kept printing money. It is like the QE
[quantitative easing] we are seeing in the E.U. and the
U.S. If one had looked at the numbers prior to 2010, the
cash-GDP ratios in these countries would have been
much lower. What one is seeing is the effect of the QE in
Japan, the U.S. and the E.U.
How viable is this as an economic policy decision?
There is this short-term pain versus the long-term
gain. Ination is viewed as one such short-term pain.
Freight movement has been affected and spending and
purchasing power are constricted. It has been pointed
out that the move has constricted employment as well.
I havent quite gured out what the long-term gain
is. Everyone talks about it but I havent seen anyone
articulate it. The short-term gain I can understand.
Supposing freight movements get blocked, prices at the
mandi level might drop. At the retail level, particularly
in urban areas, prices will go up because of the shortage.
Net-net, it is anyones guess.
The government seems to have sent a fear signal to
the public to somehow come out with their ill-gotten
money. Is this working?
How a fear signal works out needs to be seen. It may
work out in different ways. It can send a signal to the
corrupt person to plan on how to spend that money. It is
a signal that says: dont sit on the funds that you have,
spend it. It makes matters just worse. It doesnt make it
better at all.
There is a view that the rural poor do not deal with
high-denomination notes and that only luxury
consumption stands to be affected because of
demonetisation. Does this understanding hold good?
One of the things that perennially appals me is the
complete lack of understanding of how systems works.
Let us take one sector with large numbers of our poor,
which is agriculture. Agriculture always works in large
values of transactions at very limited times of the year.
So, at harvest time farmers get a huge amount of money
which is then supposed to carry them over for six
monthsthey get it at one shotand then at sowing

time they borrow a huge amount of money to buy

inputs. These are all lump sum, not a monthly ow or a
weekly ow or small amounts. As an example, a onehectare farm, which is the average in India, will produce
some ve tonnes of food grain. At the current market
rates, ve tonnes [roughly around 50 quintals] multiplied by a thousand comes to Rs.50,000. Now who is
going to pay this person in small denominations? These
are large transactions.
What kind of an impact is this going to have on the
economy as a whole, given the fact there is constricted
demand, low purchasing power, etc.?
I am not so worried about purchasing power. It is a
short-term pain. Once the currency has been replaced,
this problem will go away. The real problem is on the
production side. If the farmer cannot buy seeds or
pesticides or fertilizers and if the small manufacturer
cannot buy raw materials, that will give long-term pain.
One of the things that the government seems to be
encouraging people to do is move in the direction of a
cashless economy. How realistic is that?
There are two dimensions. A cashless economy imposes a certain cost on each transaction. It is like a tax.
So, when a credit card or a debit card is used or when a
cheque is issued, a charge is levied by the nancial
institution. And this charge is levied on each transaction. And it is cumulative. The reason why people use
cash is because the transactional costs are lower. If all of
this were so easy, why would Europe and the U.S. have
their majority retail transactions in cash? This question
should be asked. In the U.S., it is more than half.
Do you think the government should have opted for a
different course altogether? Has the message of
controlling corruption and black money gone through
to the sections concerned?
My problem is basically that at one shot the government pulled away 86 per cent of our currency. One of
the big things they are trying to address is the problem
of counterfeit notes. My understanding from what I
have been reading from the papers is that all the counterfeit notes are 500-rupee notes. What would have
happened if only 500-rupee notes had been withdrawn? The pain would have been much less. Maybe
the black [money] guys would not have been penalised much; in penalising them and the counterfeit [people], a situation has been created where the poor have
been badly affected, particularly the rural poor. A villager and an urbanite are being treated at par. I can use
plastic money to buy vegetables, etc. The rural poor do
not have the option of plastic money.
27

FRONTLINE .

DECEMBER 9, 2016

THE average bank official had not witnessed this kind

of pressure in an entire lifetime! quipped the veteran
journalist Padmanabha Devarajan, who has tracked the
business sector for close to four decades. Employees in
nationalised banks were often mocked for their slow
pace of work and long lunch breaks. Until the midnight
of November 8 when demonetisation took effect.
With no warning or time to plan for the transition,
banking officials, clerks and other staff were plunged
into the chaos that built up over the following days.
There are only a few cash handlers in a bank, but the
crisis forced even officers to sit behind cash counters.
When digitisation was introduced in banks in urban
areas, branches became smaller and staff was downsized. The majority of the Reserve Bank of Indias work
shifted to commercial and private banks. The RBI had
22,000 employees in Delhi alone a few years ago, but
today its total employee strength across the country is
around 15,000, said M.L. Malkotia, vice president of
the Centre of Indian Trade Unions.
Post-demonetisation, the leave of all bank employees was cancelled and overtime became the norm. With
the government changing its instructions to banks at
will, the staff had to continuously change gear to keep
pace. Irate customers kept pushing them to the brink.
The long queues outside banks maintaining a constant
pressure did not help matters.
Reports from some banks of angry customers berating and getting violent with bank staff poured in. A
branch of IDBI bank in Sabzi Mandi, Delhi, was vandalised by people who threw huge rocks. The bank employees had to hide in a toilet and the vault to protect
themselves. It is not the fault of the bank staff if enough
money is not available through the day. The rush is so
much that the currency is being picked up by people in a
few hours and the bank is helpless, explained C.H.
Venkatachalam, general secretary, All India Bank Employees Association. For a week, bank officials fully
supported the decision of the government, and worked
overtime and through their holidays. They put on hold a
strike that had been planned to demand a revision of
pension. In some places, bank officials even made a
quick buck by doing precisely what they were supposed
to curb: they took a cut to facilitate illegal transactions.
But a week into the exercise, they seemed to be
reaching breaking point. Collecting IDs, applying indelible ink and keeping a tab on black money are, after
all, not in the job description of bank officials. It is not
my job to track black money. It is Modis job, let him do
it, said Venkatachalam. He added that if the situation
remained the same for the 50 days time that Modi had
asked for, the majority of the bank staff would review
and even consider withdrawing their support for the
FRONTLINE .

DECEMBER 9, 2016

28

ANUPAM NATH/AP

Bank staff at breaking point

AT THE CUR R E N CY E XC HA N G E C OUN TE R of a

bank in Guwahati, an employee makes sure the
500-rupee note is a genuine one, on November 11.

entire exercise. The government did not anticipate

the problems of demonetisation and the bank employees are bearing the brunt of its fallout. If the
government wants, it can allow all government institutions to exchange the notes, and that would
clean up the system in 15 days. But what is happening is very unplanned. The indelible ink was introduced after a week, by which time the money
launderers had already done their job. Now it is only
the genuine people who are suffering, said Venkatachalam. Whatever surplus would remain with the
banks after the squaring off of accounts would need
to be pumped back into the economy probably as
retail loans. Otherwise banks would be required to
pay interest on the amount they hold. By that token,
thousands of crores of rupees would have to be paid
by the banks as interest towards the money lying in
their accounts, said Venkatachalam. Let the government collect the money and give interest to the
bank, why should banks be penalised? As it is, the
cost of logistics towards this exercise has been humungous. Why are they crucifying us? he said.
Meanwhile, the banking sector is gearing up for
a second stress cycle post December 30 when exchange of currency will stop and Rs.2,000 notes are
likely to get inducted into the corruption cycle. Why
does HDFC give housing loans of up to 80 per cent
only? If they give 100 per cent loans, then the window of black money in such transactions to real
estate builders effectively closes. But they dont do
that, said Devarajan, indicating that this demonetisation exercise was just a gimmick.
Divya Trivedi

C OVER STO R Y

After the shock

The beating to cash-driven sectors like gold and real estate
notwithstanding, Indian industry is gung-ho about the Prime Ministers
decision to derecognise notes. B Y ANUPAMA KATAKAM
PRIME MINISTER NARENDRA MODIS
announcement derecognising Rs.500 and Rs.1,000
notes came when most shops in Mumbai were seeing
end-of-day sales or were about to down their shutters.
Within an hour of the announcement there was a massive rush and we remained opened till close to midnight,
says Navin Jhaveri, a jeweller in the Opera House area
which houses upmarket jewellery stores.
The days and nights that followed November 8 at the
citys Zaveri Bazaar, one of the central points for precious

SANTOSH HIRLEKAR/PTI

metal and jewellery trading, resembled the week before

Deepavali when people buy a lot of jewellery. Apparently,
many jewellers were willing to take cash and give backdated bills for sales. Jhaveri said, The big loophole in the
gold and ornament business is that you can buy jewellery
or bullion up to Rs.2 lakh without having to give a PAN
[permanent account number]. If the price of the product
is above that, the seller has a way of splitting the bills.
Therefore, this was an easy way to dispense cash and still
hold a good investment.

AT A J E W E L L E R Y S T O RE in Mumbai on November 12. The days that followed November 8 at the citys jewellery trading

centre, Zaveri Bazaar, resembled the week before Deepavali when people buy a lot of jewellery.
29

FRONTLINE .

DECEMBER 9, 2016

Nothing was illegal about it as the seller was giving

valid bills and VAT charged, says Jhaveri. Everything
was kosher. But for the seller who might have, say, 80
per cent of the payments in cheque and 20 per cent in
cash, it spells trouble. He does not pay taxes on that cash.
A diamond merchant with a leading company says,
People were going nuts. They would rather take a hit and
have something in their hands than lose all the money.
On November 8, gold was selling at about Rs.31,500 for
10 grams. When the currency crisis hit, the price peaked
at Rs.60,000 per 10 grams.
According to market estimates, such has been the
demand for gold that as much as $1 billion worth of gold,
or around 30 tonnes, was imported from November 9 to
November 15. On an average 30 tonnes of gold is imported in a month.
It did not take long for the Directorate General of
Central Excise Intelligence (DGCEI), an arm of the Finance Ministry, to begin cracking down on various jewellers across the country. Many have been served notice
seeking details of gold sales and the stock for those days.
The year has not generally been good for jewellery
shops or companies. According to industry data, sales
have been slow because of sharp increases in gold prices.
Excise duty imposed on gold jewellery in the Budget led
to a further slowdown in demand. However, the situation
perked up during Diwali and with the onset of the wedding season, sales were showing an improvement. But
the currency crisis, says Jhaveri, has crippled the sector.
Apart from bullion/jewellery, another sector that will
really feel the knock is real estate. Both are largely driven
by cash, says an analyst with a leading bank.
Real estate and related businesses (cement, ceramic,
building materials, and so on) are perhaps the most
affected. It is anticipated that sale of homes, already
affected by a slow economy, will slow down further to a
trickle. This will bring down prices in the short term.
However, the sector long needed a clean-up, and in the
long term it will improve, says an analyst.
Industry observers say the general feeling is that
though the long-term implications of the governments
move are likely to be positive, in the short to medium
term several businesses and livelihoods will be affected in
varying degrees.
It has been a mixed bag for nancial services. Banks
being primary recipients of cash deposits have been winners. Other lending businesses have not been that lucky
as they are closely linked to real estate or discretionary
spending or the informal sector.

in the stock market this year, says a stockbroker.

In spite of the toll the move took on the stock market,
the pressure on banks and the confusing economic consequences, corporate India applauded the government
for its decisive action against black economy and the
plague of counterfeit money. Companies came out with
statements saying that the bold decision would take Indias economic reforms to another realm.
Most people Frontline spoke to in the corporate sector believed a clampdown on black money and a move to
a more transparent economy is the only way to go forward and it would benet the country in the long term.
However, they are unhappy with the way it was executed
and the hardship it has brought to people. A good number of the people said this socio-economic experiment
should have been timed better and that it could have been
executed more efficiently. Yet if it brings good change,
then the pain is worth it, they say.
Hopefully, now we will see a more equal distribution
of wealth. We work hard, put our blood and sweat into
looking after a family. Its unfair to see the lifestyle business people lead because of their undeclared income.
Additionally, we pay taxes. But where does the money go?
Our quality of life in the cities is miserable, says Mihir
Desai, a sales executive with an advertising rm. More
people need to be in the tax net and the money has to be
spent on improving the country. That will be real
change, adds Desai.
To the middle-class salaried person, it was redemp-

CORPORATE THUMBS UP

Along with Donald Trumps victory in the United States

election, the governments move jolted the stock markets
so severely on November 9 that the BSE index plunged
1,600 points (more than 5 per cent) in the opening hour.
It recovered substantially as the day wore on. However, in
the week following the announcement, the market progressively lost value and overall dipped a little more than
4 per cent. This has been the most signicant correction
FRONTLINE .

DECEMBER 9, 2016

30

ARUNANGSU ROY CHOWDHURY

Terming the move a masterstroke, the CII says the

domestic economy will emerge stronger eventually. After
a short period of pain when the economy adjusts to the
sudden withdrawal of cash, the CII expects a much stronger economy. Indias cash dependence is extremely high
with a currency-GDP ratio of around 12 per cent compared with 4-5 per cent in other developing countries,
says Chandrajit Banerjee, director general of the CII.
He says: High levels of cash usage tend to slow down
the ow of money through the economy. As we transition
to a greater usage of ntech for payments, spending will
rise, leading to additional economic growth. This is an
economic masterstroke by the Prime Minister and must
be allowed time to play out. Moreover, he says lower
cash use will have a dampening impact on ination and
this will be a further positive for Indias
macro-fundamentals.
The CIIs statement says the prevalence of cash use
has also made India prone to high ination, adding that
corruption and excessive cash use tends to erode the
purchasing power of money. Currently, the costs of informality are evident in the low tax base which impacts
government revenues, lack of economic control through
monetary instruments, and lower economies of scale.
Indias tax base is low and its tax to GDP ratio needs to
increase from the current level of 16.6 per cent, which is
much lower than about 21 per cent in other emerging
economies, it said.
The day following the announcement, several business houses and banks issued statements. Chanda Kochhar, managing director and chief executive of ICICI
Bank, said: I welcome the announcement made by the
Prime Minister to derecognise Rs.1,000 and Rs.500
notes. It is perhaps the most signicant move ever taken
to curtail the parallel economy. This will give a sharp
boost to all formal channels of payment which in turn will
help the formal economy to grow.
Uday Kotak of Kotak Mahindra bank said this one
signicant stroke would help cleanse Indian society. This
was a turning point for Indian industry, where the economy would grow stronger, he told the media.
One sector that stands to benet immediately from
the currency clean-up is digital nance services. Online
payment wallets are now the next best thing to credit and
debit cards, says an analyst. Kunal Bahl, CEO of Snapdeal, released a statement saying: We welcome the governments bold and courageous move to weed out black
money, which will have signicant long-term benets for
the economy. With this, the quantum of Indias economy
moving through the digital pipes will witness massive
growth.
The jury is still out on whether the adverse effects of
the governments action will last a few months or more.
However, it will take a couple of quarters to fully understand the impact of the move and which sectors are less
affected than others. In the meantime, it is likely that the
stock markets will be volatile and the economic recovery
that people anticipate will start soon is going to be further
delayed, he says.

AT THE B O M B A Y S T O C K EX C H A N GE , before the

opening of the markets on November 9, the day after the
governments decision to withdraw the 500- and
1,000-rupee notes.

tion time. It was time tax evaders were brought to book

and some manner of balance restored, say several of
those interviewed.
An investment banker says: From the moment it was
announced, it was expected to create some amount of
dislocation to the aam aadmi and corporate India. It was
felt that since the government promised quick action to
replace the old notes, the dislocation would be for a
relatively short period. As always, the challenge of this
monumental task was sorely underestimated and it now
looks like the disruption is likely to last a lot longer than
estimated. I think that is where they failed.
I think there is a lot of confusion in the industry. This
took everyone by surprise. For instance the stock market
plummeted and ideally people buy stock in a low situation, but no one knows which sector will take a beating
with this move and hence are keeping away from the
equity market as well, he says. But the overall mood is
that this is for the better and will help curb ination and
increase economic growth.
INDUSTRY STATEMENT

The Confederation of Indian Industrys (CII) statement

on the demonetisation sums up corporate Indias views.
31

FRONTLINE .

DECEMBER 9, 2016

C OVER STO R Y

Ruined livelihoods
More than 80 per cent of Indias workforce is in the informal
or unorganised sector and has taken the full brunt of the
demonetisation move. BY AKSHAY DESHMANE
most glaring instance of how badly Indias informal economy has been affected by the sudden invalidation of
nearly 86 per cent of the countrys circulating currency.
According to the National Commission for Enterprises in the Unorganised Sector, the informal or the unorganised sector comprises all unincorporated private
enterprises owned by individuals or households engaged
in the sale and production of goods and services and
operated on a proprietary or partnership basis with fewer
than 10 workers. In 2011-12, nearly 83 per cent of Indias
workforce was concentrated in the informal sector.
By its very nature, the informal economy relies on
cash. Electronic nancial transactions are an exception
to the norm of daily transactions in cash carried out by
hundreds of millions of Indians engaged in micro-,
small- and medium-scale businesses. Predictably, the
effect of demonetisation has been the worst on the informal economy, especially on the workers who depend
on their daily earnings to make ends meet and have no
reliable social security mechanisms to fall back on.
It should come as no surprise then that many interest
groups representing specic sectors of the informal economy have spoken out against the demonetisation measure or the manner of its implementation. Speaking to
Frontline, Shaktiman Ghosh, general secretary of the
National Hawker Federation, said: There has been an
adverse impact on street vendors and the entire lowcircuit economy. Our producers come from cottage and
small industries. They are small, poor and retail-dependent. They number about four crore and have a turnover of
Rs.8,000 crore a year. The adverse impact on the lowcircuit economy has beneted the online businesses.
From November 9, sales in the retail market has been
reduced to one-third of what it was previously and in
wholesale markets to half of what it was. This is unjust.
They have let off the big businesses easily.
Interestingly, an assessment by the international
consulting rm Deloitte, which was released soon after
the demonetisation announcement, also pointed out that
there would be an adverse impact on the informal economy. It said: There will be disruption in the current
liquidity situation as households are likely to get affected
by the note exchange and currency withdrawal terms laid

DESPITE HAVING SPENT THREE DECADES

unloading fruits and vegetables at Asias biggest fruitsand-vegetables market, Delhis Azadpur Mandi, Nabi
Ahmed does not remember a time when business was
this bad. Except during times of peak militancy or intense winter in Kashmir, arrivals of apples have never
been as affected as they are now, he told Frontline,
gazing at the largely vacant apple sheds nearby, which
would usually be abuzz with the arrival and sale of cartons of apples at this time, the peak season for the fruit.
He is not sure about actual numbers but says he is
unloading fewer than half the number of cartons he used
to unload previously. Notebandi has affected everybody
at the mandi. My daily earnings of Rs.500 to Rs.1,000
have come down by about half. There is a lot of unpredictability about the business because the number of shipments and the number of prospective buyers have come
down drastically, said Ahmed.
In some cases, stocks have arrived but remain unsold
because there are no buyers. Take the case of Ranjit
Singh, who has driven all the way from Punjabs Hoshiarpur district. He brought a truckload of potatoes two days
ago but they are lying unsold. There is nobody to buy
them because they dont have new notes. That is why I
have been waiting here for two days to sell this stock, he
explains, speaking with this correspondent at a small tea
stall. The slump in trading activity has hit many ancillary
businesses located around the market. The owner of this
tea stall, for instance, is Ram Vilas, a migrant from
Samastipur district in Bihar. Ever since notebandi, my
earnings have reduced by more than half. If I made
Rs.1,000 a day before, I make only about Rs.250 now, he
said.
His predicament appears to mirror the situation in
the entire market, spread over 17.2 hectares. Metharam
Kriplani, president of the Chamber of Azadpur Fruit and
Vegetable Traders, said arrival of fruits and vegetables to
the market had decreased by half and that prices had
come down by 10 to 20 per cent because of the impact of
demonetisation. There are some who support the move,
seeing it as an important weapon in the governments
battle against black money, but the cash crunch has hit
them hard. The situation at the Azadpur Mandi is the
FRONTLINE .

DECEMBER 9, 2016

32

SUSHIL KUMAR VERMA

Post-demonetisation, trade in the markets of the country has reduced to 25 per cent in comparison with normal
days. Rural retailers from taluka and other mofussil areas
who generally visit nearby district markets for procurement of goods had to remain at their respective places for
want of sufficient funds of acceptable denomination.
APMC [Agricultural Produce Market Committee] and
mandis across the country had very less business as
farmers who had brought their produce for sale in the
market have to face a nightmare when he could not get
money against his saleable produce due to non-availability of smaller denomination of notes. The logistics sector
came to standstill as the truck drivers had only high
denomination notes which caused blocks in smooth
movement of transportation.
To give a sense of how large the retail sector is and
what an adverse impact on it could mean for the economy, the CAIT shared some gures: It is estimated that
the Indian retail trade is of about 42 lakh crore of rupees
annually, resulting to approximately Rs.14 thousand
crore per day, out of which about 40 per cent trade is
conducted through Business to Business (B2B) whereas
rest of the 60 per cent business is conducted through
Business to Consumer (B2C) activities. Sixty per cent of
the total retail trade is conducted in urban areas whereas
rest of the 40 per cent trade is conducted in rural areas.
Opposition politicians have naturally seen this as an
opportunity to intervene. Back at the Azadpur Mandi,
while discussing the losses in the apple trade, Nabi
Ahmed also spoke animatedly about politics. On the day
he spoke with this correspondent, Arvind Kejriwal and
Mamata Banerjee were at the market and they spoke
against the policy of demonetisation. Kejriwal mentioned the lack of trading activity at the market and called
the policy Independent Indias biggest scam. While
Ahmed was not sure about this claim, he agreed with
Kejriwals larger message: demonetisation has affected
the most vulnerable and poor unjustly and disproportionately.

WA IT I N G I N V A I N for customers. A shop selling fruits in

Azadpur Mandi on November 15.

by the government. Though clarity is unfolding on this,
commodity transactions and general cash market transactions are likely to feel an immediate impact. Unorganised sector proceedings, including small trade market
activities will remain volatile in the short term. Roadside
vendors, cab drivers, kirana stores, etc., have already
stopped accepting INR 500 and INR 1,000 notes. It is
important to note that a signicant percentage of the
Indian workforce, employed in this sector, is likely to be
affected by immediate liquidity issues. Overall, a likely
negative impact on disposable income is expected along
with disruption in the consumption patterns of the general populace. It is estimated that there may be a negative
GDP impact in the current quarter as consumption shock
gets transmitted in the system. However, the quantum
and degree of this impact cannot be ascertained at this
time.
ANTAGONISING BJPS CORE CONSTITUENCY

A large section of those affected are clearly the core

constituency of the ruling Bharatiya Janata Party (BJP).
Finance Minister Arun Jaitley has hinted in his recent
statements that the government was aware that a situation such as this was likely to emerge. Demand may be
affected in the short term, he said, due to shortage of
liquid money.
However, he airbrushed that concern by promising
that the system would become functional once the new
notes were replenished. However, it is uncertain how
long that will take.
Even those considered to be BJP supporters in the
trading communitylarge parts of which continue to be
in the informal sector even though the nancial size may
have grown biggerhave steadily begun speaking out
about the adverse impact of the policy. The Confederation of All India Traders (CAIT) said in a statement:
33

FRONTLINE .

DECEMBER 9, 2016

C OVER STO R Y

Rural distress
To rural India, which is already reeling under multiple crises,
demonetisation has come as yet another blow. B Y T.K. RAJALAKSHMI
WHEN THE PRIME MINISTER MADE THE
decision to withdraw Rs.500 and Rs.1,000 notes, he did
not quite factor in the impact it would have on agriculture. Despite the rhetoric the concept of digital wallets
has not yet entered rural India unlike in much of the
countrys urban areas, and much of rural and agricultural
India was caught unawares by the decision. While the
mainstream media documented the serpentine and unending queues in front of banks in the metros and smaller
cities, similar images from the rural hinterland were
missing. This was not because there was no crisis of a
currency crunch there but because of the thin density of
the banking network in rural India. If anything, the
reduced footfall at vegetable markets in the metros and
other cities was an indication of the crisis that had hit the
perishable commodity sector.
Private consumption overall was expected to drop
because of the cash crunch, which was interpreted by
some quarters as short-term pain. But the crisis in the
rural hinterland and the shape of things to come because
of it remain understated. The effects of the currency
crunch, coming as it did at the peak of the sowing season,
are going to be long term. Producers of perishable items
such as vegetables and fruits have already begun to feel
the punch.
Despite a record harvest, farmers were not able to sell
their produce; neither could they procure seeds and fertilizers for the rabi crop. All the four largest markets in
the country run by Agricultural Produce Marketing
Committees suffered major losses as traders were not
able to sell the produce or pay farmers.
The volume of trading in Asias largest wholesale fruit
and vegetable market, Delhis Azadpur Mandi, which has
around 30,000 small traders apart from labourers engaged in loading, unloading and other activities, came
down by 10 to 20 per cent. The low turnout of the public
too at prominent vegetable markets was an indication of
the exchange crunch. The only queues seen were at bank
branches for the entire fortnight. The mandis were empty. The rural economy, comprising almost 65 per cent of
Indias population, is a cash economy. Plastic money is an
unheard of concept here. And with just 53 per cent of the
people having bank accounts in the country, it was unrealistic in the least to assume that much of the rural
FRONTLINE .

DECEMBER 9, 2016

income was lying in bank accounts. Vijoo Krishnan, joint

secretary of the All India Kisan Sabha (AIKS), said that
agriculture as the main source of livelihood had been
disrupted by the decision, which choked the availability
of cash for investment in agricultural operations and for
household expenses. The AIKS, which was on an allIndia campaign on farmers issues for one month, said
that farmers were caught completely unawares by the
decision. Activists were shocked to see the kind of largescale suffering that farmers and agricultural labourers
were going through.
UNCERTAIN FUTURE

The worst hit is the area of perishable commodities like

vegetables and fruits. Farmers want to sell their produce, but traders are not willing to buy it citing lack of
legal tender. The opening of Jan Dhan accounts has not
made access to credit any easier as the majority of the
transactions are still in cash. Institutional credit is not
available to tenant farmers, agricultural labourers, poor
peasants and the socially oppressed sections. They all rely
on cash borrowings for their day-to-day requirements,
said Krishnan. He said he had seen long queues of mostly
women outside the local branch of Andhra Bank in Nirmal district, carved out of erstwhile Adilabad, in Telangana. The women, he found, had been coming to the
bank repeatedly to exchange the high-denomination
notes they had received after the sale of paddy crop. This
effectively debunked the notion that transactions in agricultural India were in the form of low-denomination
notes as was being propounded by some economists who
defended the governments decision and discounted the
discomfort in rural India.
While the landed people had something to fall back
on, the situation was particularly pathetic for the landless
and agricultural labourers. Inderjit Singh, vice president
of the Haryana unit of the AIKS, said that wages under
the Mahatma Gandhi National Rural Employment
Guarantee Act were paid into bank accounts, but with the
paucity of work under the scheme, the landless were
suffering hugely. The rural poor were unable to buy even
medicines and other essentials, not only food. In Haryana, too, agricultural activities came to a standstill because
of the uncertainty over the availability of cash in ex34

changeable denominations. Migrant workers in several

States were hit badly as they lacked local contacts and
resources to see them through the currency crisis. In its
overzealousness to convey a message that the government was serious about its drive against black money, the
Reserve Bank of India (RBI) on November 14 sent a letter
to cooperative banks to ensure strict compliance with the
instructions regarding deposits and the exchange of bank
notes. It had apparently come to the notice of the RBI
that some cooperative banks were not complying with its
directive. All district central cooperative banks were instructed not to participate in the exchanging of demonetised notes. They were not authorised to exchange

Rs.500 and Rs.1,000 notes, said the RBI directive.

This one decision of cutting both the deposit and
credit facilities not only affected the operations of district
cooperative banks all over the country but had direct
consequences for the account holders, mainly agriculturists. Kerala Chief Minister Pinarayi Vijayan, who could
not get the Union Finance Minister to roll back this
directive, went on a satyagraha in front of the RBI office
in Thiruvananthapuram on November 18. Interestingly,
the opposition United Democratic Front in the State
extended support to the Chief Minister.
The RBI allowed those holding kisan credit cards to

KUNAL SHANKAR

TH E M A I N W H O L E S A LE V EGET A B LE M A RK ET at Jadcherla in Telangana wearing a deserted look at 9:30 a.m., peak

business time, on November 15.

35

FRONTLINE .

DECEMBER 9, 2016

withdraw up to Rs.24,000 a week. But exchange and

deposit of the old currency were not allowed. The government was yet to give a cogent explanation for this decision that affects the rural masses.
Bhartiya Kisan Union spokesperson Dharmendra
Kumar said the government would learn its lessons in the
elections. Women who had saved money to meet exigencies as well as for small family rituals and ceremonies
were forced to part with their savings apart from being
labelled as black money holders, he said. The rural rich,
he said, did not get affected anyway.
The money that people kept for emergency purposes
became useless, and people nd it hard to meet wedding
and health care expenses. What can the farmer do? This
is the peak sowing season in Madhya Pradesh, the Bundelhand [region], western Uttar Pradesh and Maharashtra. Either he has to stand in a queue or take out a protest.
He cannot do both. The banks will ultimately take peoples deposits and give loans to other people, which will
then be declared as non-performing assets only to be
written off, he observed, referring to the controversy on
NPAs being written off. The government clearly had little
idea of the kind of crisis that was going to emerge in the
coming months.

Frontline, pointed to the difficulties agriculturists were

facing. It pointed out that while exchange was not allowed, there was an embargo on deposits as well. The
Bhiwani bank manager wrote that it was discriminatory not to allow cooperative banks to accept old currency
notes from its customers and that because of this decision, the banking system would crash as they would be
unable to accept the deposits of our valued customers
who have reposed their faith, condence and trust in our
cooperative banks for the last hundred years. The depositors in our bank are pressing very hard to accept the
deposits as they do not have any savings bank account in
other commercial or private banks.
He wrote that the loanee farmers of our bank, who
are about 2.54 lakhs are facing great difficulties as they
are unable to get fertilizer and seed in exchange of
Rs.500 and Rs.1,000 old currency notes. The manager
pointed out that the bank had three lakh customers and
that its situation was rather solvent but suggested that if
it was not allowed to accept deposits, it might lose
credibility.
UNABLE TO PAY BACK CROP LOANS

Another result of the demonetisation and the subsequent

RBI directive to cooperative banks has been that farmers
are unable to pay back their crop loans. The money that
they received after the sale of the kharif crop would
normally have been utilised for paying off their crop
loans. The irony is that the peasantry wants to repay
their loans but cannot do so, said Inderjit Singh. The
repayment of other debts had also become difficult and
challenging with every passing day, with the interest on
the loans and penalties for not paying by due date accumulating.
Moreover, banks were not the only place from where
farmers took loans. Moneylenders too had to be paid
back. Farmers said not only were they unable to clear
their old crop loans with the old currency, but they were
unable to take fresh credit to purchase inputs and other
requisites for the sowing season. With much of the rural
banking transactions taking place through cooperative
banks, the governments discriminatory decision has the
potential to force farmers to take loans from moneylenders at usurious rates.
In the uniquely symbiotic relationship of a rural
economy, the farmer and the trader depend on each
other. The latter is a supplier of seeds and fertilizers and
often would give out raw material on credit. But the lack
of availability of acceptable currency has affected the
traditional ties the two have enjoyed. Similarly affected is
the routine sale and purchase of cattle in States where
pastoral activities and dairy farming are combined with
agricultural work.
The coming months will reveal the full impact on the
rural economy and the countrys economy as a whole. The
aftershocks will continue until the rabi harvest, which
many people are not optimistic about now. To the farmer
already reeling under the weight of multiple crises, demonetisation has come as yet another blow.

The aftershocks will

continue until the rabi
harvest, which many
people are not optimistic
about now.
At several places, Dharmendra Kumar said, farmers
were bartering their produce in the absence of money.
Can the farmer afford the luxury of standing in a line
during the sowing season? The government did not apply
its mind before taking such a big decision, he said. And
not all villages have banks or ATMs; few farmers have
debit cards. Dharmendra Kumar said that there was only
one bank for every four villages.
A MANAGER SPEAKS UP

A letter sent by the general manager of the Bhiwani

Central Cooperative Bank to the Chief General Manager,
Department of Currency Management in the RBI, responding to the November 14 missive directing cooperative banks to ensure no exchange facility of bank notes
(Rs.500 and Rs.1,000) indicated how out of sync with
reality the government was. His letter pointed out how
badly the decision had hit both farmers and the credibility of the banking system.
The letter, dated November 15, a copy of which is with
FRONTLINE .

DECEMBER 9, 2016

36

C OVER STO R Y

Cash bombs
in rural U.P.
Times are bleak in the season of sowing wheat, mustard and lentil in
western Uttar Pradesh. B Y ZIYA US SALAM
days labour. The workers in turn use these canes as fuel.
Even these meagre earnings are welcome when cash has
virtually disappeared from rural India.
Says Haz Sheikh Mansoor Ahmed, a villager: I have
had a small plot of land here for a long time. Things have
been bleak for many years now, but this is the worst. We
have not had a suitable procurement price for sugarcane
for the past ve-six years. This time, with the elections
near, we were expecting better times, but then Modijis
move took us all by surprise. I do not have cash at home to
pay the worker who wants to be paid daily wages. I am
dependent on those who take sugarcane in lieu of wages.

ANINDITO MUKHERJEE/BLOOMBERG

MASURI IS A HAMLET IN UTTAR PRADESHS

Ghaziabad district, on National Highway 24. It is often
hidden by a row of tractors and trucks loaded with sugarcane. An occasional goat tethered to a tree or dogs running around complete the picture.
This time though the scene is different. The inhabitants, many of whose ancestors survived the massacre of
Partition, are a worried lot. It is sugarcane harvest time
and the daily wagers have not turned up for over a week
as the farmers cannot pay them in cash. Only those
labourers who accept their wages in kind are available.
They are paid in inferior or rejected sugarcane for their

A SU GA R C A N E F A R M ER with his crop in Modinagar, Ghaziabad district, Uttar Pradesh. It is harvest time and the daily

wagers have not turned up in several places as the farmers cannot pay them in cash. Those who come are paid in kind.
37

FRONTLINE .

DECEMBER 9, 2016

Mostly, there are women and old people. Hiring a tractor

to transport the cane is a problem. Some farmers have
money and they can take help from the Gramin Bank, but
small farmers like me, who do not have a bank account,
are at a loss. Where do we go for help? And if we do not
send our harvest quickly, it will rot.
REMOVED FROM THE WORLD OF ATMS

FRONTLINE .

DECEMBER 9, 2016

CHANDAN KHANNA/AFP

Masuri, though only 40 kilometres from New Delhi, is far

removed from the world of ATMs and banks. The village
gets electricity for four to six hours a day. There is no
water connection and almost all roads are unpaved. Only
elementary means of public transport, including buffalo
carts, are available. It is moneylenders who lend to people
here. People could get small loans at 3 per cent interest
for three months earlier. Now it is 5 per cent, says
Ahmed.
Some 40 km further ahead on NH 24 is an agricultural belt known for its mustard cultivation. The cash
bomb, as a villager puts it, could not have been more
ill-timed. Says Shamsuddin of Okar village, 18 km off
Aligarh: This is the time to sow mustard. If we delay it
even by a couple of weeks, there will be no crop as
mustard has to be harvested around February-March.
But most farmers in the village have no money to procure
manure. Most of us had got seeds. Some 15-20 per cent
has sowed the seeds. Those who did not buy them earlier
are the worst affected.
Sher Mohammed of the same village looks at the
pradhan (village chief) for help. He is our gaon bhai
[village brother]. We are Muslims; he is a Chauhan. But
in our village he is a brother to everyone. He has helped
many small farmers with money from the Gramin Bank,
but how many can he help? We need cash to buy seeds,
manure, everything. The elds are dug up.
But it is not just rapeseed or mustard farmers who are
affected. Uttar Pradesh is the largest wheat-producing
State [in India]. Yahan se zyada gehun kahin nahin
milta [no place produces more than this], not even
Punjab, he claims. Indeed, last year, Uttar Pradesh reported the production of 300 lakh tonnes of wheat,
whereas in Punjab it was 164 lakh tonnes.
The problems for wheat farmers, it turns out, are
similar to those of other farmers except that they have a
window of a couple of weeks. Wheat can be grown well
into late November, early December. So if the farmers
can somehow get money for seed and manure, the crop
can be saved. Otherwise, they too will be like us. You
travel across Uttar Pradesh and you will nd farmers in
distress. Our Prime Minister went to Mahoba, but he did
not come here. Mahoba, incidentally, has reported many
suicides by farmers because of successive droughts. Narendra Modi preferred to talk of triple talaq there rather
than addressing the problems of farmers.
It is not very different for those into lentil sowing
chickpea, gram and green gram. If lentil cultivation is
not normal or above normal, dal rates will go up in the
next six months or so. The agrarian distress which the
media do not know of is for real, says Dr Saurabh Tiwari

from Gajraula. We have had instances where small

farmers have come to my clinic looking for work, even a
sweepers work. Things have come to such a pass that a
landowner is ready to work on another persons land if he
can get cash at the end of the day.
Rampur, the efdom of Samajwadi Party leader
Azam Khan, is no different. Here much of the sugarcane
has been harvested. However, the farmers involved in
wheat and mustard cultivation are in trouble. Their
plight is compounded by the absence of daily wagers
because of the governments decision to ban Rs.500 and
Rs.1,000 notes. These men used to stay in the elds at
night. At times in one room, ve-six people used to sleep
in the middle of our elds and help out with irrigation.
Others would hire a room above a garage or a mechanics
shop nearby. They used to help out in the elds and do
odd jobs. However, when they were not paid for threefour days, they went back to their villages as the poor live
38

farmer; the more acute the need, the higher the rate.
Some have been charging as much as 10 per cent since
the money demonetisation. Earlier the rate was 5 to 7 per
cent.
The farmers in Hardoi were used to an informal
banking system. That is, the most popular or the richest
farmer takes a big loan from a bank and gives a share of it
to smaller farmers at a slightly higher rate. This rate has
never been exploitative, and the farmers were happy to
pay the amount at the time of harvest. It is different now.
It is each to his own. Some farmers go to Lucknow to get
loans. Others fall back on their relatives and friends. Still
others mortgage their jewellery. But everyone urgently
needs money for sowing and manure. Ploughing is going
on. We cannot wait for seeds, says Rishipal.
The government has sought 50 days. We would be
ruined much before that. But does a farmers problem
bother anyone at all? he asks.

R E SID E N T S O F B A S EN D U A village in Bulandshahr,

Uttar Pradesh, wait at a bank to exchange their notes.
Small farmers and agricultural labourers are at the
receiving end of the governments shock decision.

on daily earnings, says Sultan Ali Khan, a relatively

well-off farmer who has multiple business interests. For
these poor people from Swar, Tanda and Shahbad, Rampur is a city where they can earn their daily bread. Now
local farmers have no cash to pay them. Hence, the
movement back home.
Will their life be easier back home? Cannot say. After
all, they migrate because of poverty in their villages, says
Sultan Ali Khan.
In Hardoi near Lucknow, where wheat and potato are
sowed around this time, local moneylenders are making a
killing. The interest charged depends on the need of the
39

FRONTLINE .

DECEMBER 9, 2016

C OVER STO R Y

Grinding to a halt
A rural economy like Mahbubnagars runs on cash transactions and
demonetisation has brought a painful disruption to normal life.
B Y KUNAL SHANKAR

building work for the past 14 years except this year, when
farm labour has been in demand as the rains have been
good. The arrangement with the landlord is that he will
pay a days wagesRs.150 for women and Rs.200 for
menfor standing in the serpentine line at the post office
and something extra for chai aur pani (tea and water),
says Shanti. They produce a photocopy of a government
ID, mostly Aadhaar or ration cards, along with the forms
and the currency, and the post office returns the
Rs.4,000 in newly printed Rs.2,000 notes or worn-out
Rs.100 notes, which the landlord takes back.
Less than ve minutes walk from the post office, the
main wholesale vegetable market of this town with a
population of about 18,000 is near empty at 9:30 a.m.
Mohammad Abdul Salim, a wholesaler selling mainly
chillies, says that usually most of the produce would have
been sold by now, but not today, November 15, a whole
week after the big currency recall. Salims bags of chillies
lie on the road unsold. Most customers buy produce for a
few hundred rupees. I dont have change when they give
me Rs.2,000 now! says Salim, exasperated.
Ramulu, another wholesaler within earshot, says
people are panic-stricken. He says: One normally needs
about a kilogram of salt per family every month. But at
the market yesterday, I saw people buying 10 kg. Everyone is afraid they will run out of money.
About two kilometres away, outside the local State
Bank of India (SBI) branch, a jeweller-cum-pawnbroker
gets a Lambada tribesman to affix his thumb impression
on a promissory note to return Rs.1.85 lakh of the Rs.2
lakh that he has lent him. The deal is for the jeweller to
pay off the latters farm loan of Rs.15,000 in return for
this favour. The rest of the money is to be paid over a
period of time free of interest.
Inside the bank, it is utter chaos. A worn-out employee says there has been no let-up in the near stampede-like
situation for the past week, and most of those coming in
are not customers. They are there to exchange Rs.4,000
as cash, as that is the amount the bank had been authorised to dispense to a single customer each week. The
official says that those with more cash simply take the
rest to the next bank and get another Rs.4,000 exchanged there. This was a day before the government

KUNAL SHANKAR

OUTSIDE THE POST OFFICE AT JADCHERLA

in Telanganas Mahbubnagar district, a local landlord
frantically lls out forms to turn in his wad of 1,000rupee notes. One form for every Rs.4,000 for each of his
seasonal employeesBanjara tribesmen and women
who work in his paddy elds during the harvest season.
The landlord is worried that he might be asked to produce income records for his life savings, mostly in 500and 1,000-rupee notes which the Central government
invalidated as legal tender overnight on November 8.
One of those waiting for her form to be lled is Shanti,
who is in her forties. She has been engaged in road-

A W O R R I E D landlord lls out forms outside Jadcherlas

post office for each of his seasonal farmworkers to get his
invalidated Rs.1,000 notes exchanged.
FRONTLINE .

DECEMBER 9, 2016

40

KUNAL SHANKAR

whether there has indeed been any recovery of unaccounted wealth. Until then, we will keep all the records,
he says.
It is as if Mahbubnagars overwhelmingly rural economy had come to a near standstill, but the response to the
Narendra Modi governments sudden jolt to the countrys monetary policy ranged from adulation to shock.
Back at the vegetable market, Venugopal, a wholesaler-turned-auto nance dealer, says: I read in the
papers, in WhatsApp and in other social media that fake
currency worth Rs.20 lakh crore has been taken out of the
system. Haz Sayeed has been sending this into India
through Jammu and Kashmir. The government should
go after the Vijay Mallyas of the country next. Ramulu,
standing next to Venugopal, also approves of the policy
but disapproves of the timing to introduce Rs.2,000.
He says it is easier to hoard, say, Rs.10 crore with
Rs.2,000 notes than it would be with Rs.500 or Rs.1,000
notes. The latter takes up more space, says Ramulu. He
also wishes the government was better prepared, with
pre-calibrated ATM machines to dispense Rs.2,000
notes and wished the recall of the Rs.500 and Rs.1,000
had been done in a staggered manner.
But 40-year-old Mohammed Nayeem Irfan, who
joined the ruling Telangana Rashtra Samiti party four
years ago, is a worried man. He has a poultry business
and sells 10,000 eggs a day. Until November 8, the going
rate per egg was Rs.3.91, he says, but that has now
dropped to Rs.3.50 as wholesalers complained of a cash
crunch, citing looming tax payments. If the trend continues, Irfan calculates a revenue loss of about Rs.1.5 lakh
every month. The rural economy runs on cash, even if it
is in lakhs of rupees. All of the money is rotated from one
business to another. All our savings are also in cash. How
are we to pay daily wagers, for chicken feed, or to buy
groceries? And how can we be sure that we can get back
the money once we deposit it in the bank? Some families
have Rs.10-20 lakh in cash, but thats their savings for the
past 20 years! Would all that be taxed now? And how can
they prove that it is genuine income? No one maintains
receipts! says an anxious Irfan.
A high-ranking officer in Telanganas Panchayati Raj
and Rural Development Department, however, sought to
dispel such fears. He pointed out that agriculture was
free from income tax and that most farmers knew this
already.
He said: If somebody has commensurate landholdings to justify having such large amounts of cash, then the
banks should accept it as genuine income. Look, farmers
dont normally operate bank accounts, and most people
dont deal with cheques. The fact is that the practices
which people are used to have been disturbed, so naturally they are worried. But going cashless is the future. They
will take to banks the way they took to mobile phones or
cable TV. It is only a matter of time. Deepening the
governments e-seva portal and other such measures will
help.
Hyderabad, which is just 80 km away from Jadcherla,
suddenly felt a world away.

KUNAL SHANKAR

M OH A MMA D A B D UL S A LI M (left) and his business

partner Shekhar, who sell chillies at the wholesale
market, with the unsold bags of chillies lying on the road.

TH E Q UE UE outside the post office at Jadcherla.

decided to use indelible ink as a way to prevent people

exceeding the exchange limit.
We believe that several of those coming in to exchange currency are agents for hoarders, but we cannot
tell for sure, says an SBI official who did not wish to be
identied. He hopes the Reserve Bank of Indias audit
after the deadline of December 30 to return 500 and
1,000-rupee notes will give a better picture, if at all, as to
41

FRONTLINE .

DECEMBER 9, 2016

COV E R S T OR Y

Despair
in the
delta
R.M. RAJARATHINAM

Coming on top of a severe water

crisis following a failed monsoon
and the Cauvery deadlock,
demonetisation has played a cruel
joke on the farmers of the delta
districts of Tamil Nadu.
BY T.S. SUBRAMANIAN

FOR TAMIL NADU FARMERS, DEMONETISATION

of Rs.500 and Rs.1,000 notes could not have come at a
more terrible time. The water level in dams across the
State is fast heading towards dead storage, and farmers in
the Cauvery delta and other districts are unable to cultivate both the kuruvai (short term) and samba (medium
and long term) crops this year. Faced with the the worst
agrarian crisis in the past 55 years, it is not surprising
that farmers look at the demonetisation as a direct
assault on them.
The situation is so grim that six farmers committed
suicide or died of heart attack in the past few weeks on
seeing their paddy or turmeric crops wither away for
want of water. Given this, what has angered farmers the
most is that cooperative banks and cooperative credit
societies in villages have become inoperative consequent
upon the demonetisation. These banks and credit societies are not transacting any business in cash on a directive
from the Reserve Bank of India (RBI) after the Narendra
Modi government announced the demonetisation on
November 8.
From November 9, in the wake of the RBI instructions, district central cooperative banks and primary
agricultural cooperative credit societies in Tamil Nadu,
FRONTLINE .

DECEMBER 9, 2016

which are the backbone of the rural economy, have refused to exchange Rs.500 and Rs.1,000 notes from farmers. Farmers have not been allowed to withdraw money
from their savings bank accounts in these banks and
credit societies. Ration shops in villages do not accept
Rs.500 or Rs.1,000 notes either. With no ATMs in villages and nationalised banks having their branches mostly
in the towns, farmers across Tamil Nadu do not have
money even to buy groceries. They do not have cash to
buy fertilizers, repair pump sets, pay farm labourers or
undertake weeding operations where groundwater is
available and the samba crop has been sown. That the
long-term samba crop, raised between August and December/January, has withered away for want of water is
another story. Worse, there has been no cultivation of
kuruvai, which is done from June to September, for the
past ve years.
To add insult to injury, District Collectors have told
farmers that they will have to pay the premium for their
crop insurance in cooperative banks or primary cooperative credit societies before the November 30 deadline.
Farmers have been warned that if they fail to do so, they
will become ineligible to receive compensation for their
failed crops. On top of all this is the currency famine.
42

rainfall). Water from Kallanai, situated on the border

between Tiruchi and Thanjavur districts, was released
only from September 24. Water released by Karnataka,
after interventions from the Supreme Court, was only
enough to water the samba crop in the delta region a few
times.

A FAR M E R in his withered paddy eld near Thanjavur on

November 11.

A normally unappable Ranganathan, secretary,

Cauvery Delta Farmers Welfare Association, reacted
sharply. He said: Weeding operations are under way for
the directly sown paddy in the Cauvery delta districts of
Thanjavur, Tiruvarur and Nagapattinam. This involves
considerable number of women labourers whose daily
wages have to be paid in cash. After the demonetisation
was announced, agricultural operations have come to a
standstill. We are not able to withdraw more than
Rs.10,000 a week from our savings bank accounts. But a
farmer with a medium-sized holding of up to 10 acres
needs at least ve to eight times that amount to pay for
weeding and other operations. The demonetisation has
completely jeopardised these operations. Farmers are at
a loss as to how to pay the wages and get the work done.
Considering the entire gamut of the problems we are
facing in the Cauvery delta region, 2016-17 appears to be
the worst season in the last 65 years.
The sluice gates of Mettur dam, which irrigates the
Cauvery delta districts, were opened only on September
20 (they are opened on June 12 in a year of normal

AN ASSAULT ON FARMERS

P.R. Pandian, who owns cultivable land near Irulneeki

village, about 15 kilometres from Mannargudi in Tiruvarur district and who is the president of the Mannargudi
branch of the Tamil Nadu All Farmers Associations
Committee, called the demonetisation a direct assault
on farmers. It had led to total stoppage of life in the
delta districts, he said.
A late north-east monsoon will only spoil the [directly sown] samba crop, he said. Given this background, the demonetisation has led to a situation where
we are unable to exchange the Rs.500 and Rs.1,000 notes
for valid notes from the district central cooperative
banks. We are also not able to withdraw money from our
accounts there. These banks do not accept cheques from
us. There are no ATMs in villages either, he added.
Middle-class people, farmers and the common man
43

FRONTLINE .

DECEMBER 9, 2016

were, therefore, standing in queues for hours together in

front of nationalised banks to exchange their notes. People in rural areas are not in the habit of stocking up
groceries and now they have no money to buy even
groceries. Thus, demonetisation has hit the livelihood of
farmers hard, Pandian said.
G.S. Dhanapathy, a farmer from Bharathipuram, Andakulam village, Pudukkottai district, said there was
neither an ATM nor a nationalised bank in a stretch of 50
km around Bharathipuram covering about 200 villages.
People in these villages are unable to exchange Rs.500

notes. We are not able to withdraw money from the

cooperative banks in order to buy urea for our crops. The
cooperative credit societies also do not accept Rs.500
notes from us. No cash transaction is being done in these
banks and credit societies. So agricultural operations
have been affected, said Dhanapathy, who is also the
Pudukkottai district chairman of the Farmers Forum of
India. Shops selling fertilizers or groceries do not accept
Rs.500 or Rs.1,000 notes from farmers. Farmers are
unable to sell their cattle because potential buyers insisted on giving only demonetised notes, he added.

Struggling to
stay aoat
Fishermen in Tamil Nadu are hit hard as
the cash ow dries up and people stop
buying sh. B Y R . K . R A D H A K R I S H N A N
CUSTOMER footfalls in the Chintadripet fish market,
one of the many government-designated markets for
the retail sh trade in Chennai, have gone down from
about 5,000 in the morning hours to a few hundreds.
Arrivals at most sh markets in the State remained
steady on November 8 and 9, but fell subsequently
because of poor demand.
Yes, there is a huge slip [after the demonetisation], said S. Janakiraman, who was until recently
president of the Kovalam panchayat, a village that
depends on shing and tourism for its survival. Earlier, for instance, if a hawker sold sh worth Rs.5,000,
now it is down to about Rs.1,500, he said and added
that people were willing to undergo the pain caused by
demonetisation because they believed that it was for a
greater good and that it was a temporary phenomenon.
What if the present situation continues? Then,
there will be a problem because people will nd it
difficult. Cash is an essential requirement to run the
trade, he said. Similar sentiments were voiced by other workers and association representatives across the
State. Theres a liquidity problem even after a week,
said U. Arulanandam, a prominent voice in the Fishermens Association in Tamil Nadu. All of us support the
government in the drive against black money. Our only
request is that the government help us with some kind
of subsidy because many shermen are out of work, he
told Frontline.
That is the main problem. Across the country, the
sheries sector has ground to a halt. In Tamil Nadu,
despite the fact that no association has openly come
out demanding relief, most of the boats across the 13

FRONTLINE .

DECEMBER 9, 2016

44

coastal districts are barely venturing out. For most of

them, the economics just do not work out.
Each boat (regardless of whether it is a mechanised
or a smaller motor-tted bre one) has four or ve
persons working on it. The input costs vary: for bre
boats, they are insignicant because the government
makes available ve litres of diesel for each and the
boats do not venture too far from the coastline. But
mechanised boats have to carry anything from 50 to
100 litres of diesel, and this is the major input cost.
Once back on land, the catch is sold and the money
evenly distributed among the labourers (if the boat
owner is also one of the crew).
But in the case of hiring a boat from an owner, this
cost too has to be factored in. The hiring route is not
available to many labourers and sh workers though. It

BOA T S A T K A S I M E D U harbour in Chennai.

B. JOTHI RAMALINGAM

Dhanapathy said, We are unable to pay farm workers. They havent got their wages. The new Rs.500 and
Rs.1,000 notes are not available here. In petrol bunks,
they accept Rs.500 notes. But if we buy petrol or diesel for
Rs.200 or Rs.300, they write out the balance on a slip of
paper and ask us to come after some days to get the
money. Demonetisation is a good scheme but people are
running from pillar to post to rustle up some valid money.
They are undergoing indescribable hardships, he added.
We are not able to do any work and agriculture has
been hit hard was the refrain of R. Manickam, a farmer

depends on the condence of the boat owner in the

person hiring the boat, and also on the record of the
labourers. The recordin the case of most of the boats
in Thangachimadam, Pamban and nearby areasdepends on whether the labourers have been arrested by
the Sri Lanka Navy. If they were in the past, then the
condence of the owner in the crew diminishes.
According to Tamil Nadu Fisheries Minister D.
Jayakumar, the total sh production of Tamil Nadu in
2015-16 was 7.08 lakh tonnes. Tamil Nadu stands
fourth in total sh production of the country, besides
exporting marine products of 85,063 tonnes and earning foreign exchange worth Rs.4,184.06 crore in 201516, he informed the State Legislative Assembly while
presenting the demands for grants for the Ministry
earlier this year. A total of 5,862 mechanised shing

in P.K. Agaram in Lalgudi taluk, Tiruchi district. We do

not receive loans from the cooperative credit societies
and we cannot exchange our Rs.500 or Rs.1,000 notes for
Rs.100 or Rs.50 or Rs.20 notes. Cooperative banks were
open but they were not working. Fertilizers couldnt be
bought. We are unable to pay mechanics to x our pump
sets. We are unable to maintain our tractors, he said.
Since the rains had totally failed this year, the cotton
crop, which had grown to a height of about a foot and a
half, has started wilting. The onion crop, which is dependent on rains, has started withering. So we cannot

boats, 28,886 motorised and 5,261 non-motorised traditional craft have been registered till 15.07.2016, says
the policy note for 2016-17. Tamil Nadu has the second
longest coastline in India: 1,076 kilometres across 13
coastal districts (exclusive economic zone of 1.9 lakh sq
km and a continental shelf area of 41,412 sq km). The
marine sher population in Tamil Nadu is 9.64 lakh,
living in 608 shing villages. Fishermens unions, including its leaders such as Arulanandam, dispute this
number. They say that the State government only
counts those with a government identity card; in reality, there are over 13 lakh sh workers in Tamil Nadu.
The entire trade, barring a few up-market retail
outlets, operates on cash. Cash is required to meet the
daily needs of the labourers and also for the cost inputs
for the next trip. A few shermen this correspondent
spoke to insisted that there was nothing illegal about
their cash transactions as most of them did not have
the annual income required to make it even to the
lowest income tax bracket.
It is largely a hand-to-mouth existence, and the
government subsidies, such as the lean season allowancethough it is delayed every single timeare a
welcome relief whenever they reached them. Most of
the registered shermen do have bank accounts and
also opt for the National Rural Employment Guarantee Scheme during the lean months.
Fishermens representatives insist that there is no
other way to run the sectorbarring a minuscule part
of the industry populated by big multi-day trawlers
employing 15 to 20 labourers. In such cases too, the
labourers have to be paid in cash after each trip.
Despite the fact that the sector provides employment to about 15 million people in the country, the
problems of the sh workers have barely made it to the
media after the November 8 announcement on demonetisation. The sector is in danger of falling apart
unless the government provides input support or buys
the catchas it does in the case of procurement of
cropssh worker leaders say. But, with hardly any
spotlight on the sectorexcept when shermen are
shot at by the Sri Lanka Navyeven this is a tall order.
For now, it appears that the shermen will have to fend
for themselves.

45

FRONTLINE .

DECEMBER 9, 2016

E. LAKSHMI NARAYANAN

food production. The statement, which was issued after

Sellur K. Raju, Minister for Cooperation, presided over a
meeting in the Secretariat, said the RBIs directive had
made these societies and cooperative banks inoperative.
recover the money we have invested in agriculture this In the nancial year 2015-16, as many as 6,38,643 farmyear. If farmers stand in the queue for days on end to ers received crop loans totalling Rs.3,152 crore. However,
exchange Rs.500 or Rs.1000 notes or to withdraw cash crop loans amounting to only Rs.2,075 crore had been
[from nationalised banks], how can they cultivate their distributed to farmers as on November 7, 2016, although
the target for the nancial year 2016-17 was
elds or pay wages to farm labourers?
Rs.6,000 crore. Supply of fertilizers and
Manickam asked.
seeds from all the 4,474 primary agricultural cooperative credit societies had been afGOVERNMENTS STATEMENT
fected. All this would severely affect food
On November 16, the AIADMK governproduction in Tamil Nadu, the statement
ment issued a statement acknowledging
predicted.
that the cooperative credit societies, which
The only person to strike a different note
functioned at the level of villages, had bewas Cauvery V. Dhanabalan, a farmer in
come inoperative because they were not
Odhiyathur in Nagapattinam district.
able to receive any cash. They could not
There is no impact of demonetisation, he
disburse loans to farmers or collect dues
said, because rains had again failed this year
because Rs.500 and Rs.1,000 notes could
and both the kuruvai and samba crops were
not be deposited in them unlike in the case
lost.
of nationalised banks. The services of 23
This year we have lost the samba crop in
cooperative banks and their 813 branches,
which served several lakhs of people, had P . R. P A N D I AN ,
a major way. In the last 35 years, I have
president of the
been hit hard, the statement said.
never seen agriculture being affected in
Demonetisation had led to a situation Mannargudi branch of
such a big way, Dhanabalan said. Since the
where farmers were unable to pay their crop the Tamil Nadu All
crops had failed and farmers had no money,
loans on time. Credit societies were unable Farmers Associations
there was no impact of demonetisation on
to disburse crop loans, which would affect Committee.
them at all, he argued.

R.M. RAJARATHINAM

COOPE R A T I V E B A N K W O RK ERS protest against the

RBIs decision not to allow cooperative banks to exchange
the demonetised notes, in Salem on November 14.

FRONTLINE .

DECEMBER 9, 2016

46

C OVER STO R Y

Choking a lifeline
Ruling and opposition parties in Kerala join hands to protest against what
they see as a politically motivated move to destroy the cooperative sector
in the State. B Y R. KRISHNAKUMAR I N T H I R U V A N A N T H A P U R A M

C. RATHEESH KUMAR

THE DEMONETISATION INITIATIVE, WITH

the withdrawal of Rs.500 and Rs.1,000 notes, has
pushed the vibrant cooperative sector in Kerala, including the wide network of primary credit cooperatives and
district banks, into one of the worst crises in its history.
It has also triggered a sensitive political battle, with
Chief Minister Pinarayi Vijayan and his Cabinet colleagues launching an agitation on November 18 in front
of the regional office of the Reserve Bank of India (RBI)
in Thiruvananthapuram, and joining hands with the
Congress-led opposition against what they described as
attempts by the Bharatiya Janata Party (BJP) government at the Centre to destroy the cooperative sector, the
lifeline of Kerala economy.
The strong cooperative movement in the State, whose
origins can be traced back to the years before Independence when commercial banks were not so popular, has
played a crucial role not only in liberating the rural poor
from the clutches of moneylenders and extending banking services to them but also in addressing the various
social needs of ordinary people throughout the State.
Today, prots from these cooperatives not only reach the
government but are also used to provide low-cost essential services and in a variety of socially useful activities,
including the public distribution of essential commodities and medicines, marketing, housing and construction, womens welfare, and in the elds of education and
health.
Perhaps more than in other States, the cooperative
movement in Kerala has established very close links with
the lives of ordinary people. While commercial banks
together have 6,213 branches in the State, and accounted
for a total deposit of Rs.3.7 lakh crore, the district and
primary cooperative societies, though still backward in
technology adaptation and in the provision of many services, have 4,800 branches and have accumulated a total
deposit of Rs.1.8 lakh crore. Unofficial estimates say that
every day nearly Rs.25,000 crore worth of transactions
take place through cooperative banking channels in
Kerala.
The three-tier system, with its wide network of State,
district and urban banks, and primary agricultural credit

CHI E F M I N I S TE R Pinarayi Vijayan and Cabinet

colleagues at a protest meeting in front of the RBI office in

Thiruvananthapuram on November 18.
societies and other primary societies, came to a halt from
November 10 when the RBI barred all but the State and
urban banks from exchanging the Rs.500 and Rs.1,000
notes that had ceased to be legal tender or from accepting
such notes as deposits or receiving fresh cash in exchange
for its own reserves.
The apex State Cooperative Bank, with its 20 branches, and the nearly 60 urban banks in the State, accounted
for only 10 per cent or so of the total banking business in
the cooperative sector. In other words, over 80 per cent of
the total transactions in the sector took place through the
district/primary banks that were barred by the RBI from
exchanging money or accepting deposits. As the cooperative banking system lay immobilised, the Income Tax
Department began its long-pending hunt for alleged tax
evaders in it, giving notice to many cooperative banks
and societies to throw open their books for scrutiny.
Thousands of depositors who had invested their savings
in these cooperative banks were left in the lurch, with no
clarity on when normal transactions would resume.
The chaos that followed led to widespread protests,
and after repeated requests by the State government for a
rollback on the freeze on exchange of currency by the
primary cooperatives and district banks were ignored by
the Union Finance Ministry, the States Ministers led by
Pinarayi Vijayan staged the day-long agitation on No47

FRONTLINE .

DECEMBER 9, 2016

guidelines proved unsuccessful because of the concern,

among other reasons, that it would drastically alter the
character of the cooperatives as the common mans easy
avenue for credit and savings and hinder its role in the
service sector. Successive governments led both by the
CPI(M) and the Congress had refused to accept the
package put forth by the K. Vaidyanathan Commission
for reforms in the sector. Earlier attempts made by the
Income Tax Department to collect information about the
deposits in these banks too were not successful because of
non-cooperation from a lot of societies/banks and lack of
political support for such moves. All this had added to the
unfair impression that the cooperative sector was but a
den of black money, eclipsing the crucial role it had in
bolstering the States economy and as the common mans
neighbourhood banking avenue.
The RBIs recent moves, including its unexplained
action imposing restrictions on the district cooperative
banks, even though they followed banking regulations
and worked under its supervision, is seen as politically
motivated and meant to destroy a peoples movement
with a long and reliable history in the State. After a
Cabinet meeting on November 17, the Chief Minister said
it was a deliberate move and that he suspected a clear
political conspiracy behind it. There is no hindrance to
legal inspections being conducted in cooperative banks.
Nobody has tried to prevent it. But the current restrictions will only destroy the cooperative sector where thousands of ordinary people keep their money and is the
lifeline of the States economy. He also said that the
allegation of State BJP leaders that the cooperative banks
were centres of black money was pure nonsense.
BJP State general secretary K. Surendran had alleged
in a memorandum to Union Finance Minister Arun
Jaitley that there was an estimated Rs.30,000 crore deposits in the cooperative sector in the State belonging to
politicians, real estate maas, hawala dealers and terrorists and that not a single paisa has been paid as income
tax on them.
State Finance Minister Thomas Isaac said such statements were part of a major conspiracy to destroy the
cooperative banks in Kerala, with the State unit of the
BJP and some vested interests at the Centre behind it. He
said that the background of such moves is Keralas refusal
to accept the Vaidyanathan Commission reforms which
seek to destroy the cooperative sector. Successive LDF
and UDF governments in Kerala were against it. But
vested interests are using the present crisis to achieve
their aim through the destruction of the primary cooperative banks. The State unit of the BJP is in full support of
such a move. The people of Kerala will have to go for a
major agitation against it, he said.
Curiously, the current crisis comes at a time when the
Kerala government is exploring the possibility of forming
a Kerala Cooperative Bank, by merging the State Cooperative Bank with 14 district cooperative banks, with linkages with member primary banks/societies, to make use
of the huge deposits and resources of the cooperative
sector for the States development.

vember 18. The Congress-led opposition too announced

it would join hands with the ruling front in the ght
against the BJP governments moves to destroy the cooperative sector and called for a special session of the State
Assembly to discuss the issue.
According to the Minister for Cooperation, A.C.
Moitheen, there are total deposits worth Rs.1,83,435.90
crore in Keralas cooperative sector. This includes the
deposits in primary cooperative societies/banks
(Rs.1,20,905.71 crore), district cooperative banks
(Rs.57,404.52 crore) and the State Cooperative Bank
(Rs.5,125.67 crore). Given the facts that some of the
funds of primary banks are deposited in the district
banks and that of the latter in the State Cooperative
Bank, the net total deposits would be Rs.1,37,813.85
crore, the Minister informed the Assembly in October.
In addition to the money used for disbursing loans
and that required to be kept as statutory deposits, the
States cooperative banks hold a surplus fund of
Rs.1,161.36 crore in various banks, securities and bonds.
There are also unclaimed deposits lying idle in these
banks, of a total of Rs.80.86 crore, the Minister said.
The RBIs restrictions on primary cooperative societies and district banks literally froze these deposits and
brought all transactions in the cooperative sector, which
include 1,642 primary agricultural credit societies and
over 15,287 other primary cooperatives, to a stop. A large
chunk of these transactions were linked to the daily needs
of ordinary people who depend on them for credit or for
depositing their life savings for essential needs like education and weddings or for parking funds from the sale of
property and other such activities.
TARGET OF ALLEGATIONS

However, over the years, cooperative banks were the

target of allegations that, especially because of their
grass-roots nature and popularity, they were being used
by many for stashing ill-gotten wealth and for large-scale
tax evasion. In general, many of these banks/societies are
known to offer higher interest rates, easy KYC (know
your customer) requirements and a general exclusion
from tax scrutiny, as the majority of the primary cooperative societies (though not the district banks) were outside the RBIs direct scrutiny and control. Such a relaxed
atmosphere was equally attractive to ordinary people
with limited surplus funds as well as to those with immense black wealth.
The cooperative sector has also been an area for
political patronage and funding, with the Communist
Party of India (Marxist) and its Left Democratic Front
(LDF) allies reportedly controlling nearly 70 per cent of
the banks and the Congress and its United Democratic
Front (UDF) allies controlling the rest. Members of the
governing bodies are elected mostly on party lines, and
the recruitment of employees is a major area of patronage
politics. For historical reasons, the BJP has only a negligible presence in the sector.
It is true that attempts made by the RBI earlier to
make cooperative banks/societies to follow many of its
FRONTLINE .

DECEMBER 9, 2016

48

C OVER STO R Y

Deposits before dark

In Kolkata, the BJP deposits in its bank account Rs.3 crore just before the
demonetisation announcement, raising allegations of selective leaking of
information. B Y S U H R I D S A N KA R CHATTOP AD HYAY
HOURS BEFORE PRIME MINISTER NARENDRA
Modi announced the demonetisation of Rs.500 and
Rs.1,000 currency notes on November 8, his party, the
Bharatiya Janata Party (BJP), deposited Rs.1 crore, all in
Rs.500 and Rs.1,000 notes, in a nationalised bank in
central Kolkata. In fact, in a span of just eight days before
the demonetisation announcement, the BJP deposited a
total of Rs.3 crore in its account in the Central Avenue
branch of Indian Bank, raising questions of whether
there was selective leaking of information and what the
party was doing with such a large of amount of cash in
high denominations.
Though the West Bengal unit of the BJP has dismissed all allegations and claimed that it did not act upon
any prior intimation and that there were no nancial
irregularities in what it did, sources in the banking industry said the BJPs rush to deposit such a large amount of

money was unprecedented. The timing and the hurry in

which the deposits were made has ignited suspicion in
political and social circles.
According to a report in Ganashakti, the mouthpiece
of the Communist Party of India (Marxist), on the afternoon of November 8, Rs.60 lakh was deposited in the
account of the BJP (account number 554510034) in the
Central Avenue branch, Kolkata, of Indian Bank, all in
Rs.1,000 notes. A few hours later, Rs.40 lakh more was
deposited in the same account, but this time there were
also a large number of Rs.500 notes. The PAN card
number that was shown was that of the central BJP
account. A week earlier, on November 1, Rs.75 lakh was
deposited in a current account of the BJP in Indian Bank
(account number 6365251388). Four days later, on November 5, in the same account, Rs.1.25 crore more was
deposited, lending weight to Delhi Chief Minister Arvind

T H E S T A T E MEN T showing cash deposits amounting to Rs.1 crore made by the BJP at the Central Avenue
branch of Indian Bank in Kolkata on November 8 before the Prime Ministers demonitisation announcement.
49

FRONTLINE .

DECEMBER 9, 2016

level our workers are worried. We will have to face the

questions of the people and this may affect whatever little
gain we have made in the State, a BJP worker said.
There are a total of 10,460 ATMs all over West Bengal, and only around eight service providers. So, for the
rst week after the demonetisation announcement
around 90 per cent of the ATMs were not functioning
owing to a lack of Rs.100 notes in them. Moreover, there
are 700 gram panchayats in the State which are unbanked and hence completely cash dependent. With the
patience of the masses wearing thin with every passing
day, business transactions slowing down, payment of
wages getting delayed, and general panic and despair
spreading, Mamata Banerjee has been most vocal in her
criticism of the demonetisation programme. With her
new battle-crythe suffering of the peopleshe reached out to various opposition parties, including the Aam
Aadmi Party (AAP) and the Rashtriya Janata Dal (RJD).
For the rst time she even made overtures to her arch
enemy, the CPI(M). She made a call to CPI(M) general
secretary Sitaram Yechury, explaining to him the need
for a united effort to oppose the Modi government. Earlier, she said in a media conference: We are ready to work
with all, including the CPI(M) with whom we have political and basic ideological differences.
According to the noted social scientist and political
observer Biswajit Chakraborty, this is a carefully calculated political move by Mamata Banerjee to further her
aspirations at the national level. Her all-out attack on
Modi will consolidate her minority vote in the State on
the one hand, while on the other her call for a united
stand against the BJP at the Centre will create new space
for her at the national level, he told Frontline. The West
Bengal unit of the CPI(M), though opposing Modis demonetisation, has made it clear that it will have no truck
with the Trinamool Congress. We have seen in the Narada sting case her party leaders accepting cash on camera.
She is agitated because the daily functioning of her party
is now hampered. A sizable per cent [of unaccounted-for
money] has gone out [of the country]. But there are
problems now getting money from extortion, syndicates,
etc, and this in turn is causing problems for her in the
upcoming byelections. We are protesting, but then again,
anybody can protest, and if thieves are joining in the
protest, we cannot help it, Surjya Kanta Mishra told
Frontline.
Mamata Banerjee also hit the streets, talked to the
people in the queues and tried to garner support for her
opposition to the scheme. However, while most people
admit to being exasperated, few have actually been critical of the main plan. While the common people support
the idea of what the Centre professes to achieve with its
demonetisation, they are critical of its implementation.
Mamata Banerjees overzealous opposition also runs
the risk of being counterproductive. Her actions are also
being construed, not without smirks, by the same people
standing in long queues under the midday sun as that of
one who seems to have been personally hit hard by the
demonetisation.

Banking sources said the

depositing pattern was
unprecedented and abnormal.
Kejriwals allegation made on November 10: There is
evidence that their [BJPs] friends and own people were
informed a week before the decision was announced.
Sources in the banking industry conrmed the dates and
the gures reported to be accurate. The BJP did not deny
that the deposits were made but maintained that the
dates on which they were made was just a coincidence.
What difference would it have made if we had deposited
the money after November 8. We put the money in a
nationalised bank account and gave our PAN. All of it is
accounted for, said Jaiprakash Majumdar, vice president of the West Bengal unit of the BJP.
But the question remains, why the unseemly rush to
deposit such a large amount of money in denominations
of Rs.1,000 and Rs.500, for banking sources have
claimed that such depositing pattern as displayed by the
BJP is both unprecedented and abnormal. The way the
BJP deposited the money, one can be certain that the
information was leaked out. Whatever be the amount,
what was the need to deposit the money on the 1st, 5th
and 8th of a total of Rs.3crore? This is just one example; it
may be that throughout the country more such examples
are there. Moreover, if you analyse the statement of [BJP
president] Amit Shah on [Chief Minister] Mamata Banerjees reaction to the demonetisation decision, you can
draw certain conclusions. He said certain political parties
are reacting because they have become poorer. In other
words, it is not his party that has become poorer but
others. In other words, the BJP protected itself and let
the other parties become poorer, Rajen Nagar, president
of the All India Bank Employees Association (AIBEA)
and general secretary of the Bengal Provincial Bank Employees Association (BPBEA), told Frontline.
Surjya Kanta Mishra, State secretary and Polit Bureau member of the Communist Party of India (Marxist),
challenged the central BJP leadership to come clean on
the issue. If the national president of the BJP has the
courage let him say in what other bank accounts money
has been deposited in this manner, he said at a media
conference. Has money also been deposited in the accounts of party leaders or those close to the party? he
asked. Questioning the BJPs claim that there was nothing suspicious in what it did, Mishra asked: Does the
BJP then deposit such an amount every week?
With the prevalent chaos and the inconvenience
faced by the people, the revelation came as an unexpected
blow to the party, which is trying to carve out some
political space for itself in the State. Even as the partys
leaders dismissed the allegations, its rank and le have
been feeling the heat. There is no denying that this has
been a major embarrassment for us. At the grass-roots
FRONTLINE .

DECEMBER 9, 2016

50

ESSA Y

BALOCHISTAN
VS KASHMIR
tan, Ajit Doval, now Prime Minister Narendra Modis
National Security Adviser, said at the 10th Nani Palkhivala Memorial Lecture at Sastra University, Thanjavur, on February 21, 2014. This was three months before
he became NSA and the Manmohan Singh government
was still in power.
The shock this Doval Doctrine of defensive-offence
induced precluded any cool analysis of its implications
(see the writers The Doval doctrine, Frontline, November 13, 2015). Doval was advocating a diplomacy of tit for
tat with full knowledge of the perils it entailed, not least
among them being the risk of matters getting out of hand
in the retaliatory ladder of escalation. This becomes apparent when one moves from the doctrine to the specic,
Balochistan.
Whoever perpetrated the Mumbai attacks committed a dastardly crime. But at no time did India ever allege
that Pakistans top leaders were complicit in it. Is it not a
wholly disproportionate retaliation to secure the detachment of one of Pakistans four provinces? Would its

The pursuit of a tit-for-tat

diplomacy will not get India
anywhere because Balochistan
and Kashmir are not on a par,
legally and politically. The time
has come for India to drop the
Baloch card and work for the
settlement of Kashmir.
BY A . G . N O O R A N I

AKISTANs vulnerabilities are many times

higher than us [sic]. Once they know that
India has shifted gear from defensive mode to
defensive-offence, they will nd that it is unaffordable for
them. You may do one Mumbai, you may lose Balochis-

I N HI S I N D E P E N D E N CE

MONEY SHARMA/AFP

Day speech from the Red

Fort in 2016, Prime Minister
Narendra Modi spoke of
Indias ties with Baloch
leaders.

51

FRONTLINE .

DECEMBER 9, 2016

KAMAL NARANG

leaders, civil and military, sit back with folded hands

when this is being attempted? And the Great Powers in
the Security Council, especially China, which now has a
stake in Balolchistan? And, pray, how does Doval propose to detach Balochistan? By military invasion? Far
from it. Our intelligence commando has other plans
whose elements are no secret. He proposes to do this by
fomenting subversion through covert action. He could
not possibly have made the claim (you may lose Balochistan) unless India had acquired signicant assets
thereas they are called in the idiom of covert operationsover the years. They cannot be acquired instantly. It is these existing assets, acquired, trained and funded
over the years, which emboldened Doval to speak as
condently as he did.
An extremely well-documented book by acknowledged scholars has made a timely appearance now. It is
Not War, Not Peace by George Perkovich and Toby Dalton (Oxford University Press, 2016). It is based on interviews with persons in the know. It has a whole chapter
on covert operations in which they write: The American
scholar Christine Fair reported that in 2009 she visited
the Indian mission in Zahedan, Iran, and concluded that
it was an element of a broader covert action programme
against Pakistan. I can assure you they are not issuing
visas as the main activity! Moreover, India has run operTHE HI N D U S E N A staging a demonstration in support
ations from its mission in Mazar-i-Sharif (through which
of the freedom struggle in Balochistan, in August at
it supported the Northern Alliance) and is likely doing so
Jantar Mantar in New Delhi.
from the other consulates it has reopened in Jalalabad
and Kandahar along the border. Indian officials have told Minister Manmohan Singh allowed this one sentence to
me privately that they are pumping money into Balochis- nd a place in the famous Joint Statement he issued with
tan.
Prime Minister Yusuf Raza Gilani at Sharm el-Sheikh on
Reports and allegations of Indian covert involve- July 16, 2009: Prime Minister Gilani mentioned that
ment in Balochistan and elsewhere invite distinctions to Pakistan has some information on threats in Balochistan
be made and debated. India, like other states and sympa- and other areas. Given the realities, could the unilateral
thetic outsiders, could draw a line between providing mention have been any milder? Congress president Sofunds, logistical support, and political encouragement to nia Gandhi got her party spokesman to disassociate himdissident groups in Pakistan and, alternatively, providing self from the statement with the dishonest assertion that
equipment, training, and operational supthis was the governments business not the
port for violent action. Pakistan naturally
partys.
would oppose both categories of interfeBy then both India and Pakistan knew
rence.
what each was doing to the other. What
In Karachi it is likely that India has
General (retired) Pervez Musharraf told
former Foreign Secretary Maharaj Krishprovided funds to some leaders of Muttana Rasgotra at Islamabad on August 7,
hida Quami Movement (MQM). Like ma2000, is highly signicant. Rasgotra rejor regional and global powers, India could
cords: I added: You sure have some probperceive an interest in covertly funding
lems in your part of Kashmir, we are not
relatively friendly political movements
adding to your difficulties. (He did not
and parties in another country. The MQM
cavil at or contest this.) We have problems
in Karachi has provided an opportunity to
on our side, which Pakistan-sponsored vido so.
olence has aggravated. Political wisdom
From this brief survey, it is safe to say
demands that you handle your problems
that India has not been purely abstemious
peacefully and leave us alone to handle
in the use of covert agents and actions
ours peacefully. When the situation is
against Pakistan. This is especially evident A J I T D O VA L, National
calmed, India and Pakistan, as sovereign
when Afghanistan is included along with Security Adviser. You may
entities, should sit together and address
Pakistani territory as the area of oper- do one Mumbai, you may
the issue and amicably resolve it to mutual
ations for Indian agents (pages 147-149). lose Balochistan, he said
satisfaction or mutual dissatisfaction. The
Yet, all hell broke loose when Prime at a lecture in 2014.
FRONTLINE .

DECEMBER 9, 2016

52

INDRANIL MUKHERJEE

DSFSGSGEA

Pakistan-occupied Kashmir [PoK]. Will

Modi mentioned (August 18). China reacthe world shut its eyes to the Indian part of
ted to Modis speech with a warning that it
Kashmir? A ne invitation to the internawould have to get involved if the Corridor
tionalisation that India dreads.
was disturbed (The Times of India, August
The real opening salvo was red on
29).
Independence Day, August 15, 2016. Modi
On September 22, New Delhi received
threw Gilgit as well into the bargain: ToBrahamdagh Bugtis application for politiday, from the ramparts of Red Fort, I want
cal asylum. He had applied at the Indian
to greet and express my thanks to some
Consulate in Geneva three days earlier. He
people. In the last few days, people of Bais the founder of the Baloch Republican
lochistan, Gilgit and Pakistan-occupied
Party. Soon enough, his cousin Shahzain
Kashmir have thanked me and expressed
Bugti voiced a different view. He said at
gratitude and expressed good wishes for
the annual convention of his Jamhoori
me. The people who are living far away,
Watan Party in Karachi that the Bugti
whom I have never seen, never metsuch
tribe would ght for Pakistan in the event
people have expressed appreciation for the B RA H A M DA G H BUG TI ,
of war with India. Brahamdagh can stay
Prime Minister of India. One wonders founder of the Baloch
in India or Geneva; that is his personal
what the hard-boiled foreign envoys as- Republican Party. He
decision. But as far as I or the party is
sembled there thought of this achieve- applied for political asylum
concerned, we will always follow the dicment.
tates of Nawab Akbar Bugti. He said that
in India in September.
One astute correspondent noted that
his grandfather, Nawab Akbar Bugti, was
Modi made no reference to his descent at Raiwind, at always with Pakistan (The Hindu, September 26).
four hours notice, to greet Nawaz Sharif on his birthday
There now descended on New Delhi yet another
in December 2015. The situation in the territories he guest, one Tarek Fateh, a Pakistani settled in Canada. He
mentioned could not have been different then. Concern parked himself in New Delhi for days and performed
for their people is a recent acquisition. Foreign Secretary with gusto on TV channels. He participated in a RashtriShyama Saran chipped in: Although we made those ya Swayamsewak Sangh (RSS) seminar in New Delhi on
references to Balochistan in 2005-2006, and even asked Baloch Nationality. Another participant was Mazdak
our High Commissioner to visit Gilgit-Balochistan, we Dilshad Baloch (The Telegraph, October 2). The group
never followed it up at the time, as the government was acquired another member on October 11the Kabuldivided on the issue (The Hindu, August 16). None based Naela Quadri Baloch. Soon a erce competition
doubts the line of the divide. The principled and sensible began for New Delhis favours. No sooner had Naela
Manmohan Singh would have none of such ventures, no Quadri set foot at the Palam airport than Brahamdagh
matter what NSA, M.K. Narayanan, said.
Bugti attacked her: Naela Quadri is not representing the
Already by then, Baloch separatists in exile were Baloch people. Rather than supporting, they are damagenjoying Indian hospitality in New Delhi. They belonged ing the Baloch cause with their insane actions. Governto the Free Balochistan Movement. Their
ment-in-exile is a national issue and
leader was one Balaach Pardili Baloch. Denational issues cannot be announced withscribed as the representative of the Free
out national consensus. He had stopped
Balochistan Movement in India, he has
at seeking political asylum; she had gone
been a resident in India for some years.
further and asked for a government-inHe rst addressed a public event in Delhi
exile (The Hindu, October 14).
in October 2015when the Valley was
The issues are daunting. Who will fund
quiescent. His leader, based in London,
that rump? New Delhi, of course. But on
was Hyrbyair Marri. They immediately
whom will its bounty be showered? That
upped the ante, to the embarrassment of
depends on the ones who become its Presitheir hostssupport a Baloch governdent, Prime Minister and Ministers. Can
ment in exile. As a bait, Marri rejected
you trust this squabbling lot to agree on its
both Pakistans origins and its claims on
composition even if the Research and
Kashmir (The Hindu, August 16).
Analysis Wing (RAW) offers its mediatory
Pakistan has good company, China.
services? For, on that depends which paFor, New Delhi also put out feelers to the
triot gets the bigger slice of the cake.
Tibetan Prime Minister in exile, Loksang N A ELA Q U AD R I
SECOND FRONT
Sangey, and to Taiwan and the Uighurs B A LO C H addressing a
This is not all. The Free Balochistan Move(The Telegraph, August 16). The Hindus- press conference in
ment in London opened a Second Front. It
tan Times correspondent reported that Mumbai on November 1.
was against Chinas presence in BalochisModis remarks were also aimed at China. She has asked for a
tan (Sunday Guardian, October 16). The
The China-Pakistan Economic Corridor government-in-exile and
government-in-exile will, doubtless, have
passed through all the three areas that demanded Indias support.
FRONTLINE .

DECEMBER 9, 2016

54

BANARAS KHAN/AFP

containing China, which is developing the China-Pakistan Economic Corridor (CPEC) and prevent it from setting up a base in Indian Ocean. Thirdly, it will provide a
safe and short passage to India in Eurasia, which it can
get in Balochistan through the sea route. This is benecial for India to get its resources, gas, and oil from the
region as its energy requirement will double by 2030.
India is a developing the Chabahar port in Iran,
which is in occupied Sistan Baloch province. We welcome India. Why is China so insecure and not able to
move freely in the province for its CPEC project? (Armed
Baloch insurgents attack Chinese employees in Balochistan as it opposes Pakistans occupation and Chinese involvement.) We dont want the same to happen to Indian
nationals in Chabahar as we love and respect India. We
want India to emphasise to Iran and Afghanistan to
protect the human rights of Baloch nationals living in
their region. Iranian forces have already started killing
Baloch people and displacing villages for the development of ports, like the ones in Kumb-Moradabad and
Roshanabad. Pakistans development of Gwadar port for
China has resulted in the genocide of our people and now
Iranians are doing the same in Chabahar. India cant
criticise human rights atrocities against Balochs in Pakistan and ignore those being committed in Iran. It needs to

A JA N UA R Y 2006 photograph showing rebel tribesmen

guarding Baloch leader Nawab Akbar Khan Bugti (centre) in
the remote mountainous area of Dera Bugti in Balochistan.
The Indian External Affairs Ministry paid a glowing tribute to
him in its condolence message after he was killed by
Pakistani forces in his cave hideout in August 2006.

an active and very imaginative foreign policy from its

base in India. Shweta Desai reported in DNA on October
16: Weeks before Prime Minister Narendra Modis August 15 Red Fort speech, when he mentioned human
rights atrocities by Pakistan Balochistan, prominent separatist leader Naela Quadri Baloch had been quietly
meeting policymakers, retired military generals, intellectuals and rights groups, making a case for Indian intervention in Balochistan. The feisty leader, in her second
visit to India, is laying the groundwork for a government
in exile by building public consensus. In a conversation
with DNAs Shweta Desai, Quadri talks about how helping Balochistan will help India kill two birds with one
stoneweaken Pakistan and its sponsoring of terrorism,
and give a safe passage to India in Eurasia.
She said: Independent Balochistan will benet India
rst in security. Weakening Pakistan will weaken the
terrorism being sponsored from there. It will also help in
55

FRONTLINE .

DECEMBER 9, 2016

take a stand. She was asked: You are here to form a

government in exile. What is its mechanism? She replied: This will be a representative government for 40
million Baloch nationals all over the world. Our liberation movement has trained us in creating democratic
political structures like the Baloch Students Organisation, which has numerous units. We will ask the Baloch
people to follow this pattern and elect representatives/
councillors and send them to India. They will be facilitated in India for a National Council Session here. They will
create a constitution, adopt a ag and national anthem,
which will be recognised by the council. There will be
elections among councillors, after which a cabinet will be
formed. We want this process to be autonomous by the
Balochs, for the Balochs and of the Balochs, and no
interference from India. We want India to provide moral,
logistical support and resources to create this government. She had, to be sure, received the RSS invaluable
support.

terference in the internal affairs of India (Indian Express, August 13). But Kashmir is not on a par with
Balochistan, legally and politically.
The episode illustrates the knee-jerk, impetuous
character of the Modi-Doval decision-making process. It
calls for a close study by itself. It is reected in other
policies as well. Evidently, no thought was given to Balochis within Balochistan. The pliable exiles were all that
mattered. Exiles are a notoriously embittered lot. Undoubtedly, though, over the years Pakistans policies in
Balochistan have been disgraceful.
EARLIER MEDDLINGS

It has happened twice before. Pakistanis were angered by

Indian intervention. On March 28, 1948, the Khan of
Kalat issued a communique that said: On the night of 27
March, 1948, All India Radio, Delhi, announced that two
months ago Kalat State had approached the Indian
Union to accept its accession to India and that the Indian
Union had rejected the request It had never been my
intention to accede to India It is, therefore, declared
that on 9 pm on 27 March 1948, the time when I heard
the false news over the air, I forthwith decided to accede
to Pakistan, and that whatever differences now exist
between Kalat and Pakistan be placed in writing before
Mr Jinnah, the Governor General of Pakistan, whose
decision I shall accept.
The United Kingdom High Commissioner, Lawrence-Graftey Smith, commenting on the Khans denials,
wrote: Khans public denials of rumours about offers
made to him by India and Afghanistan conict with his
own statements in earlier discussion with Pakistan representatives, when he used these offers as a blackmailing
argument. There was good reason to believe that he has
been irting with both India and Afghanistan.
While the Instrument of Accession was signed by the
Khan of Kalat on March 27, it was placed before Jinnah
on March 31, 1948; Jinnah accepted it. There was no
kind of resistance to the accession till the middle of July
1948, when the brother of the Khan returned from Afghanistan, where he had ed with a body of armed followers. The Pakistan Army engaged this band and the
majority of his followers arrested. (Dushka H. Saiyid,
The Accession of Kalat: Myth and Reality, Strategic
Studies, page 43.)
The second such instance was in 1984 when the
Movement for the Restoration of Democracy (MRD) was
making headway against Zia. Indira Gandhis statements
in its support harmed the movement.

COLD FEET

The signs are that New Delhi has begun to develop cold
feet. These squabbling Baloch leaders will ruin Indias
relations with China as well as Iran. Baloch separatists
will any time cut a deal with Pakistan, leaving India high
and dry. Brahamdagh Khan Bugti said in Washington,
D.C. that he was prepared to talk to Pakistan. We are
practical people. We will talk (Dawn, August 2016).
The United States State Department spokesman
John-Kirby said on September 15 that the U.S. respects
the unity and territorial integrity of Pakistan and we do
not support independence for Balochistan (The Telegraph, September 16).
However, while accepting that Balochistan is Pakistans territory, the U.S., increasingly Indias natural ally, also holds that Jammu AND Kashmir is very much a
disputed territory. This was stated unequivocally, in so
many words, as late as on August 20, 2015, by none other
than the Special Assistant to President Barack Obama,
Peter R. Lavoy: Jammu and Kashmir is disputed territory. There was no change in the U.S. position, he explained. We do acknowledge that this is a contested
territory; or contested border between India and Pakistan (The Asian Age ,August 21, 2015). To this day, United
Nations maps carry the legend The Final Status of Jammu and Kashmir has not yet been agreed upon by the
parties. Kashmir cannot be put on a par with Balochistan. Such a policy is doomed to failure.
The timing suggests two things. The infrastructure
of intervention was long in place. Failure to tackle the
revolt in Kashmir led to desperation. The Baloch card
was used in the foolish belief that Pakistan was behind
the revolt. It was not, as even Omar Abdullah said. In the
three months since Modi spoke on August 15, the revolt
has not subsided.
Finance Minister Arun Jaitley let the cat out of the
bag on August 12. Asked why the Prime Minister had
raised the question of Balochistan and PoK, Jaitley said
Modis remarks were in the context of Pakistans inFRONTLINE .

DECEMBER 9, 2016

CHASTENING PERSPECTIVE

Hamid Mir has been a fearless critic of the establishment

in Pakistan. His comments on Modis performance
should open peoples eyes: Maybe Modi is not aware that
many Baloch militant outts want to unite Pakistani
Balochistan with parts of Sistan-o-Balochistan province
of Iran where India is building Chabahar port. Maybe he
was trying to divert attention from Kashmir by playing
the Balochistan card, but some Baloch people think he
56

the Dominion of Pakistan is concerned are Bahawalpur,

Khairpur, Kalat and the States in the N.W.F.P [North
West Frontier Province]. All these States have Muhammadan Rulers with a predominant Muslim population.
The principle which both India and Pakistan ought to
follow is Render unto Caesar that which is Caesars and
unto God that which is Gods. If some sort of an understanding is not reached on this matter between the two
Dominions, there is bound to be serious trouble ahead.
Kalat is a frontier State and ought really to go into
Pakistan.
Kashmir presents some difficulty. It is claimed by
both the Dominions, and at the present moment my
feeling is that the issue should not be forced by either
party. It is possible that a predominantly Muslim State
like Kashmir cannot be kept away from Pakistan for long
and we may leave this matter to nd its natural solution.
The districts of Kalat that were directly administered
by the Khan were Makran, Jhalawan, Sarawan, Kachhi
and Dombki and Kaheri. The status of Kharan and Las
Bela was disputed as the rulers claimed not to be under
the suzerainty of the Khan of Kalat. Balochistan was a
playground for its many Sirdars.
L E TT E R F R O M T H E N I Z A M of Hyderabad to the

Governor General of India, C. Rajagopalachari.

1947 ACCORD RIPPED APART

actually helped the Pakistan establishment most separatist Balochis who are thanking Modi are in the West.
They are not present on the ground because they lack
public support.
Many in India claim that Pakistan forcefully occupied Balochistan in 1948. But facts are different from
ction. There were four princely states ruled by Baloch
leaders in 1947. The Baloch tribal areas and Quetta
Municipality were separate entities. On 29 June 1947,
the Tribal Jirga (54 members) and Quetta Municipality
(100 members, including Hindus and Sikhs) voted for
Pakistan, including Nawab Akbar Bugti, grandfather of
Brahamdagh Bugti, who thanked Modi for his 15 August
statement. Akbar Bugti not only voted for Pakistan but
also helped Mohammad Ali Jinnahs Muslim League
nancially.
Sorry to say, Modi actually strengthened the Pakistan establishment in Balochistan. Time will prove the
speech was one of Modis biggest mistakes. The Indian
PM tried to internationalise Balochistan but, in fact, he
internationalised hatred between India and Pakistan
and helped the hate-mongers (Outlook, September 5).

India has not only waded into a marsh but ripped apart
the India-Pakistan Accord of 1947, an aspect which is not
noticed. An Experts Committee comprising members
from both sides was set up then to consider the effect of
Partition on the existing treaties and engagements between India and other countries and tribes. Annexure V
contained a list of 627 treaties and engagements. Treaties
Nos. 109-124 between the British Crown and Kalat were
listed as ones of exclusive interest to Pakistan. More
relevant to our times, item No.143 concerned The IndoTibetan Boundary Agreement of 1914 regarding xation
of Assam-Tibet boundary, that is, the McMahon Line.
Item Nos. 149 to 158 covered treaties with Afghanistan,
including the ones on the Durand Line. The Steering
Committee accepted this. So, did the Partition Council.
On August 14, 1947, the Governor General made an
Order, under Section 9 of the Indian Independence Act,
1947, endorsing the India-Pakistan Agreement, based on
the Experts Report, which was set out in a Schedule. The
result is that India cannot question Kalats status nor the
Durand Line, and Pakistan cannot question the McMahon Line, either (Partition Proceedings, Vol. III, Experts
Committees, Nos. III-IX, Government of India Press,
1948, pages 226-230).

MIRROR IMAGES

Kalats case was a mirror image of Hyderabad. India and

Pakistan could not have permitted them to survive and
weaken the new nation states. Hyderabad wanted return
of Berar; Kalat asked for return of Quetta and much else.
India took over rst the feudatories of Junagadh and
then Junagadh itself. Pakistan did the same to Kalat.
As always, V.P. Menon spoke realistically and honestly. In a brief for the Viceroy, Lord Mountbatten, his
Reforms Commissioner wrote: The States with which

TENUOUS TITLE TO J&K

The map attached to The White Paper on Indian States,

published by the Government of India after the Constitution came into force in 1950, shows Balochistan as a part
of Pakistan. Its depiction of Jammu and Kashmir as
Indian territory runs counter to the depiction in the
U.N.s maps.
What is the root of Indias title to the State of Jammu
and Kashmir? It cannot be the popular will, for that will
57

FRONTLINE .

DECEMBER 9, 2016

ence to the federal framework under the Act. This must

be coupled with the Governor Generals formal acceptance. The Nizams letter did nothing of the kind. It was
like a power of attorney to the Centre. A plebiscite was
promised to the people of Hyderabad. It was not held.
The fact that like the Nizam, the ruler of Kashmir
accepted the Constitution of India on November 25,
1949, is irrelevant. It provides for Kashmirs secession
from India. The post-Constitution White Paper on Indian States itself says that the accession of this State is
subject to conrmation by the people of the State (paragraph 221, page 111). These are strong words.
Sir Girja Shankar Bajpai, the Secretary General of the
Ministry of External Afairs, in a letter to the U.N. Commission for India and Pakistan on November 21, 1949,
spoke of the Government of Indias determination to
abide, in the matter of accession, by the freely declared
will of the people of Jammu and Kashmir. Should that
will be against the State continuing to be part of India, if
and when it comes to be expressed in a constitutional way
under conditions of peace and impartiality, the representation of the State in Indian Parliament would automatically cease and the provisions of the Constitution of
India that govern the relations of the State of Jammu and
Kashmir with the Union of India will also cease to operate.
The proviso to Article 254 says: Provided that after
the commencement of the Constitution (Application to
Jammu and Kashmir) Order, 1954, no decision affecting
the disposition of the State of Jammu and Kashmir shall
be made by the Government of India without the consent
of the Government of that State. The issue is therefore
open still. We have a later text: the Shimla Agreement of
July 2, 1972. It pledges the parties to respect each others
territorial integrity [paragraph 1(v)]. In contrast, it
binds them to strive for a nal settlement of Jammu and
Kashmir.
Kashmir is not on a par with Balochistan. The time
has come to drop the Balochistan card and work for a
settlement of Kashmir in both its dimensions, external
and internal. In 2016, plebiscite is dead; not so the
solemn and repeated pledges to the people of Kashmir.

was never ascertained by a plebiscite. A plebiscite was

held in Junagadh on February 20, 1948, after the administration of the State was taken over by the Government
of India in November 1947. It was called a referendum
(White Paper on Indian State 1950: 114) and was conducted by the Indian Civil Service officer C.B. Nagarkar.
Out of an electorate of 201,457, a total of 190,870 cast
their votes. Only 91 voted for Pakistan. Of the 31,434
votes cast in Junagadhs ve princeling areas, only 39
voted for accession to Pakistan (V.P. Menon, Integration
of Indian States, 1956, page 142).
A referendum was also held in Sikkim. The Election
Commission of India conducted it on April 14, 1975, to
conrm the resolution passed in the Sikkim Assembly
on the States merger with India in 1973-74. Nari Rustomji, ICS, whose services were placed with the Chogyal
in 1954 for appointments as his Prime Minister, opined
that it would be injudicious to assess, however, that the
resolution respecting Sikkims merger with India necessarily represented the wishes of the people. He recorded the demand for a completely impartial authority to
conduct the poll and added that the Army and the heavy
Indian presence in Sikkim were also factors that inevitably weighed in inuencing the vote.
The democratic principle was formally applied only
because the result was a forgone conclusion. In the case of
Kashmir, a plebiscite was never held also because the
result was a foregone conclusion. Indira Gandhi warned
Prime Minister Jawaharlal Nehru in a letter from Srinagar on May 14, 1948, while the war was on, that they say
that only Sheikh Saheb is condent of winning the plebiscite. On August 13, 1947, Kashmirs Prime Minister
Janak Singhno friend of Pakistanopined the bulk of
Muslims will not accept [a] decision to accede to India.
On October 26, 1947, N. Gopalaswamy Ayyangar advised
his colleagues that immediate accession might create
further opposition. Hence the condition in Mountbattens letter, collateral to the Maharajas Instrument of
Accession, on a reference to the people. Nearly 70 years
later, that reference is yet to be made.
FIG LEAVES OF LEGALITY

The signatures of the autocratic Maharajas, propped up

by the British, which appeared on the various Instruments of Accession were just so many g leaves of legality. Neither Junagadh nor Sikkim nor even Hyderabad
signed any Instrument of Accession. What the Nizam of
Hyderabad did accept was a virtual accession by his
letter dated the 18th November 1948 (see illustration
on page 57).
It is utterly devoid of any legal efficacy. Accessions
were not governed by the Indian Independence Act,
1947, as V.K. Krishna Menon dishonestly asserted, but by
the Government of India Act, 1935, which was adapted to
serve as Indias interim Constitution. Section 6 of the Act
prescribed a precise procedure for the accession. There
must be a formal declaration of accession by the ruler in
regard to the three federal subjectsdefence, foreign
affairs and communicationand also an explicit adherFRONTLINE .

DECEMBER 9, 2016

THERE IS A DISPUTE TO BE SETTLED

As a rst step we must accept what the world acknowledgesthere is a dispute to be settled. It is no use talking
of Kashmir as an atoot ang of India or as a jugular vein of
Pakistan. In the opinion of the Office of the Legal Adviser [of the U.S. State Department], the execution by the
Maharajah in October 1947 could not nally accomplish
the accession of Kashmir to either Dominion, in view of
the circumstances prevailing at that time (Foreign Relations of the U.S., South Asia, Vol V; page 1,379). Britains
Attorney-General and Foreign Office questioned the validity of the Instrument.
The cowardly Maharaja had ed, deserting his people
and thus relinquishing his title as ruler. Of what avail the
g leaf when the tree itself is gone? Kashmir cannot be
settled by legal debates, only by political conciliation.
58

L AB OU R ISSUE S

End of wage
disparities?
ONE worrisome and persistent
phenomenon in the labour market
has been the growing tendency of
employers to keep a signicant proportion of their workforce, especially
the blue-collar sections, in temporary forms of employment. Recruited
through an elaborate system of contractors, these workers, though they
are as competent as their regular
counterparts, are denied not only the
same wages and emoluments for the
same work done but also other benets. Such workers constitute almost
50 per cent, sometimes more, of the
workforce in many organisations
and even in government departments. These are the precariat of the
21st century, the social class of people subject to the uncertainty of existence.
On October 26, in a landmark
judgment, setting aside a clutch of
appeals and adjudicating on the
principle of equal pay for equal
work, a two-judge bench of the Supreme Court comprising Justices
J.S. Khehar and S.A. Bobde directed
the Punjab government to pay equal
wage for equal work to thousands of
casual, temporary, daily wage workers employed by the State
government.
The court ruled that it was fallacious to determine articial parameters to deny fruits of labour. An
employee, observed Justices Khehar

R. RAGU

The Supreme Court, in a landmark judgment, upholds the principle of

equal pay for equal work irrespective of whether one is a permanent
or a contract employee. B Y T . K . R A J A L A K S H M I

C O N T RA C T W OR KE R S desilting storm water drains in Chennai.

59

FRONTLINE .

DECEMBER 9, 2016

and Bobde, engaged for the same

work, cannot be paid less than another who performs the same duties
and responsibilities. Certainly not, in
a welfare state. Such an action, they
said, besides being demeaning,
strikes at the very foundation of human dignity. Anyone who is compelled to work at a lesser wage does
not do so voluntarily. He does so to
provide food and shelter to his family
at the cost of his self-respect and dignity, at the cost of his self-worth and
at the cost of his integrity. For, he
knows that his dependants would
suffer immensely if he does not accept the lesser wage. Any act, of paying less wages, as compared to others
similarly situated, constitutes an act
of exploitative enslavement, emerging out of a domineering position.
Undoubtedly, the action is oppressive, suppressive and coercive, as it
compels involuntary subjugation.
The judgment not only highlighted the exploitative nature of such
employment but reminded the state
that it is a signatory to the 1966 International Covenant on Economic,
Social and Cultural Rights. The covenant calls upon state parties to recognise the right of everyone to the
enjoyment of just and favourable
conditions of work which ensure, in
particular, remuneration which provides all workers, as a minimum,
with fair wages and equal remuneration for work of equal value without
distinction of any kind.
India ratied this covenant on
April 10, 1979. There is no escape
from the above obligation, in view of
different provisions of the Constitution and in view of the law declared
by this court under Article 141 of the
Constitution of India, the principle
of equal pay for equal work constitutes a clear and unambiguous right
and is vested in every employeewhether engaged on regular or
temporary basis, ruled the bench.
The order was the culmination of
protracted legal and juridical proceedings in thePunjaband Haryana
High Court that began in the late
1980s. The Supreme Court entered
the picture only in 2013. The matter
of wage parity pertinent to this particular judgment had been hanging
FRONTLINE .

DECEMBER 9, 2016

re since 1988 in the High Court. It

all began after a single judge of the
High Courtdirected the State(CWP
no. 1536 of 1988, decided on February 5, 2003)to pay the writ petitionersdaily wagers who were
working as pump operators, tters,
helpers, drivers, plumbers, chowkidars, and so onthe minimum of the
pay scale, revised from time to time,
with permissible allowances that
were being paid to similarly placed
regular employees. The single judge
order also directed the State government to pay them wage arrears, limited to a period of three years.
A division bench of the High
Court in 2009 (State of Punjab & Ors
vs Rajinder Singh & Ors)set aside in
an intra-court appeal the order of the
single judgeandheld that temporary employees were not entitled to the
minimum of the pay scale that was
being paid to similarly placed regular employees.
Another division bench of the
same High Court (State of Punjab &
Ors vs Rajinder Kumar) in 2010 set
aside an intra-court appeal against
the judgment of the single judge and
affirmed the decision of the single
judge in Rajinder Singh & Ors. The
Supreme Court judges observed that
the earlier judgment had not been
noticed by the later bench. A conict
of views arose and then the case was
referred for adjudication to a larger
bench on May 11, 2011. A full bench
of the High Court, which took up the
matter, accepted in its order that the
workers were entitled to the minimum of the regular pay, subject to
certain conditions. Its conclusion
was that temporary employees did
not become entitled to the minimum
of the regular pay scale simply because the work they did was similar
to that done by regular workers.
This order was challenged in the Supreme Court.
On its part, the Supreme Court,
in its October 26 order, disagreed
with the manner in which the full
bench had arrived at its decision.
Justices Khehar and Bobde observed
that the government counsel had acknowledged that the temporary employees in the cases under appeal
were appointed against posts that
60

were available in the regular cadre/

establishment. The government
counsel also accepted that the employees were being randomly deputed to discharge duties and
responsibilities that were assigned to
regular employees.
The Supreme Court bench relied
on past judgments of the apex court
wherein the principle of equal pay for
equal work had been upheld and
some others where it had not been.
In Randhir Singh vs Union of India
(1982 1 SCC 618), which was decided
by a three-judge bench, the petitioner, a driver with the New Delhi Police, demanded that he should be
placed in the same scale of pay as
other drivers in government organisations in New Delhi. His contention was that his duties were the
same. In this case, the court held that
the fact that employees were engaged in different departments was
not a sufficient reason to justify different pay scales, especially if their
powers, duties and responsibilities
were identical.
It concluded that the principle of
equal pay for equal work, which
meant equal pay for everyone irrespective of sex, was deducible from
the Preamble and Articles 14, 16 and
39 (d) of the Constitution. In 1983, a
ve-judge Constitution Bench, while
affirming the principle of equal pay
for equal work extended it to pensionary entitlements as well. In yet
another case, in 1988, a two-judge
bench decided that the principle
could not be translated into a mathematical formula and declined the
prayer of the petitioners.
The signicant part of the October 26 judgment is that it has come at
a time when the impermanence of
employment and the trend of classifying workers as temporary or casual have been on the rise. Even so,
there have been controversial
amendments recently to laws, such
as the amendment to the Apprenticeship Act that allows employers to
keep a large proportion of their
workforce as apprentices for unspecied durations even if those apprentices are qualied and discharge
duties at the same level of competence as their non-apprentice regu-

In another instance, ruling on a

claim for equal wages, the court had
ruled that criteria such as the duration for which an employee had been
engaged and the manner of his/her
selection and appointment made no
difference. The only relevant criteria
were whether the employee was discharging similar duties and responsibilities as regular employees were
and whether he or she possessed the
qualications prescribed for the
post.
The October 26 judgment, therefore, stated that the legal position
relating to temporary employees,
which has been repeatedly declared,
is being reiterated by us, again. The
judgment is rooted in the realities of
todays India.
Trade unions have welcomed the
judgment. The Centre of Indian
Trade Unions (CITU) pointed out
that the issue of denial of same wage
for the same kind of work was raised
at every tripartite forum, especially
the Indian Labour Conferences
(ILCs). Despite the existence of the
Equal Remuneration Act, which, a
trade union leader claried, had to
do with non-discrimination against
women workers, the provision for
equal pay for similar work was not
implemented anywhere. In 2009
and in 2010, the ILC had agreed to
amend the Contract Labour (Abolition and Regulation) Act to ensure
same wage for same work and similar jobs. The 46th ILC in 2015 reiterated
this
commitment.
Representatives of the CITU and
other central trade unions feel that

J U S T I C E S . A . BOBD E .

(below) J.S. Khehar.

K. MURALI KUMAR

ROOTED IN REALITY

V. SUDERSHAN

lar counterparts. It is the spirit of the

judgment that stands out. It relies on
references to previous judgments
where claims for pay parity raised by
temporary employees were settled in
favour of such workers. In one such
instance (the Dhirendra Chamoli
case), the court observed that the
action of not paying the same wage,
despite the work being the same, was
considered violative of Article 14 of
the Constitution. It was held that
the action amounted to exploitationin a welfare state committed to a
socialist pattern of society.

with the Supreme Court order, all

ambiguities regarding the principle
of equal pay for equal work have been
settled and that the government
should, therefore, ensure the implementation of the judgment and
amend the Contract Labour Act accordingly. A.K. Padmanabhan, president of the CITU, told Frontline
that the Supreme Court order had
statutory status. The amendment to
the Contract Act is awaiting Parliaments approval. The public sector
has become a model of exploitation.
There are contract workers in the
Labour Ministry. The government
should ensure that the Supreme
Courts order is implemented in both
the public and the private sector, he
said.
Concerns about wage disparities
are not conned to India. The Organisation for Economic Cooperation
and Development, in a 2015-report
61

on inequality, pointed out that much

of the job creation in its 34 member
countries since the mid 1990s was
non-standard vis-a-vis more secure and standard jobs. Compared
with permanent workers, such temporary workers faced wage penalties, earnings instability and slower
wage growth. The zero-hour contracts in the United Kingdom, in
which employees are entitled only to
the minimum wage and no other
benets, including sick leave, have
been a burning issue. While the bulk
of such work is in the private sector,
the public sector, particularly the
health care services, are also using
such contracts. The issue of gender
discrimination in wages is also gaining traction in some countries in Europe such as France, the U.K. (which
has a four-decade-old Equal Pay Act)
and Iceland.
It has been globally recognised
that non-formal types of employment are on the rise, and bodies such
as the International Labour Organisation, taking cognisance of this
phenomenon, have urged employers
to make the transition from non-formal to formal types of employment.
Rising industrial unrest is one of the
reasons for this concern.
While the unorganised and the
private sectors are notorious for
outing the principle of natural justice in the matter of equal pay for
equal work, such violations have far
greater ramications when government departments opt for such employment on a large scale, ostensibly
to reduce their nancial burden. This
has been a dominant characteristic
of neoliberal economic policies for
the last two and a half decades that
subtly and overtly advocate exibility
in the labour market to make it easy
to hire and re. Temporary, casual,
ad hoc, daily wage and contract employees are the easiest to re, and
more so in an environment that legitimises and encourages the ease of
doing business to the detriment of
everything else.
The Supreme Court judgment in
this context has come as a muchneeded relief. The onus of its implementation, however, lies with the
Central and State governments.
FRONTLINE .

DECEMBER 9, 2016

EN VI R O NME NT

C ON N A UG HT P LACE ,

New Delhi, a birds-eye

view on November 5.

An unusual conuence of factors caused unprecedented pollution and

smog in the Delhi region soon after Deepavali, and experts warn of a
similar episode in the days to come. B Y R . R A M A C H A N D R A N
AN unusual conuence of factors, the most important among
them being meteorological, is what
caused the unprecedented polluted
atmosphere and smog in and around
Delhi that hung low in the air for over
a week following Deepavali (October
30).
Come winter, parts of north India, particularly the capital region of
Delhi, are enveloped in smog during
the night and early morning hours,
which clears up in the morning as the
sun moves higher up. This is owing to
the formation of what is known as
the inversion layer, a meteorological phenomenon that occurs during
winter months, when the normal decrease in temperature with height is
reversed across an atmospheric layer
that forms close to the surface of the
FRONTLINE .

DECEMBER 9, 2016

earth, at heights of 100-200 metres,

and whose thickness can be a few
hundred metres. During November-December, this can be much
lower, under 50 m at night and hovering around 200-500 m during the
day, said Sarath Guttikunda, founder of UrbanEmissions.Info.
Under normal conditions the air
near the surface of the earth is warmer than the air above it because the
atmosphere is heated from below as
insolation warms the earths surface,
which in turn warms the layer of the
atmosphere directly above it. When
the air is colder near the earths surface, like it is during winter, a warmer, less-dense air mass moves over
the cooler, denser air mass forming
an inversion layer. (Inversion layers
form in summers too but they are
62

formed at much greater heights of

two to three kilometres.)
When temperature inversion
happens, atmospheric mixing due to
the convection that is normally present does not take place, resulting in
the atmosphere becoming stable
over the area experiencing inversion.
The warm layer acts much like a lid
trapping the cold air below it, which
results in the collection of dust and
pollutants at low heights as they can
no longer be lifted from the surface
and dispersed. Moreover, Delhi is a
landlocked city where there is no
natural horizontal sea breeze to
sweep away pollutants. But in the
mornings, local heating takes place
because of sunshine, the inversion
layer breaks, air rises because of convection and pollutants slowly get dis-

ALTAF QADRI/AP

Hazy winter

NASA
NASA

P IC. 1 : Distribution of res on November 2, 2016, based on data from the VIIRS
instrument aboard satellite Suomi-NPP. Each of the small coloured squares
(25 km 25 km) on the map indicates the number of res detected. The dark
red squares have between 1 and 5 re detections (within the 25 km 25 km
area), while the yellow areas represent up to 25 re detections.

NASA

P IC. 2 : Suomi-NPP satellite image of smoke spread on November 6, 2016,

showing res originating from sources in the north, north-west, west-northwest, including regions in Pakistan. The red dots indicate the distribution res
on the basis of data from VIIRS instrument, which have been overlaid on the
image.
P IC. 3 : (below) Smoke spread on November 6, 2015, showing the emissions
being steered towards the west over Rajasthan unlike (compare with Pic. 2)
this year where it is seen spreading all across the Indo-Gangetic plain. The big
white blob in the image is fog in that region on that day.

FRONTLINE .

DECEMBER 9, 2016

64

dimensionless number varying between 1 and 500. It is calculated on

the basis of ve main pollutants and
when a value of AQI for the entire
Delhi region is given, it is the 24hour average of the most prominent,
or lead, pollutant from all the 10 stations. Given that 2.5-micrometresized particulate matter (PM2.5)
poses the greatest health hazard and
also happens to be the lead pollutant
in the Delhi region during the current winter period, the AQI is calculated on the basis of concentration
levels of PM2.5.
The AQI scale is 0-100: Good;
101-200: Moderate; 201-300: Poor;
301-400: Very poor; and 401-500:
Severe. Anything beyond 500 (usually denoted as 500+) is off the scale
and is considered extremely harmful
to human health. SAFAR also issues
a three-day forecast in terms of the
ve AQI categories on the basis of a
model in which the initial inventory
of different pollution sources and
measured values of meteorological
parameters such as wind speed, wind
direction, humidity and temperature
are the inputs, which generates a value for AQI as the output.
According to Beig, on October
29, the day before Deepavali, particulate pollution (both PM2.5 and
PM10) was typical of winter months,
which was gradually increasing owing to the fall in temperature leading
to the formation of low-altitude inversion layer. [The concentration of
the lead pollutant] PM2.5 was already more than 250 microgram/cubic metre. We had forecast a Severe
AQI for October 31 and that the situation would signicantly improve
on November 1. The PM2.5 level did
indeed fall down to nearly half the
value, but AQI was still Severe.
Widespread biomass burning had already begun in several areas of Punjab and Haryana by October 15 or so,
but it did not have much impact as
winds were mainly north-easterly
and winds continued to be mainly
north-easterly till November 2. Its
contribution to Delhi pollution then
was only 1-2 per cent, Beig said (Fig.
3).
The easterlies/north-easterlies
would help in blowing away much of

Haryana during September-November 2004-14 based on MODIS instrument

on-board the NASA satellite Aqua at 1 km resolution.
the pollution from stubble burning
from Delhi. On October 30, the wind
speeds of the north-easterlies (which
blew for nearly one-fourth of the
time) were also signicant, being in
the 1-4 m/s range. Although there
were winds from the north and
north-north-west, they were there
for only fractions of the time.
According to a report on the Delhi pollution episode prepared by SAFAR/IITM, on Deepavali and the
day after, winds were very calm over
Delhi (less than 1 km/h), the inversion layer had come down to as low as
40-50 m, there was enough moisture
in the air, and venting of pollutants
from the surface was almost zero.
These conditions resulted in the
emissions from recrackers getting
stagnated at low heights, causing the
PM2.5 levels to peak on October 31
(Fig. 4).

On November 2, however, the

wind
circulation
signicantly
changed. As pollution from recrackers was dispersing slowly, the
wind direction became north-westerly and there was no easterly/northeasterly component at all. And as
stubble burning was going on in the
north-west and north-north-west directions, particulate matter from
these res started getting injected into the atmosphere over Delhi because of the altered wind direction.
Also, the wind speeds over the region
did not increase and remained as low
as 0.3-0.4 km/h, a direct consequence of the anti-cyclone over the
region. These conditions were ideal
for pollution to remain trapped over
Delhi, and PM2.5 levels once again
increased. They dropped briey on
November 4 when wind speeds temporarily picked up and dispersed

FIG . 3 : Wind Rose Diagram: The gures show how wind speed and direction were distributed during the days indicated. The colour
shading scale on the left of the plots indicates the wind speeds and the circles indicate different percentage shares of the total time for
each speed and direction.
65

FRONTLINE .

DECEMBER 9, 2016

SAFAR/INDIAN INSTITUTE OF TROPICAL METEOROLOGY, PUNE

NRSC, HYDERABAD/CURRENT SCIENCE, NOV. 25, 2015

FIG . 2 : Temporal variability in the number of re detections in Punjab and

part of the pollution away from Delhi.

Air quality started to worsen in
the following days. During November 5-6, all wind components became
north-north-west
and
north-west. This was a directed
channel for the smoke particles from
stubble-burning areas. In fact, this
resulted in the stubble smoke
spreading all across the Indo-Gangetic plain (IGP). Also, thanks to the
north-westerlies, there was an inux
of stubble-burning pollutants from
Pakistan, said Hiren Jethva, a research scientist at the NASA Goddard Space Flight Centre (Pic. 2).
There was direct ux of particulate matter from stubble burning,
and the area in which biomass was
being burnt too had increased significantly during November 3-5. On
November 6 the inversion layer too
remained below 100 m throughout
the day, Beig said. This is unprecedented and the highest since SAFAR
started in 2010, he added.
According to him, the share of
biomass burning to PM pollution
had shot up to 70 per cent during
November 6-7, although Guttikunda feels that would be an extreme
value.
I feel that would be an extreme
case, maybe for some hours. But saying that all of 22 million people, eight
million vehicles, more than 10,000
industries, more than 1,000 brick
kilns, and all the cooking and heating
and waste burning contributed to
only 30 per cent of the pollution in a
day seems very unreasonable. There

NAAQS

FIG . 4 : PM2.5 concentration levels during October 20-November 6. The plot also shows temperature, horizontal surface

wind speeds on each day and the categories of air quality index in which the values fall.

TAB L E 1: Though it may seem that recracker bursting was less this year, pollution
on the single day of Deepavali was higher than last year. (Credit: Central Pollution
Control Board)

were times when the [modelled, not

measured] contribution of res was
close to 50 per cent, but that was only
for certain hours. The average during
the peaks was around 20-30 per
cent, Guttikunda said.
On November 8, the winds became westerly and west-west northerly and picked up speed as well to
8-10 km/h and the share of stubble
burning had come down to about 1015 per cent. Though at present the
wind circulation pattern remains the
same, the temperature has dropped
by about 2 Celsius and consequently
the inversion layer has also come
down to about 150 m, Beig said. Of
course, pollution levels will continue
to fall to around 200 microgram/
cubic metre, but in terms of AQI still
Very Poor, he added.
Comparing the situations in 2015
and 2016 using satellite images,
FRONTLINE .

DECEMBER 9, 2016

Jethva, who is analysing the pollution effects of stubble burning over

the years, made an interesting observation. In 2015, the wind circulation
pattern was such that the pollutants
from Punjab and Haryana were
steered around towards Rajasthan
[Pics 2 & 3]. Though I have not
looked at what pollution effects it
had over Rajasthan, this aspect is
worth studying, he said. One of the
reasons for this happening could be
the effect of the easterlies that would
have set in under normal circumstances following the monsoon
period.
One of the main reasons for the
absence or very low speeds of surface
wind over the Delhi region was, as
pointed out by Rajeevan, the anticyclone hovering over the region. But
what was the reason for the absence
of, or at best weak, easterlies? Even
66

the north-easterlies that were there

during the pre-Deepavali period
were not very strong. By now, following the monsoon, the easterlies
should have been established over
the IGP.
Monsoon withdrawal this year
was quite late; it withdrew from the
north by about October 20 and the
total withdrawal occurred only on
October 28. Was the late withdrawal
from the north, a delay of nearly 15
days, the reason for the easterlies not
getting formed? It is very possible
that the late withdrawal could have
had an effect, Rajeevan said. Even
now the easterlies are very weak.
Normally, by November the easterlies set in. Gujarat and Maharashtra
have received rains even in October.
That also could have had a role in the
circulation, he added. But why was
the withdrawal so late? Climate
change or some other reason? That is
a topic for a different article.
The temperatures are higher
than usual for a November. By now,
the temperature would have been
under 15 C at night, kicking in the
need for heating, which has not happened yet. While the open agri-res
will be gone now, as soon as the heating period starts we have another
episode in the making, said Guttikunda, warning of a possible intense
pollution episode in the days to
come.

C U LTUR E

RAMAYANAS
OF SOUTH AND SOUTH-EAST ASIA

R A MA A N D S I T A .

Ramayana ballet, Prambanan Temple, Yogyakarta, Indonesia

It is the most important

cultural tradition of
Thailand, Cambodia,
Indonesia, Lao PDR,
Myanmar, Nepal and
India.
Text & photographs by Benoy K. Behl

R AMA R E L I E F . Prambanan Temple, ninth century,

Yogyakarta.

IMAGINE a gure who has been loved and worshipped by hundreds of millions of people in many
countries for untold generations, a personality upon
whom countless kings have modelled themselves, a
story which has been central to the culture of many
countries cutting across a spectrum of religions, an epic
which has shaped the lives and daily behaviour of millions of people and provided them an ethical framework
on which to build their understanding of their duties in
the world.
We are speaking of the Ramayana, one of the great
stories of the world. The story of the Ramayana is
enacted more often than any other story in the world. It
is performed by Hindus, Buddhists and Muslims. It is
the most important cultural tradition of Thailand,
Cambodia, Indonesia, Lao Peoples Democratic Republic, Myanmar, Nepal and India. It is also widely preva-

Series
FRONTLINE .

DECEMBER 9, 2016

lent in Bhutan, Singapore, Malaysia and Vietnam.

The Ramayana is a great epic of ethics that teaches
the values of life to men and women across South and
South-East Asia. Scores of generations of children have
watched these performances over 1,500 years, to learn
the importance of leading an ethical life. The Ramayana
has been the cornerstone of the life of South and South-

This is the rst part of a two-part photo feature.

68

R AVA N A I N D I S G UI S E A N D S I T A . Ramayana ballet, Prambanan Temple, Yogyakarta.

East Asia. Many kings in these countries have taken the

name of Rama, and cities and islands have been named
after persons and places in the epic. Symbols of Vishnu
(whose incarnation is Rama) have been royal emblems
across the region.

made 138 documentaries, which are regularly screened at

major cultural institutions worldwide. His photographic
exhibitions have been warmly received in 58 countries
around the world. He is in Limca Book of Records as the

most travelled photographer.

This photo feature in two parts carries stills from Benoy
K. Behls recent lm made for the Ministry of External
Affairs, Government of India. He was assisted in the
shooting and research by Sujata Chatterji.

Benoy K Behl is a lm-maker, art historian and

photographer who is known for his prolic output of work
over the past 40 years. He has taken over 50,000
photographs of Asian monuments and art heritage and
69

FRONTLINE .

DECEMBER 9, 2016

R AVA N A A N D S I T A . Ramayana ballet, Prambanan Temple, Yogyakarta.

FRONTLINE .

DECEMBER 9, 2016

70

71

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72

D E A TH OF J A TA YU.

Ramayana ballet,
Prambanan Temple,
Yogyakarta.

73

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DECEMBER 9, 2016

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DECEMBER 9, 2016

74

BUR N I N G OF LAN KA.

Ramayana ballet,
Prambanan Temple,
Yogyakarta.

75

FRONTLINE .

DECEMBER 9, 2016

R AVA N A B E I N G K I L L ED . Ramayana ballet, Prambanan Temple, Yogyakarta.

FRONTLINE .

DECEMBER 9, 2016

76

R AMA A N D L A K S H M A N A . Wat Xieng Thong, Luang Prabang, Lao Peoples Democratic Republic.
77

FRONTLINE .

DECEMBER 9, 2016

R AVA N A .
GURU
AMM A N O O R
M A DH A V A
CH A K YA R ,

Koodiyattam,
Sanskrit dance
drama.

R AVA N A , W A YA N G
SH A D O W PUPPE T .

Museum Wayang,
Jakarta, Indonesia.
FRONTLINE .

DECEMBER 9, 2016

78

D EA T H O F RA V A N A . Lav Kush Ramlila Committee, New Delhi.

R A VAN A .

Lav Kush
Ramlila
Committee.

R A VAN A ,
OD I S S I
D AN CE . Kiran

Sehgal & Sahitya

Kala Parishad
(all female cast),
New Delhi.
79

FRONTLINE .

DECEMBER 9, 2016

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DECEMBER 9, 2016

80

S TATUE OF B ALI . The

island of Bali, Indonesia,

is named after the
character in the
Ramayana.

81

FRONTLINE .

DECEMBER 9, 2016

VIC TO R I O US R A M A . Sala Chalermkrung Royal Theatre, Thailand.

FRONTLINE .

DECEMBER 9, 2016

82

R AMA A N D S I T A , O D I S S I . Kiran Sehgal & Sahitya Kala Parishad (all female cast).

R A MA, O D I S S I . Kiran Sehgal & Sahitya Kala Parishad (all female cast).
83

FRONTLINE .

DECEMBER 9, 2016

SITA A N D R A V A N A . Kecak dance, Uluwatu Temple, Bali.

FRONTLINE .

DECEMBER 9, 2016

84

85

FRONTLINE .

DECEMBER 9, 2016

BOO KS in review

Challenges to the
global economy
In this tribute to their teacher, Prabhat Patnaiks former students put
together a volume that covers three major themes: the internal
contradictions of capitalism, the growth of the Indian economy
and the feasibility of socialism. B Y C . T . K U R I E N

RABHAT PATNAIK,
a frequent contributor
to Frontline, is currently
Professor Emeritus at Jawaharlal Nehru University
and has been one of Indias
most renowned economists and public intellectuals. The volume under
review contains essays
contributed entirely by
Patnaiks former students,
especially those whom he
guided in their doctoral
work. It is a tting tribute
to a teacher who inspired
them by his commitment
to scholarship and involvement in public affairs.
Apart from an excellent introduction by the editors,
there are 19 chapters in the
book, making the reviewers task difficult.
The editors have indicated that there have been
three major themes in Patnaiks voluminous writings: the growth of the
Indian economy, the internal contradictions of capitalism, and the feasibility
of socialism. In this review,
I shall follow that lead, although that would mean
not identifying individual
contributors. Critical reviews of individual papers
are sure to appear in pro-

FRONTLINE .

Economic
Challenges for the
Contemporary World
Essays in Honour of
Prabhat Patnaik
Edited by Mausumi
Das, Sabyasachi Kar
& Nandan Nawn
Sage, New Delhi,
2016
Pages: 324
Price: Rs.1,195

fessional journals. I urge

research scholars to go
through the papers carefully for the data that have
been assembled, the methodology that has been
adopted and the rigour of
analysis that has been
followed.
As the performance of
the Indian economy now is
closely linked to global
capitalism, let me start
with the chapters dealing
with the contemporary
phase of capitalism. What
has been happening to
global capitalism since the
meltdown of 2008 and its
immediate
aftermath?
One of the papers explains
vividly that in August 2011,
the rating agency Standard
& Poors cut the rating of

DECEMBER 9, 2016

U.S. Treasury bonds from

AAA to AA+. It may not
have appeared to be anything drastic, but it was the
rst time since 1917 that
U.S. Treasury Bills lost
their highest rating.
The fact is that with all
its power and might, the
U.S. today is the most indebted nation in the world.
However, since those who
are the countrys creditors,
especially China, prefer to
hold their surplus (earned
by exporting goods to the
U.S.) in U.S. dollars, indebtedness is not a source
of much worry for the
debtor country, though
sovereign debts of other
countries (Greece, for instance) became a matter of
heavy burden for their citi86

zens and of political instability as well.

WALMART
PHENOMENON

In a world where there is

no genuine international
currency and most countries are on oating rates,
currency trading is one of
the most protable activities for capitalist corporations. To put it in general
terms, what is good for
capitalists is not necessarily good for nations, including capitalist nations.
There is a related phenomenon,
which
is
brought out by another paper. Even in countries such
as the U.S., capital now
nds it advantageous to
move into trade rather
than production. Witness
the Walmart phenomenon. It buys and sells.
While buying goods from
wherever in the world they
are available, it uses its economic power to weaken
producers, and while selling goods, it wipes out
smaller retailers. It is both
national and transnational. Retail capital is akin to
merchant capital tending
to subjugate even industrial capital, observes the au-

FINANCIALISATION

A third feature of todays

global capitalism is what is
increasingly referred to as
nancialisation, whereby
prot-making and accumulation take place not
through the production of
commodities but through
transactions in nancial
assets. Finance, which in
its early stages was an attempt to mobilise past savings and make credit
available for production
involving long gestation
periods, has become a directly
prot-making
activity.
A couple of chapters in
the volume explain how
this has happened and
what its implications are.
In the early stages, assets
pledged to secure a loan remained essentially as security to be made use of in
case of default. But with
the increase in their volume, it was found that
these could be traded too
as securities and such
trade became an additional source for prot. Then
new salable claims were
derived from such securities, and these derivatives came to have a
market of their own whose
volume soon overtook the

value of goods and services

produced, thus setting up a
competition between production and transaction as
the source of prot.
The boom thus generated could not last very
long and could only lead to
a collapse, as in 2008, rst
in the U.S. and soon
spreading to centres in Europe and Asia where stock
markets were enthusiastically responding to the
new nancial architecture initiated in the U.S.
When markets collapsed
deeply hurting production
activities also, the state
had to step in to revive the

system. However, the calamity brought out some

hidden truthstransactions in stock markets are
the surest way to ensure
adequate liquidity in the
system and, more important, being in the nature of
claims to wealth, they are
the quickest way for the
rich to become richer still.
Accumulation is no longer
the aim of producing capitalists, but of the wealthy
for whom transactions in
claims to wealth are the
easiest way to make quick
prots and accumulate
wealth. That is the new
phase of global capitalism,

not only across nations but

within nations as well.
The chapters directly
discussing with the growth
of the Indian economy deal
with some of the implications of this transformation of capitalism.
While the formal opening up of the Indian economy to global capitalism in
the early 1990s led to a perceptible increase in the
growth of the gross domestic product (GDP), the pattern of that growth has
some disturbing aspects.
One of the clearest of them
has been the neglect of the
agricultural sector.

BLOOMBERG

thor. In this sense, global

capitalism is undergoing a
major transformation.
We nd the First
World in the Third, the
Third World in the First,
and the Second almost nowhere at all, quotes another writer in the book.
Everywhere the authority
of national governments
appears to be giving place
to the buying and selling
power of big corporations.
Even foreign direct investment is increasingly a matter of mergers and
acquisitions.

A T A W A LM A RT wholesale store in Zirakpur on the outskirts of Chandigarh. Retail

capital is akin to merchant capital tending to subjugate even industrial capital, one of
the authors in the book observes.
87

FRONTLINE .

DECEMBER 9, 2016

organised sector accounts

for only around 8 per cent
of the workforce, with the
rest being in the unorganised or informal sector. A
related aspect of the employment scene is the fact
that both in the private and
in the public segments of
the organised sector employment is becoming increasingly on a specied
contract basis, thus informalising the organised
sector as well.
Three chapters deal
with the related issues of
education and inequalities. One of them shows
how in an unequal society
poorer households aspiring to catch up with the
lifestyles of their richer
counterparts may end up
in a long-run poverty trap.
Another points out that
providing access to higher
education could be an important measure in mitigating poverty. A third
insists that reduction in
educational
inequality
does not necessarily reduce income and wealth

what it was 60 years ago.

The distorted growth
pattern has had its impact
on landholdings, too, with
well over 90 per cent of the
holdings being below one
hectare and the combined
numerical share of marginal and small farmers
going up from 75 per cent
in the early 1960s to over
90 per cent at the dawn of
the new century. These
changes explain to some
extent why there is so
much visible distress in rural areas and unprecedented movement of workers
into urban areas.
JOBLESS GROWTH

Another theme that has

been dealt with is what has
come to be known as jobless growth. One of the
contributors points out
that while gross value added in the organised sector
grew by 7 per cent per annum between the 1980s
and 2004-05, the growth
of employment in that sector was only 0.9 per cent. It
is widely known that the

ARUNANGSU ROY CHOWDHURY

One of the writers

points out that the share of
agriculture in total GDP
has come down sharply
from over 50 per cent in
the 1950s to around 14 per
cent in 2014. That by itself
is not a matter of concern.
In fact, the primary sector
losing its share in GDP
over time is to be expected.
However, in the Indian
case, what is distressing is
that it happened without a
signicant reduction in the
share of the workforce out
of that sector, and to the
extent it happened it was
more into the services sector dominated by transactions of various kinds. The
reason for the phenomenon is also fairly clear: the
sharp fall of public investment in agriculture since
the reforms of 1991, of
which a major plank has
been the withdrawal of the
state from the economy.
It has had serious consequences also, for instance, the fact that the per
capita availability of foodgrains now is less than

OU TS I D E the Bombay Stock Exchange in Mumbai. Currency trading is one of the most
protable activities for capitalist corporations.
FRONTLINE .

DECEMBER 9, 2016

88

inequalities and argues

that inheritance of wealth
is a major factor responsible for inequalities and
for perpetuating them.
However, there is no discussion about the glaring
and growing inequalities
throughout the world as an
unavoidable feature of
capitalist growth, especially its latest nancial thrust.
What is missing in the
volume is a treatment of
the third theme identied
by the editors, the feasibility of socialism. This is
rather disappointing because Patnaik has written
extensively on the topic,
and some of his writings on
this have been brought together in his Re-envisioning Socialism (2011).
The introduction has a
section dealing with Patnaiks critique of capitalism and his thinking on
socialism. Patnaiks views
on socialism have been unconventional. For instance, he does not agree
with the position held by
some Marxists of the historical inevitability of socialism,
although
he
strongly argues the case for
socialism as it is the full
owering of democracy
and the only conceivable
alternative to capitalism.
Even more controversial
will be his position that socialism calls for not only
the transformation of society as a whole but the
transcendence of the individual as well because the
individual can become a
subject only in a society in
which he transcends selfinterest. One hopes Patnaik will write more on
this theme and that not only his admirers but also his
opponents will join in the
discussion on a socio-economic alternative to capitalism.

BOO KS in review

Environment
and business
The strength of the book is that it casts a wide net
and looks at the interface between business and the
environment over multiple sectors. Its weakness is
the varying quality of the papers collected.
BY S . G O P I K R I S H N A W A R R I E R

RITING is all about

creating
imagery.
Words, when strung appropriately together, can
create pictures that can
nudge the imagination of
readers. At the outset the
editors of the book under
review make a statement
when they write about the
number of lamps burning
through the day in the conference room hosting a forest summit.
Kanchi Kohli and
Manju Menon are unequivocal in their argument
against business interests
getting involved with environmental issues. The environmental crisis also
affects private prots directly, and that is the reason that industry is
interested in the environment, they state in their introduction to the collection
of multi-author papers.
Economic liberalisation
in many parts of the world
allowed private players to
enter into sectors that were
held exclusively by the
state, they write. Several
laws on mining, electricity
production and others
have been amended to accommodate private corpo-

Business Interests
and the
Environmental
Crisis
Edited by Kanchi
Kohli and Manju
Menon
Sage Publications
India
Price: Rs.845

scientists, policymakers,
economists, legal experts,
NGOs [non-governmental
organisations], environmental activists, indigenous community leaders
and heads of state. The
punchline is strong. The
congurations of partnerships or collaborations that
emerge from these negotiations rely on commitments
between partiesbe they
nations, regions or communities. These are similar
to scal contracts and these
efforts to arrive at agreements are presented as
philanthropic initiatives of
corporations for a better
world or a greener planet.

rations in these sectors,

either by full ownership of
production units or by
joint ventures. As a result,
they are pushed to respond
to the escalating situation
that if degradation continues there may be no resources for them to use in
their processes.
International conventions and global congregations on environment,
biodiversity and climate
change are setting up formal dialogues between polarised entities such as
affected parties and private
corporations. Mediating
this relationship is a whole
host of actors that include
89

These partnerships and

contracts for environmental projects blur the distinctions between public
and private, choice and
obligation, processes and
commodities, producers
and consumers, benets
and costs, and legality and
corruption. Even though
these words come across
strongly, lost in the narrative of the early paragraphs
of the book is the space for
nuance, engagement and
negotiation. The arguments in some of the chapters are an articulation of
position rather than an exploration of possibilities.
For instance, in the
chapter on markets for
ecosystem services, Jeremy
Walker states: [I]t was
the publication of the U.N.
[United Nations] Millennium Ecosystem Assessment
(2005),
which
adopted the idiom of ecosystem services for its policy framework, that did the
most to catalyse the mushroom-cloud shaped literature on ecosystem services
across journals like Conservation Biology and the increasingly
mainstream
Ecological Economics, the
grey literatures of governments and natural resource management, big
environmental NGOs such
as The Nature Conservancy, Conservation International and World Wildlife
Fund, global development
institutions (UNEP [U.N.
Environment
Programme], World Bank,
etc.), and transactional
networks where scientic
and policymaking coalitions are formed. Walker
attempts to kill two birds
with one stone. With the
imagery of the mushroom

FRONTLINE .

DECEMBER 9, 2016

cloud, he links biodiversity

discussions to the anti-nuclear narrative. And with a
wave of his hand, he packs
a range of institutions into
a band of conspirators out
to commodify nature and
make money out of it.
There is a danger in
such strident positioning.
Self-righteousness and irrelevance can come as the
two sides of a coin. Howsoever strong and pertinent
may
be
the
arguments for bringing judiciousness and conscientiousness into the process
of economic valuation of
biodiversity, leaving no
space for engagement
could mean that such voices are never heard. The objection
to
bringing
business and economic interests into environmental
discussions is old. Even before the Rio Summit of
1992, Edward Goldsmith,
the editor of Ecologist
magazine and the leader of
the school of deep ecology,
was decrying efforts by nations to commodify nature.
That was the time when
India had just embraced
economic reforms, and
Goldsmith spoke to a
packed hall at the India International Centre, New
Delhi, about the dangers of
the neoliberal economic
policies that rst nd economic values in nature and
then market them.
These opposing voices
reached a crescendo as the
concept of The Economics
of Ecosystems and Biodiversity (TEEB) took shape
in international biodiversity discussions in 2007.
As Walker articulates in
his paper, one of the main
objections was that TEEB
and other articulations of
market-based conservation do little to question
the dominant economic
FRONTLINE .

theory that has licensed

the nancialisation of social, political and economic life and led to our
current global crisis.
Fair enough criticism
since TEEB takes neoliberal economics as a given
and tries to nd space for
valuing biodiversity for
conservation within this
framework. But the point
that those opposing economic valuation of biodiversity, almost at a
philosophical level, forget
is that policymakers take
decisions by considering
the utility value of biodiversity. If there is any hope
of contesting a decision
say, to convert a 1,000hectare coastal ecosystem
to a thermal power plant
it is by pointing out the
economic benet that the
conservation of the biodiversity will bring, in the
short and long run.
It is in this context that
the paper by Shripad
Dharmadhikary on using
value as a justication for
water resource development gains importance.
Dharmadhikary, a veteran
from the peoples movement against the Sardar
Sarovar Dam (SSD), goes
into the history of nding
value for water ow in a
river. Value has become
an instrument in water resource appropriation. The
key to address this problem is to democratise the
concept and practice of
value.
This, Dharmadhikary
suggests, would require
the involvement of all
communities in the planning for water resource development, thus making
visible and giving appropriate importance to all
values and not just those
that are useful for a select
few. What is of impor-

DECEMBER 9, 2016

tance is the selection of a

proper framework in
which to locate the values
and valuation, for the selection of the existing global nancial economic
framework virtually predetermines the outcome
by privileging certain values and consigning others
as waste. He lists examples to show how the current framework has been
distorting values of water
use. The Narmada Water
Disputes Tribunal allocated the entire quantity of
the water available at the
SSD among Maharashtra,
Gujarat, Madhya Pradesh
and Rajasthan. [E]ach
and every drop of water
was distributed for these
specied uses upstream of
the SSD. The 150 km or so
of the river downstream
was almost forgotten, and
any water that went down
the SSD was labelled as
wasted.
Similarly, the project
to interlink rivers across
the country aimed to
90

transfer surplus water

across basins. Just as in the
case of the Narmada, the
water assigned as surplus
was what was construed as
wasted, ignoring the fact
that rivers have other ecological and human needs.
Another example that
Dharmadhikary
talks
about is the concept of
tradable water entitlements, by which every citizen could have a right over
a certain quantum of water, which can then be
traded in water markets.
The ip side is that the
rights could be monopolised by the rich and the
powerful. When the concept was tried in Maharashtra, it led to diversion
of irrigation water for industry, especially in the Vidarbha region, which was
already in the news for
farmer suicides.
Just as a natural resource has value, space too
is a natural resource that
has value for communities
beyond what is normally

PAUL NORONHA

L AKE S I D E A PA R T M EN T S at the Lavasa urban development project in the Western

Ghats of Maharashtra. An essay in the book talks about how neoliberalism promotes the
consolidation of abstract, common-property spaces into real, privatised spaces.

perceived.
Himanshu
Burte, in his paper on the
abstract nature of building, writes about how neoliberalism promotes the
consolidation of abstract,
common-property spaces
into real, privatised spaces.
He gives three examples:
the Sabarmati Riverfront
Development project in
Ahmedabad; the Lavasa
urban development project in the Western Ghats
of Maharashtra; and the
Delhi-Mumbai Industrial
Corridor (DMIC) stretching across seven Sates and
involving the creation of
nine new cities. The Sabarmati Riverfront Development project involved
construction of platforms
and walls along the natural
ood banks of the river
owing through the heart
of Ahmedabad. About 185
hectares of land will be created along the riverside,

most of which will be used

as recreational and public
space. About 15 per cent of
the land will be sold as real
estate,
from
which
Rs.1,500 crore is expected.
What the project has effectively done is to alienate
the rights of the multiple
communities for whom the
river has many social and
livelihood uses.
The Lavasa hill station
is planned over 100 sq. km
of the Western Ghats
slopes and offers a range of
residential,
hospitality,
event management and
conferencing
facilities
within a controlled faux
environment. Committed
to enabling consumption,
it wears the disguise of an
exaggerated place identity,
and thus of an exaggerated
promise of relationality. At
the same time, it lets the
mask slip just enough so
that the consumer is not

distracted by the possible

bite of either real nature or
social relations, notes
Burte. The DMIC is expected to create a corridor
for establishing manufacturing facilities. This in
turn will generate jobs and
strengthen the economy.
There is one catch: It is located in water-scarce parts
of the country. Thus, its ecological footprint will go
far beyond the corridor.
The strength of Business Interests and the Environmental Crisis is that
it looks at the interface between business and the environment over multiple
sectors: forests, water, intellectual property, space,
coal, payment for ecosystem services and the green
economy. It spreads its net
wide. Its weakness is the
varying quality of the papers collected. While a few
break new ground, others
91

recycle rhetoric. Neoliberal economics has its problems

vis-a-vis
the
conservation, use and
management of natural resources. It is not as if nonmarket economies have always been benign towards
nature. If so, the Aral Sea
would not have died in the
erstwhile Union of Soviet
Socialist Republics. Neither have all the decisions
of gram sabhas, the grassroots democratic institutions in India, been friendly
towards
the
environment.
Ecosystem services of
natural resources have an
economic value. It cannot
be argued that the very act
of computing this value
pushes the resource towards exploitation by business interests. The bias in
the process starts after the
value is computed. There
can be two possibilities:
the resource is extracted
for use in the market or its
economic value is used to
argue for its conservation.
True, the process of value
assessment would require
broad-basing the denition of value and getting it
assessed
by
multiple
sources. This would ensure
that the real value is reected in decision making.
By opposing the concept at its roots, there is a
danger of denying the opportunity of developing a
system of economic valuation. Natural resources
would then continue to be
taken for granted and exploited without their real
worth ever reecting in national budgets or corporate balance sheets. This
could mean throwing the
baby out with the bathwater.

S. Gopikrishna Warrier is
an environment journalist
and blogger.

FRONTLINE .

DECEMBER 9, 2016

L I T ER A TUR E

A quester and his play

IN 1988, after receiving the
Neustadt Prize for The Chessmaster
and His Moves at the University of
Oklahoma, Raja Rao said: I alone
know I am incapable of writing what
people say I have written. It seemed
to him that there was some force that
he was not able to apprehend himself
which owed through the agency of
his words, revealing itself.
These words, uttered much before Raja Rao began to suffer memory loss, come to ones mind while
scanning the astonishing ways in
which this writer, questful and surrendering as he was, has been branded and appropriated, criticised and
dismissed.
The caste and academic markets
in India have always had a multipurpose resource in Raja Raohe has
inadvertently served the polemical
ends of all echelons of casteism and
literary criticism in India for a long
time now. This, I must hasten to add,
has been caused not by any duplicity
or purposiveness in the writers own
use of language, but owing to the
resonant ambiguity inherent in the
work of a quester such as him, for
whom the search of the self was primary and much more signicant
than its confusing, even contradictory, expressions.
A well-known story of a meeting
between E.M. Forster and Raja Rao
is an early intimation of how the latter thought of himself. In 1945, Forster came to Bombay and demanded
to see Raja Rao, who responded thus
FRONTLINE .

DECEMBER 9, 2016

THE HINDU ARCHIVES

There is a critical need to free Raja Rao from the constricting

political interpretations that have been imposed on him and see him
for what he really is: a poignant quester who delights in the play of
ideas and words. B Y R I Z I O Y O H A N N A N R A J

RAJA RAO, an undated photograph.

in a letter: I have abandoned literature for goodand gone over to

metaphysics; I am not a writer anymore, and I do not know on what
grounds I could come to see you.
That Raja Rao continued to write
ction in one form or another for the
next half a century since that pronouncement of abandonment of literature
must
puzzle
his
appropriators and renouncers alike.
But it might help a curious researcher and a keen reader to listen to him
closely: I love to play with ideas. It is
like a chess game with horses, elephants, chamberlains and kings,
which might ght with one another.
92

The game is not for winning. It is for

rasadelight. If one did not see this
play in Raja Rao, one has missed
him largely. But, of course, in the
contemporary marketplace of ideologies and power, one does not mind
losing the subject itself; it is ample
value if a stock readily serves a convenience.
Owing to the reective nature of
his writings, it has been widely propagated that Raja Rao was soaked in
Advaita. The Serpent and the Rope,
the most celebrated and the most
damned of his works, a revolutionary
game of style, is often read too perfectly and understood too easily
within a monistic philosophical
frame. The divorce of the protagonists of this admittedly autobiographical novel, Ramaswamy and
Madeleine, is regarded as a sure symbol of the divide between monism
and dualism, spirituality and materialism, the Eastern need for surrender
and the Western insistence on independence, and many such polar constructs. It is hardly ever seen as a
simple case of two individuals who
are incompatible despite their mutual love.
Why do we take Raja Rao so seriously? Why do we ignore him when
he says over and over that he was just
playing with ideas? Why do we superimpose our contrived academic
and political resolutions on his deeply subjective seeking? It seems to me
as imperative at this point in the political history of India to ask these

questions, for, there is an urgent

need today to let a mind like Raja
Raos be in its original horizon of
freedom; it has abundant uses for the
future beyond our myopic age and its
polemical intrigues.
Through subtler and lighter engagements with his texts, one nds
the core of what Raja Rao wrote to
Forster. Then, he comes across as
less of a novelist and more of a lyricist; more of a player of ideas and
words than a plot constructor. His
works are neither existentialist nor
essentialist; they are not novels of
ideas proposing or attempting to establish the primacy of a particular
view of life over others.
Look closely: Raja Raos metaphysique is satirical, right from the
critique in Kanthapura of the unimaginative use of Gandhism to the
absurd battle of philosophies played
out between two people who loved
each other in The Serpent and the
Rope, from the parody of communism in Comrade Kirillov to the outlandish attempt to expiate the
Holocaust in The Chessmaster. His
characters could be caricatures,
laughing at our straitjacketed sense
of spirituality as well as constructed
experience of reality. They could be
mocking their complex-minded author himself. Raja Rao provides us
with ample alienation effects within
his narratives to help us see his quiet
laugh even as we are offered thrilling
passages full of lush expressions
reminiscent of the wistful Sanskrit
and French romances and fantasies,
lost-and-found lovers, and exhilarating season sequences. Lo and behold,
the irregularly large Raja Rao transcending the regular one mixed in
India in our day:
Then the wind comes so swift
and dashing that it takes the autumn
leaves with it, and they rise into the
juggling air, while the trees bleat and
blubber. Then drops fall, big as the
thumb the earth itself seems to
heave up and cheep in the monsoon
rains. It churns and splashes, beats
against the treetops, reckless and
wilful, and suddenly oating forwards, it bucks back and spits forward and pours down upon the
green, weak coffee leaves, thumping

them
down
to
the
earth. (Kanthapura)
To be orthodox, to be a smartha,
I said to myself, is to accept the real.
Stalin is orthodox; he is crude and
smelly like some Jesuit father, he the
product of a seminary. But Trotsky
promised us beauty, promised us
paradise. There is a saying that when
Trotsky was talking of the beautiful
world revolution, Stalin was making
statistics of the bovine riches of Soviet Russia.... But the smarthasome
Innocent IIIknows this world is intangible, and all worlds therefore are
intangible, and turns his vision inwards... (The Serpent and the Rope)
Fortunately there are wars. And
rationing is one of the grandest inventions of man. You stamp paper
with gures and you feed stomachs
on
numbers. (The
Cat
and
Shakespeare)
Suicide is your endor the
Buddhist Royal robe. (Comrade
Kirillov)
But do you know Brahman?
No. Not yet! For to know Brahman really one has to become Brahman, to become it.
Yet, It, he smiled as if hed found
a new idea to play with. (The Chessmaster and His Moves)
Is this Raja Rao your agenda-driven spiritualist, who was accused of
stereotyping India in the wake of Edward Saids Orientalism? Did our
media and the academia have to
readily and necessarily forsake Raja
Rao in order to welcome Salman
Rushdies keen political voice in Midnights Children? Where has
this separation between the seeking
and the pragmatic led us towhere
is the Indian novel today? Where is
the idea, the hunger, the irony, the
play?
At his 108th birth anniversary
(such a nice Vedic-type number!), on
the one hand, some of us harbour
very legitimate nationalist aspirations to make Raja Rao more relevant in todays India. On the other,
the dim quasi-secular plots are as
ready as ever to mundanely dismiss
him as a Vedantist propagating
Brahminical elitism through his
works.
We have now come to the point:
93

there is a historical and critical need

here and now to discover Raja Rao
beyond all manipulative attempts to
expunge his imaginary of all its politically inconvenient questionings,
free movings of characters, and playful seizings of words. The self-dissipating secular mix in India must
begin to see Raja Rao beyond redundantly countering the oating Advaitic interpretations that rather
ludicrously and short-sightedly homogenise the tragicomic inquiries
and poignant philosophical puzzles
that his texts raise.
While he lived, he never claimed
anything more than a questers simultaneous intensity and play. Postmortem, he offers no ready-to-use
solutions. Hence, for the survival of
imagination in our times, we must
not superimpose on a writer like Raja
Rao any system of thought or counter-thought with a fundamentalist
ontology. Lest such interpretations
drain his imaginary of its beauty,
sensuality and play, one must alternatively attempt to excavate the multiple
aesthetic,
political
and
philosophical possibilities of Raja
Rao.
THE PRISM OF SANKHYA

In this regard, it might be rewarding

to look at a much-appropriated text
like The Serpent and the Rope
through the prism of Sankhya, the
dualistic Indian darsana, the preposterously positioned anti-thesis of
which is Vedantic Advaita. The
terms prakriti and purusa, embodying the basic dialectic offered by the
Sankhya system, are very much present in the said work, and that serves
me as a take-off point.
The novel tells the story of Ramaswamy, an Indian student who
comes to France to research the Albigensian heresy, and Madeleine, a
French woman, whom he meets at
the university, gets married to, and
gets divorced from.
Rama tends to identify the biological male as man and thus purusa, the Lord of Creation, and the
biological female as woman, and
consequently prakriti. This view
comes into conict with Madeleines
dualistic emphasis on herself as inFRONTLINE .

DECEMBER 9, 2016

There is an urgent need today to let a

mind like Raja Raos be in its original
horizon of freedom; it has abundant
uses for the future beyond our myopic
age and its polemical intrigues.
dependent, a bare unity in herself as
different from Rama, another independent bare unity. It is Madeleines
interest in the dualistic theology of
the Cathars and her knowledge of the
Albigensian heresy that initially connects Rama and her. Before we analyse the spiritual perspectives of
Rama and Madeleine, let us dwell a
little on the pages of history to nd
out what happened to the Cathars, or
Albigensians as they were called because of the city of Albi where they
were settled.
By the 12th century, organised
groups of Cathars were appearing in
the newly urbanised areas of western
Mediterranean France. Soon, with
their dualistic theology and puritanical outlook, they began to become a
dissident mass movement. The Cathars believed in two equal and comparable
transcendental
principles:God , the force of good,
andSatan , or thedemiurge, the force
of evil. They held that the physical
world was evil and created by the
demiurge, whom they calledRex
Mundi, the King of the World. Rex
Mundi encompassed all that was
corporeal, chaotic and potent. The
Cathar understanding of God was
disincarnate: they saw God as a being or principle of pure spirit, untarnished by matter. It was the God
of love, order and peace. Jesus was an
angel with a phantom body, and
their reading of thegospels was allegorical. As the physical world and the
human body were the creation of the
evil principle, sexual abstinence,
even in marriage, was encouraged.The civil authority had no claim
on the Cathars since this was the rule
of the physical world which they did
FRONTLINE .

DECEMBER 9, 2016

moralistic philosophy and theological framework which clearly distinguishes between Gods goodness and
spirituality and the demiurges worldliness and materiality. Madeleines
dualistic belief and spiritual practice
are possibly inuenced by the Cathar
theology, the dualistic world view of
which suffered a violent death and
complete erasure at the hands of the
monistic Church Council by the
mid-13th century. Her deep engagement with and belief in this theology
might have had a subconscious role
to play in effecting her separation
from Rama; it seems her growing
physical aloofness from Rama cannot be attributed entirely to her apparent Buddhist devotion.
SANKHYA DUALISM AND RAMA

not heed in their puritanical fervour.

The Cathars annoyed the Church
Council, which declared their doctrine as heretical in 1176. In
1198,Pope Innocent III sent a delegation of friars to assess the Cathar
situation, and it was brought out that
the Cathars did not respect the authority of the French king or the Catholic Church and that their leaders
were being protected by powerful
nobles who had a clear interest in
independence from the king. So
KingPhilip II of Francedecided to
crush the nobles who permitted Catharism within their lands, thus undermining regal authority. An
intense crusade followed, which lasted only two months. But the internal
conict between the north and the
south of France continued for nearly
20 years until the Treaty of MeauxParis was signed in 1229. Resistance
and occasional revolts continued,
until the military action ceased in
1255 with the complete erasure of
Catharism.
Cathar dualism is a puritanical
94

Rama, coming from India, has a

strangely mixed-up understanding
of, and relatedness to, terms such as
prakriti and purusa. His use of these
words is replete with the moralistic
and subjective remnants of his upbringing. In him, India is mixed, as
in anyone in the Indic space, exposed
to the intimations of myriad thought
systems and traditions while also being trapped in specic social and cultural contexts. He erroneously places
the concepts of prakriti and purusa
within a monistic thought frame that
potentially legitimises the suppression/submission dialectic in sociopolitical contexts. This, in turn, leads
him to identify with stereotypical
gender roles for himself and his wife.
Ramas gendered perception of
prakriti and purusa is starkly different from the original Sankhya use of
these terms, which is amoral, epistemological and cosmological in its
intent. Sankhya, a system of thought
with no moralistic content or agenda, teaches that reality is twofold:
prakriti (the material principle) and
purusa (pure consciousness), which
are bare and everlasting independent unities as well as manifold and
changeable entities.
Prakriti has two attributes, an
essential capacity to remain an uncaused principle and the other, the
capacity of multifariousness. In other words, prakritis oneness includes
the ground and condition of many-

ness, and it evolves into multifarious

forms following some lawsthe evolution begins at subtle levels and
then goes on to create grosser matter.
Sankhya holds that prakriti is a complex unity of three substances, the
gunassatva, rajas and tamaswhich lend buoyancy, activity and
density in differing proportions to all
beings. In the pre-evolution stage,
these three gunas are balanced in
prakriti. It is through the proximity
with the illuminating consciousness,
or purusa, that prakritis balance
shifts and begins to evolve gradually.
Purusa, the other principle, is in
a state of bondage in prakritis creation/evolution. Its bondage comes
from the misconception that it is one
with prakriti. Its unity of consciousness shifts and it becomes susceptible to a gradation of consciousness
rather than possessing its original
unied consciousness. This is possible because purusa too contains
the ground and condition of multifariousness. Its transcendent, or nirgunah, aspect and its immanent, or
sagunah, aspect are simultaneously
present. A cosmologically determined proximity between prakriti
and purusa makes it possible for
each of them to be at once One in
itself and Many in its togetherness
with the other. Liberation is when
purusa realises its difference from
prakriti.
The being resulting from the investment of prakritis gunas on purusa is neither prakriti nor purusa
but a self, a personality affected by
dukhatraya, the threefold misery.
The created self/selves, each exhibiting a particular combination of the
gunas, is/are always transforming itself/themselves towards liberation,
even as it/they is/are constantly being pulled back into the sagunah
state. Life is, thus, a cooperative, corporate yet competitive activity of the
gunas: satva, which illuminates, rajas, which actuates and moves, and
tamas, which restrains and gives
mass.
MADELEINE AND RAMASWAMY

Let us consider this complex of ideas

vis-a-vis the personalities of Ramaswamy and Madeleine and their rela-

tionship. Madeleines independence

and Ramas expectations of her as
prakriti might, on the surface, look
like a cultural divide between an educated Western woman and an Indian
man. But it might serve us better to
look at them both as evolving personalities.
Rama, coming from a Hindu
household in India, has a mixture of
divergent philosophical, religious
and cultural inuences on him. It
makes him at once confused and
proud. We see him recounting the
works of everyone from Yagnyavalkya, Maitreyi, Shankara and Madhava, and poets like Kalidasa,
Bhartrhari, Kabir, Tulsidas and Mira
with a great sense of pride, but without making any attempt to look at
the nuances of their philosophies
and their methodological differences. He seems to assume that as purusa, man has the inherent power to
create. Womans function is to submit herself to man, and help him
reach his realisation. Such assertion
of gender roles in a modern relationship comes into conict with Madeleines idea of being. She is a rm
believer in the independent, individual entity of the woman, and the
duality of the self and the other. It is
Madelienes dualism vis-a-vis Ramas rather unstudied identication
of their selves, without being mindful
of the dialectic of suppression/submission presupposed therein, that
results in their separation.
The Sankhya prism helps us see
Raja Raos protagonists as notmonolithic entities who are so sure of
themselves, their ideologies, and
their spiritual practices, but as people who are made of changing gunaic
proportions, and are constantly being transformed. Such a reading
could free Rama from his confused
identication of the self and the other and Madeleine from the effect of
puritanical dualism on her. It would
not push Rama into a befuddlement
or guilt about his experiential attachment to the myriad Hindu gods and
to sensual pleasures despite his intellectual curiosity and spiritual proclivity. For Madeleine, too, this view
could give her another amoralistic/
transmoralistic means of believing in
95

dualism. Because now it is possible

for them to contain the others belief in themselves. And that would
explain to them and to Raja Raos
readers why even at the moment of
their parting they avow that they love
each other. It allows us to think that
that which moves away from one is
an element of oneself, but it is also
different from ones self, and must
part ways.
I employ the Sankhya reading of
The Serpent and the Rope only to
propose that it may be worthwhile to
look at Raja Rao not as someone who
was so sure of what India meant to
him. We could let him and his characters be vulnerable, but not dismissible. His Indian values are often
speciously seen as deriving from Advaita alone. Maybe he was just trying
to understand, and only trying to understand and never really understood it all. He was never proposing
the supremacy of any stream of philosophy but was searching until the
end of his life. That is what the numerous unresolved philosophical issues in his voluminous work,
including ction to class notes, collected at the Perry Casteneda Library
at the University of Texas at Austin,
seem to be telling us.
The appropriation of such a multi-dynamic quester as Raja Rao into
a monistic ideology or political plot is
unfair to both the writer and the intensely subjective search of Advaita
itself. Such exclusion of other readings and interpretations may lead to
a situation like the Cathar extermination at the hands of the papal authority.
India cannot afford that level of
ideological violence today, and we
must avert it with the best of our
intelligence,
most
importantly
through open engagements with our
branded and appropriated thinkers
and writers such as Raja Rao. In that
endeavour, we may have to turn ourselves into baby monkeys playing out
their markada nyaya and let go our
assumption of ourselves as wellcared for kittens enjoying the marjara nyaya in a caregiving state of
affairs.

Rizio Yohannan Raj, 2016

FRONTLINE .

DECEMBER 9, 2016

ILLUSTRATION BY K.G. RANGARAJAN

ly. Every nook would be seen clearly.

The lamp on the western wall
Above it the black trail, which looked
as if it was holding up the entire roof,
seemed magnied.
When the stove was lit in the
night, the black trail would clamber
up the wall, like Saduka Bhootham,
the guardian-ghost in the Tamil lesson in Class Eight. It would laugh at
Chinnapappa. It would shake its
head when everyone drank kanji.
You couldnt see it at all in the dark of
the night. Suddenly in the dead of the

night Ayya would appear like a respitting demon, his beedi-end glowing. He always had a matchbox. Even
if he didnt have a beedi, he would
always have a matchbox.
Ayya always lay down smoking a
beedi. When the lit beedi moved from
hand to mouth, this way and that,
you wondered if the eyes of the bogeyman-thief looked like this.
Ayya often lit the beedi in the
night and whenever he struck the
match, sarr, the whole house would
ll up with light. Even in that mo97

mentary ash, the wall and the black

trail would appear monstrous. This
trail had been there ever since they
were children. How many years at
the time of Pongal in the month of
Thai they had whitewashed the
place; yet it never disappeared. In
the house of Mariappans friend,
Munusamy of Nine B, the black trail
faced the east on the eastern wall.
Whenever the Tamil teacher
asked a question about the guardianghost, it was the black trail that came
to Mariappans mind.
FRONTLINE .

DECEMBER 9, 2016

Powerful imagery
KONANGI was one of the
frontrunners who
experimented with Tamil
prose with verve and energy.
This poignant story is one of
his earlier stories, woven
around two children in the
deep, rural south, where
childhood is often unsettling,
lled with tension, and given
to sudden dislocations on
account of poverty.
The heart-wrenching
reality of this tale is related in
a solemn, sombre tone,
rendering it even more
convincing. In the deft hand of
Konangi, the single naked
lamp in their home, covered
by a broken chimney picked
up from an undergrowth of
weeds and patched up with a
leaf of paper torn from a
mathematics notebook,
becomes a mystical motif. The
sudden decision by the father
to relocate to another town in

At the times when the teachers

didnt ask questions or take any lessons, Mariappan lost himself in the
thoughts of bathing in the lake and
frolicking in the pond. When he suddenly thought of his house, it was the
black trail that appeared rst. Only
then would Amma, Chinnapappa
and others come to mind.
The black trail didnt come to
Chinnapappas mind often enough.
All she thought of was the chimney
that was needed for the lamp. The
broken chimney that now tted well
was patched up with the last page of
Mariappans maths notebook; the
red line in the middle revealed that it
was from a maths notebook.
It was Chinnapappa who had
picked up the broken chimney from
the undergrowth of the plant that
fenced the lake.
She put it carefully in her little
full-skirt, carried it and showed it
joyfully only to Mariappan.
Mari too was ecstatic when he
FRONTLINE .

DECEMBER 9, 2016

search of livelihood not only

shatters the grim yet innocent
lives of the children but also
the composure of the readers.
This story is replete with
delightfully fresh imagesthe
trail left behind by the soot of
the lamp hovers like a
guardian-ghost, the lit end of
a beedi in the dark looks
uncannily like the eyes of a
bogeyman thief, the rascally
wind sneakily clambers up the
wall to extinguish the lamp
with a gup sound, to name
just three. Since they were all
vividly imagined by children, it
was very important to retain
their innocent charm. Konangi
has also deliberately used
short, staccato sentences in a
few places to underline the
starkness of the story. A
highly rewarding story to
translate.
Dilip Kumar and
Subashree Krishnaswamy

saw Pappas broken chimney. Immediately he hit upon an idea. He tore

out a leaf from his maths book, cut it
to t the crack that ran along the
chimney and stuck it with cooked
millet paste. The chimney got set.
Now it looked nice when the
lamp was lit. The light was a bit dim
in the place where the maths page
was stuck. Half the head of the
man, which he had drawn with the
numbers one to nine a long while
ago, could be seen on the page.
That night Amma didnt put anything on the stove. In the pot was
some rice-water and grains of rice.
Amma said she would give kanji only
when Ayya came. Chinnapappa was
very hungry. She slowly inched
across from where she was leaning
against the wall and buried her face
in her mothers lap. Years ago Mariappan used to sleep like that on his
mothers lap.
Ayya arrived. He said that they
had to catch the train that night it98

self. Ayya and Amma spoke between

themselvesthat they would get daily-wage jobs and also rice three times
a day if they went to Thanjavur.
Should they stay back here, they
wouldnt even have anyone to give
them the last drops of water in the
mouth. In the lamps light Ayya was
counting, one by one, the notes that
he had got for the travel after pawning Chinnapappas anklets. They had
to leave without the neighbour being
aware of it. Chinnapappa couldnt
sleep. Mariappan gathered his books
and notebooks together, stuffed
them inside a cloth bag and readied
himself.
After the bustle of the town died
down, Amma got ready, bags, bundles and all.
Carrying Chinnapappa on his
shoulder, Ayya walked briskly without looking back. But as Amma walked, she kept turning and looking at
the house again and again. Periapappa walked silently behind Ayya. Mariappan walked carrying the small
sack full of vessels and his book-bag.
Only when he sat down in the
train did Ayya nd the courage to let
out a sigh. He put away the odds and
ends of the luggage under the seat.
The train started in a little while.
Chinnapappa slept off, putting her
head on Ammas lap.
Mariappan too was sleepy. The
breeze on train journeys was always
comforting. He woke up when the
train started again from one of the
stations on the way.
Everyone seemed to be asleep
when he got up. The trains light appeared before his eyes. He was troubled that they had left behind
Chinnapappas chimney-lamp burning at home. He looked at Chinnapappas face and clicked his tongue,
as she always did. He couldnt forget
the black trail that stood on the western wall. The dark trail too stalked
him stubbornly, leaping and hopping over everything.

This story is taken from The Tamil

Short Story: Through the Times,
Through the Tides (Ed. Dilip Kumar;
translated by Subashree
Krishnaswamy), an anthology, in
translation, of 88 short stories written
between 1913 and 2000.

W O R L D A FFA IRS

THE PRESIDENT'S
FRIEND

CHOI S OON - S I L

AFP

being escorted
from the Central
District Court in
Seoul following
her arrest, on
November 3.

A SCANDAL OF HUMONGOUS PROPORTIONS

has hit South Korean President Park Gyeun-hye and
plunged domestic politics into turmoil. Public support
for her is now in single digits, and calls for her resignation
are getting louder by the day. The South Korean capital,
Seoul, has been witnessing huge protests since the scandal erupted in full force at the end of October. One of the
biggest protest rallies South Korea has seen was held on
November 12, with people from all over the country
congregating in Seoul demanding that the President tender her resignation immediately. The protesters chanted
in unison that the President should come out and surrender.
Park Gyeun-hye has less than a year and a half to
complete her term in office. But as more and more sordid

Protests against President

Park Gyeun-hye of South
Korea gain momentum in
the wake of revelations of
corruption and the
vice-like grip an adviser
had on her. BY JOHN CHERIAN
99

FRONTLINE .

DECEMBER 9, 2016

revelations emerge, the signs are ominous for the countrys rst woman President. Park Gyeun-hye was elected
in 2012 on a right-wing platform espousing national
security, economic growth and a corruption-free government. She had promised an end to the culture of corruption that had perennially plagued South Korean politics.
As an opposition lawmaker, she had cultivated an
image of probity. The fact that she was the daughter of
the former dictator Park Chung-hee had also bolstered
her image. Many Koreans, particularly those belonging
to the older generation, idolised the former military general who seized power in a military coup in 1961. He was
in power until his assassination in 1979 at the hands of
Kim Jae-gyu, the head of the Korean Central Intelligence
Agency (KCIA). Park Gyeun-hyes mother fell prey to a
Japanese-born assassins bullet in 1974, which missed
Park Chung-hee, the intended target.

enormous inuence on her authoritarian father. Now it

has emerged that Choi Soon-sils inuence over Park
Gyeun-hye was also all pervasive. Apparently the South
Korean President depended considerably on the advice
of Choi Soon-sil while taking important decisions.
It has now become clear that Choi Soon-sil played a
key role in the Presidents decision to close down the
jointly run South and North Korean industrial park in
Kaesong, North Korea. According to reports in the South
Korean media, Choi Soon-sil was present at the closeddoor meeting in which the decision was taken to close
down the industrial park.
DOWNHILL RELATIONS WITH NORTH KOREA

D JONES/REUTERS

President Park Gyeun-hye had pledged to improve relations with North Korea after taking office and to tackle
economic inequality. But all her campaign promises were
soon forgotten. Relations with the North went further
CULT LEADERS INFLUENCE
downhill. Her hawkish views on the North, probably
After her mothers assassination, Park Gyeun-hye came inherited from her father who was a known Central
under the inuence of a charismatic cult leader who at Intelligence Agency (CIA) asset, have been mainly rethat time went under the name of Choi Tae-min. In his sponsible for the tense security situation in the Korean
long career as a spiritual healer, occultist and head of a peninsula.
Christian evangelical cult, he had assumed several aliasThe current leaders of both North and South Korea
es.
are dynastic leaders. Relations between Pyongyang and
The young Park Gyeun-hye, heartbroken by the un- Seoul were even more tense when Park Chung-hee was
timely demise of her mother, was convinced by Choi the President of South Korea. There has been a record of
Tae-min that she would be able to communicate with the hostilities between the two families.
spirit of her mother. From that time on, the preacher and
Park Gyeun-hyes decision earlier in the year to install
his family became extremely close to her. She never the sophisticated American anti-missile THAAD battermarried and is estranged from her two siblings, a brother ies on South Korean territory has angered China. It
and a sister. Unlike her predecessors in office, she did not claims that the THAAD systems based in South Korea
have greedy relatives exploiting their closeness to the seriously impair the security balance that prevails in the
presidency. I have no child to inherit my properties. You, region. Many Koreans are also unhappy with the deal she
the people, are my only family, and to make you happy is struck with Japan on the emotive issue of Korean comthe only reason I do politics, she said while taking over fort women forcibly enslaved to be sex workers in milthe presidency.
itary brothels during the Second World War.
The last three Presidents were accused of corruption
After Park Gyeun-hye assumed the presidency, her
and investigated after they left office. One former Presi- key speeches were rst vetted by Choi Soon-sil, despite
dent, Roh Myoo-hun, whom many South Koreans con- her being a private citizen without a high-level security
sidered the least corrupt head of
clearance. The President initially destate, committed suicide in 2009 as
nied that that there was any wronginvestigations into the corrupt activdoing and called the allegations
ities of his close relatives were going
baseless. It was the discovery of a
on.
discarded computer used by Choi
After the death of Choi Tae-min,
Soon-sil that provided concrete evihis daughter Choi Soon-sil stepped
dence that more than 40 speeches
into Park Gyeun-hyes life. A U.S.
made by Park Gyeun-hye when she
State Department cable released by
was running for President and later
WikiLeaks in 2007 quoting sources
after she assumed the high office
in Seoul described the senior Choi as
were vetted and approved by Choi
a Rasputin-like gure who had
Soon-sil. The President even dependcomplete control over Parks body
ed on her advice about the colour of
and soul during her formative years
clothes to wear on particular days.
and that his children accumulated
Choi Soon-sil even had advance noP A RK GY EU N- HYE addressing
fabulous wealth as a result.
tice of itineraries of the foreign trips
the nation on November 4. She has
Park Gyeun-hye officiated as
undertaken by the President. She
pledged to submit to an inquiry into
South Koreas rst lady after the death
used her inuence with the President
her ties with Choi Soon-sil.
of her mother. Choi Tae-min also had
to place her cronies in important posiFRONTLINE .

DECEMBER 9, 2016

100

MICHAEL HEIMAN/GETTY IMAGES

I N ON E OF THE

tions of power so that they could inuence government

policies.
According to the Korean newspaper Hankoryeh,
Choi Soon-sil used her clout to register two foundations
bypassing strict government checks and controls. Top
Korean conglomerates such as Samsung contributed
large amounts of money to these foundations. More than
$70 million found its way to Germany where Choi Soonsil had established shell companies and dabbled in real
estate.
In another case, Choi Soon-sil misused her closeness
to the President to get her daughter admitted to an elite
South Korean university. A conservative newspaper said
that South Korea in the last four years was actually under
a Choi Soon-sil administration.
The KCIA chief had said that his major reason for
shooting Park Chung-hee was the close relationship between the former President and Chois father. He had
told a Korean court that he carried out the assassination
to stop Choi Tae-min from exploiting his friendship to
indulge in corruption and more importantly to keep his
daughter, the current President, from the clutches of the
Rasputin-like gure.
FRIENDLESS

Now Park Gyeun-hye has been left friendless. Her mentor-cum-adviser Choi Soon-sil was forced to return from
Germany and surrender to the authorities. The President
has tearfully admitted to some of her lapses, saying that
she shared only certain documents with Choi Soon-sil.
She has apologised to the South Korean people and has
pledged to submit to an inquiry by prosecutors looking
into her ties with her spiritual adviser and close friend.
Park Gyeun-hye had earlier announced that she was
severing her ties with Choi Soon-sil and dismissed eight
of her political aides who had close ties with her disgraced friend. She also replaced the Prime Minister and
two other Ministers, but the South Korean parliament
refused to accept her new choice for the post of Prime
Minister.
The opposition has a majority in the parliament.

biggest protest
rallies South Korea
has seen, people
from all over the
country
congregated in
Seoul on November
12 demanding that
the President
tender her
resignation
immediately.

Even her close conservative supporters in the National

Assembly have deserted her. To divert attention from the
scandal, Park Gyeun-hye suggested in late September
that the Presidents tenure should not be conned to just
ve years and that the Constitution should be amended
to remove the one-term limit. She said that a one term
presidency hampered continuity in policy, especially the
policy towards North Korea.
Liberal Presidents who preceded her had favoured
reconciliation with the North. The sunshine policy towards the North, which was started by President Kim
Dae-jung, had won plaudits internationally and brought
a much-needed calm to the Korean peninsula.
Running out of political options, the South Korean
President gave up the prerogative to choose the nominee
to replace the sacked Prime Minister in the second week
of November and instead permitted the parliament to
pick a new Prime Minister. Scenting blood, the opposition is now demanding that the President hand over a
wide range of her decision-making powers to a Prime
Minister picked by the National Assembly. Even within
her own Saenuri party, 50 members of parliament have
raised the banner of revolt. Park has lost her authority as
President and showed that she does not have the basic
qualities to run a country, said Jae Myung-lee, a leader
of the opposition Minjoo party.
The recent developments have prematurely transformed Park Gyeun-hye into a lame-duck President. Recent opinion polls show that she is the least-loved
President since South Korea transitioned from military
rule in the late 1980s.
She will try to brazen it out until the end of her term.
As President, she remains constitutionally immune from
prosecution, except on charges of sedition and conspiring
with foreign countries. The South Korean Constitution
also has a clause that makes it impossible for a sitting
President to be impeached. But the protests on the streets
are gaining momentum as more and sordid revelations
emerge. In the face of massive popular discontent, Park
Gyeun-hye will nd it difficult to complete her full term
in office.

101

FRONTLINE .

DECEMBER 9, 2016

W OR L D A F F A IR S
INDIA-JAPAN

Nuclear embrace

FRANCK ROBICHON/AP

India and Japan sign a civilian nuclear cooperation agreement,

strengthening the Washington-New Delhi-Tokyo axis to counter Chinas
growing clout in world affairs. B Y J O HN C HE R I A N

P R IM E M I N I S T E R Narendra Modi and his Japanese counterpart Shinzo Abe at a press meet in Tokyo on November 11.

AFTER YEARS OF PROTRACTED NEGOTIATIONS,

India and Japan nally inked a civilian nuclear cooperation agreement on November 9, during the course of a
state visit by Prime Minister Narendra Modi. The deal
will now allow Japan to supply India with nuclear fuel,
equipment and technology for nuclear power production. India started negotiations with Japan soon after it
signed a nuclear deal with the United States in 2006.
Formal negotiations started six years ago. But they
gained momentum only after the right-wing nationalist
government led by Shinzo Abe came back to power.
Japanese public opinion continues to remain vehemently opposed to the spread of nuclear weapons. The
memories of Hiroshima and Nagasaki have been indelibly etched on the Japanese psyche. Ever since returning to power, Shinzo Abe has focussed on reviving the
Japanese economy and making his country a military
power to be reckoned with in the region. Japan, an
all-weather political ally of the U.S., is a key component
of the Barack Obama administrations military pivot to
East Asia. After the National Democratic Alliance govFRONTLINE .

DECEMBER 9, 2016

ernment came back to power, India has further tilted

towards the U.S. and Japan in the ongoing moves to
militarily encircle and try to stop the emergence of a
rising China as a superpower.
The nuclear deal with Japan will further strengthen
the Washington-New Delhi-Tokyo axis. Shinzo Abe was
also keen to expedite the nuclear deal with India because
it would provide a lifeline for the oundering nuclear
industry in Japan, which has been reeling from the twin
effects of the Fukushima disaster and global recession.
Very few countries in the world, for various reasons
ranging from the economic to the ecological, are going in
for nuclear power now. In Japan itself, plans for the
construction of more than a dozen nuclear reactors were
cancelled after the meltdown in the Fukushima-Daiichi
nuclear plant in 2011. Big Japanese conglomerates such
as Hitachi and Toshiba were adversely affected by the
slowdown in the business.
Among the few countries that are still keen to buy
nuclear reactors, despite the high cost and the risks
involved, are Asian ones like India, Pakistan and Viet-

102

nam. Vietnam is said to be on the verge of cancelling an

order it had placed with Japan to construct a nuclear
reactor. India, it seems, is the only country really left that
is willing to spend big bucks on nuclear reactors; India
plans to build 20 nuclear reactors within the next decade.
India has already signed agreements with the U.S. and
France for the construction of nuclear reactors, with the
former expected to build 10 nuclear reactors in the coming years.
But none of the projects has got off the ground because of the unlimited liability law in case of nuclear
accident that the United Progressive Alliance (UPA) government had to adopt. Under the law, foreign nuclear
vendors are liable to pay billions of dollars in compensation in case of nuclear accidents, like the one that happened in Fukushima. Russia and France, though they are
opposed to the liability law, plan to go ahead with the
construction of new nuclear reactors in India.
China and South Korea, meanwhile, have been bagging lucrative contracts to build nuclear reactors in a few
countries. They have the necessary expertise and they do
it at a much cheaper cost. The Japan-India nuclear deal is
important for U.S. companies involved in the nuclear
industry such as Westinghouse, which have won contracts to build six nuclear reactors in India. Westinghouse was purchased by Toshiba in 2006. The
Japan-India nuclear deal was necessary for Westin-

ghouse to start work on the construction of nuclear reactors in India.

Westinghouse has made little prot since its takeover
by the Japanese rm. Toshiba had to incur huge nancial
losses after it acquired the U.S. company because of a
paucity of orders to build nuclear reactors. Areva, the
French company which has bagged a contract to build
nuclear reactors in India, also sources components from
Toshiba. Revenue from the nuclear industry has virtually
dried up in the last decade. Now, with India announcing
grandiose plans to source most of its energy needs from
nuclear power, happy days could be here again for Japanese-owned companies such as Toshiba, Westinghouse
and GE-Hitachi.
OPPOSITION IN JAPAN

The Shinzo Abe government went ahead and signed the

nuclear deal with India despite opposition from important sections of Japanese civil society. It was, after all, the
rst nuclear deal Japan has signed with a non-NPT
(Non-Proliferation Treaty) signatory. The deal was inked
just a couple of days after Indias Defence Minister,
Manohar Parrikar, said that Indias pledge of no rst
use of nuclear weapons was not a sacrosanct one. To
clinch the deal, India had to sign a separate Note on
Views and Understanding along with the nuclear agreement. In the Note, the Indian government had to reitAFP

NA V Y PE R S O N N E L near Sasebo, Japan, during the

trilateral maritime exercise Malabar designed to enhance
cooperation between the Indian Navy, the Japanese Maritime
Self-Defence Force and the U.S. Navy.

103

FRONTLINE .

DECEMBER 9, 2016

TORU YAMANAKA/AFP

A P R O T E S T E R at a rally denouncing nuclear power

plants, in Tokyo on March 2. Nuclear technology

touches a raw nerve in the Japanese public.
erate the commitment made by the previous UPA
government that India would adhere to its no rst use
nuclear policy.
TERMINATION CLAUSE

Article 14 of the deal allows Japan to unilaterally suspend

the deal if there is any change in Indias stated nuclear
doctrine. In the nuclear agreements with the U.S., Russia
and France, India had not given such commitments in
writing. According to Indian officials, this was done
keeping in mind the strong anti-nuclear lobby in the
Japanese parliament. In reality, the termination clause in
the agreement is only a cosmetic dressing as no company
would like to jeopardise their massive investments and
prots on the grounds of principles and ethics. Indian
External Affairs Ministry officials now say that the Note
is not legally binding.
Many newspapers in Japan published articles and
editorials arguing against the signing of a nuclear deal
with countries that have refused to sign the NPT and
have a huge stockpile of nuclear weapons. Shinzo Abe
had to assure the Japanese public that his government
had the right to revoke the agreement if India conducted
another nuclear test. The agreement is a legal framework to ensure that India acts responsibly for the peaceful use of nuclear energy. It will also lead us to having
India participate practically in the international nonproliferation regime, he said at a press conference he
addressed with Narendra Modi by his side, after the
signing of the deal. The tough posturing of the Shinzo
Abe government is meant to mollify Japanese public
opinion.
FRONTLINE .

DECEMBER 9, 2016

Many in Japan are in fact suspicious of their Prime

Ministers stance on global nuclear disarmament. Japan
itself is under the U.S. nuclear umbrella. Donald Trump,
the U.S. President-elect, had wondered aloud about Japan and South Korea being allowed to develop their own
nuclear weapons to confront the so-called nuclear and
missile threat from North Korea. If Trump actually goes
ahead and withdraws the U.S. military from the region, a
nuclear arms race could become a reality. Japan and
South Korea have enough nuclear ssile material to
weaponise at short notice. Shinzo Abe is anyway determined to rewrite Japans pacist Constitution, which will
once again allow the country to openly ex its already
powerful military muscles.
India supported the Japanese position on the South
China Sea dispute. In the joint statement issued after
talks between the Indian Prime Minister and his Japanese counterpart in Tokyo, the two sides implicitly criticised China, harping on the critical importance of the
sea lanes of communications in the South China Sea for
regional energy security and trade. The two Prime Ministers called upon all states to avoid unilateral actions
that could lead to tensions in the region. China insisted
that there had never been a threat to the freedom of
navigation in the South China Sea and that it was a bogey
rst brought up by the U.S. The Chinese have said that
maritime disputes can easily be settled between the
countries involved in the dispute without outside interference. Beijings point of view seems to be claiming
more adherents in the region. The Philippines and Malaysia, which until recently were with the U.S. and Japan
on the dispute, now seem to have changed their positions
and have said that they prefer having a dialogue with
China to resolve long-pending issues.
India, under Modi, however, has toughened its stance
against China on a host of international issues despite
both countries being part of the BRICS (Brazil, Russia,
India, China, South Africa) grouping. Japan seems to be
more cautious in its approach to China. Its Foreign Ministry spokesperson, speaking to the media during Modis
visit, said that Japan-India cooperation was not targeted
at a third country and specically stated that China was
an important stakeholder for both the countries.
China is, however, far from reassured as it watches
the growing bonhomie between Japan and India. There
is increasing military-to-military cooperation between
the two countries. Japan has been included in the annual
Malabar military exercises India holds with the U.S.
The three countries also hold an annual trilateral dialogue. It is not known whether Japans failure to clinch a
deal to sell its amphibious Shinmaywa US-2 aircraft to
India was in anyway related to the China factor. It is well
known that the Indian Navy was keen to acquire the
planes and Japan had agreed to sell them at bargain
basement prices. There are reports that the Japanese
side, however, only offered to supply the unarmed version of the plane and was also reluctant to transfer the
technology to India. India wanted the aircraft for both
rescue and combat operations.

104

U.S . E LE CTIO NS

POLITICS OF

REFUSAL

MARK WILSON/AFP

The times demanded popular change.

Donald Trump had an appeal to crucial
voters in essential States who had been
bludgeoned by the trade deals favoured by
globalisation. B Y V I J A Y P R A S HAD

R E PUB L I C A N P RES I D EN T - ELEC T D O N ALD TR UM P gives a thumbs up to the crowd

during his acceptance speech at his election night event at the New York Hilton Midtown on
November 9.
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FROM NEW YORK CITY TO LOS ANGELES,

protests greeted the news that Donald J. Trump had won
the United States presidential election. Chanting Not
My President, the crowds blocked highways and major
streets. They came with equal measures of grief and
angeryoung and old people, from all kinds of backgrounds, united in a sense of disbelief. How could it be
possible that Trump had won the election? All the media
outlets, all the polls, all the political consultants and most
of the political elites had suggested that Hillary R. Clintons ascension to the presidency was utterly given. The
mood was dour at a gathering of political consultants in
Denver, Colorado, after the election. It was impossible to
conceive of an incoming President Trump, said Margie
Omero of PSB Research. It is this impossibility that is
now reality.
To be fair, Hillary Clinton won the popular vote by
something like a million votes out of the 120 million-odd
votes cast. If the election were to be decided merely by
who got the most votes, then Hillary Clinton would be the
President-elect. Democracy in the U.S. is managed between the will of the majority and the interests of the
States. The Electoral College system gives each State a
certain number of electors, who then cast their own vote
according to the voting pattern in the State. States with
high populations have a greater number of electors, but
these are not sufficiently proportionate to prevent the
kind of problem the U.S. faced in 2000 and in 2016. In
both elections, the Democratic Partys standard-bearerAl Gore and Hillary Clintonwon the popular vote
but lost the election.
FAULT LINES WERE CULTURAL

The election campaignall of 598 daysopened up deep

social wounds in the U.S. The fault lines were not economic per se but cultural. This is one of the great mysteries of the U.S.how economic inequality in the country
does not appear always as a class question but can just as
easily be seen as a question of race. White workers who
have been hit hard by the policies of globalisation are
likely to frame their discontent against immigration,
affirmative action and political correctness, rather than
against what the Occupy movement called the One Per
cent. Trumps sloganMake America Great Againis
not as innocent as it sounds. It suggests that America had
been great, but does not say when: perhaps when racial
apartheid was in place? It suggests that someone has
made America less great: perhaps Barack Obama, Americas rst black president. The slew of hate crimes in the
aftermath of the election suggests that there is now an
army of Trump supporters who believe that it has the
licence to make America Great Again by attacking those
whom it sees as the problem. Make America White
Again, says graffiti in the University of Florida library. It
is a more blatant rendering of Trumps campaign slogan.
In 2008, President Obama inherited a country that
was in the midst of at least two major wars (in Afghanistan and Iraq) and which had plummeted into a
serious recession. Not long after his election, vitriolic
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DECEMBER 9, 2016

protests took hold across the country in the name of the

Tea Party. These protests rejected the results of the election, suggesting that Obama was not really an American
and that he would sell the country to some combination
of terrorists and socialists. Racism against the rst black
President certainly drove these protests but so too did a
populist hatred of Washingtonnamely of the political
class itself. Trump, then merely a billionaire businessman, joined this rebellion. He earned his spurs in that
early opposition to Obama. When Obama moved an
agenda to reform the way Americans buy health insurance, he was pilloried as a socialist. It was Obamacare
that mortally wounded the Obama presidency. It allowed
the Republican Party to win the Senate from the Democratic Party and consolidate itself as the party of refusal.
It was this stance of uncompromising opposition that
hardened the edge of the right-wing base.
Trump was the inheritor of that politics of refusal.
None of the establishment Republicans or the anointed
liberal who ran for the presidency this year found an easy
way to undermine Trump. No rational argument was
enough. His is a politics of emotion and trust. Believe
me, he says of his agenda, which was not spelled out.
Trumps nastiness counted as a plan. His machismo was
sufficient to prove that he would stand up to the powers
that be to repeal Obamacare, tear up the Iran deal, build a
wall on the U.S.-Mexico border and ban Muslims from
entry into the U.S. These are oddball proposals with no
real argument about how they would tackle the real
problems of tens of millions of forgotten Americans. No
elaborate plan was necessary. Trumps appeal lay in his
persona.
It bears repeating that Trump lost the popular vote.
He won no landslides in any State except the hardened
Republican ones that he was fated to win. Strikingly,
Trumps open misogyny did not deter the majority of
white women from voting for him rather than for the rst
woman running for President. Other parts of their identity drove them at the polls. Trump was able to hold the
well-heeled suburban voters and the evangelical conservatives. None of them abandoned the Republican ticket
despite the fact that Trumps vulgarity and his lack of
religiosity suggested that he might have alienated these
sections.
Large sections of the white working class, including
the miners of West Virginia and Pennsylvania, had already decamped from the Democratic Partylargely driven into the arms of the Republicans on issues of guns,
God and race. Trump was guaranteed to get a large part
of the votes from these Reagan Democrats. His own
coalition drew from the outspoken epicentre of the revolt against globalisation, says Mike Davis, author of
Prisoner of the American Dream. The defection of the
white working-class Obama voters to Trump, Davis
says, was a decisive factor in the region around Ohio,
Indiana and Pennsylvania which are experiencing a new
wave of job ight to Mexico and the U.S. South. Trump
zeroed in on a Carrier air-conditioner factory from Indianapolis (Indiana), which is moving to Monterrey (Mex-

106

ico). All you have to do is take a look at Carrier Air

Conditioner, Trump said in the rst debate with Hillary
Clinton. They red 1,400. Theyre going to Mexico. So
many hundreds and hundreds of companies are doing
this, and we cannot let it happen. It was Trumps emphasis on this forgotten America that earned him their
loyalty.
VOTERS BLUDGEONED BY GLOBALISATION

Hillary Clinton could not summon the energy to outank

Trumps populism. Her long career in government was
littered with her commitment to a kind of globalisation
that had hollowed out places such as Indiana and Ohio. It
was this that made her vulnerable in the Democratic
primaries to the 74-year-old socialist from Vermont, Bernie Sanders. Like Trump, Sanders understood that the
mood in the country did not support continuity but
favoured change. Sanders pointed his nger at income

inequality and proposedunlike Trumpconcrete measures such as free college and higher taxation on the
wealthy as the means to ease the suffering of the population. The hunger of hope and change that Obama
awakened remained, said Nikhil Singh, author of Black
is a Country: Race and the Unnished Struggle for Democracy. Yet, Singh told me: Democratic voters were
told that they needed to bring back these scandal-tainted,
now well-heeled plutocrats as the best leadership that the
party had to offer. The Sanders challenge, Singh said,
revealed Hillary Clintons weakness not only with the
base but in terms of the zeitgeist. The times wanted
populist change. Trumpdespite the fact that he is a
billionaire with no planhad an appeal to crucial voters
in essential States who had been bludgeoned by the trade
deals favoured by globalisation.
Reliable Democratic votersAfrican Americans and
Latinosdid not come to the polls with the same enthu-

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JEWEL SAMAD/AFP

D E M OC R ATI C
P R E S I D E N TI AL
CA N D I D A TE
Hillary Clinton
makes a concession
speech in New York
on November 9.

siasm that they had brought for Obama. Hillary Clintons

dithering on issues of police violence and on immigration
did not re up her base. That she picked a conservative
DemocratTim Kaineas her running mate rather than
a Latino or an African American leader or indeed a white
working-class leader also made a difference. Such gures
could have lifted the spirits of the black, Latino, Asian
and white working class, dispirited and divided by this
election. It is of course the case that this is the rst
election that took place after the U.S. Supreme Court
diluted the Voting Rights Act in 2013. Voter suppression
is an art in the U.S. It was on display this year. But voter
suppression does not explain why fewer people turned
out to vote for Hillary Clinton than had voted for Obama
or why Trump was able to make gains among African
Americans and Latinos despite his openly racist associations and statements. That African American and Latino workers are also hurt by globalisation should be under
consideration. As some black voters said to me over the
course of the campaign, they would rather not vote than
vote for either Trump, whom they considered a racist, or
Hillary Clinton, whom they considered part of the establishment that has made them more vulnerable.
A fth of Trumps votersnamely 12 million peoplesaid that they had an unfavourable opinion of him.
Their vote for him was as much a vote against Hillary
Clinton.
WHAT WILL TRUMP NOW DO?

Trumps closest adviser is the white supremacist Stephen

Bannon. His inuence on Trump should not be underestimated. They promise to conduct the type of continuous low-intensity race and gender war that became the
style of his campaign, Singh tells me. Raids on undocumented immigrants will come alongside attacks on
dissenters with the police given licence to go into urban
areas to conduct full-scale warfare against the population. If Trump decides to moderate his own views as far as
state institutions are concernedwhich is unlikelyhis
supporters will still believe that they have the licence to
act with impunity. The Southern Poverty Law Centre
said that in the rst week after the election they counted
437 incidents of hateful harassment and intimidation.
Many of these took place in schools, where children are
coming in and telling other children that they will be
deported. It is this kind of violence that provoked the
high school walkouts against the Trump presidency.
Since the Great Recession of 2007, the U.S. has added
11 million new jobs. Of these, 8.4 million went to people
with college degrees, 3.1 million went to those with associate degrees, and only 80,000 went to those with only a
high school degree. Trump has promised those who have
no college degree a better life. The trajectory of growth in
the U.S. suggests that in the absence of a radical transformation there will be few jobs for them. No such radical
move is visible from Trump. His promise to repeal the
North American Free Trade Agreement and levy a 45 per
cent tariff on Chinese imports will spark trade wars and
isolate the U.S. It will not easily bring manufacturing jobs
FRONTLINE .

DECEMBER 9, 2016

into the U.S. Sparks will y, but smokestacks will remain

unlit. Which is why it is likely that Trump will fail his
constituency, who will then turn, angrily, against those
who they see as the problem, namely racial and sexual
minorities. This is the danger that Trumps incoherent
populism promises.
Even Trumps isolationism is incoherent. He campaigned against wars of aggression and pilloried Hillary
Clinton for her record on Iraq and Libya. Threats to leave
the North Atlantic Treaty Organisation came alongside
warm words for Russias President Vladimir Putin. At the
same time, Trump promised to allow Israel to fully annex
the Occupied Palestinian Territory and said that he
would tear up the Western deal with Iran. On the one
side, promises of pullback and on the other side, promises of more U.S. force.
Trump is not allergic to U.S. military adventures.
What he suggested in his comments is that he does not
like them to be half-hearted. He would commit more
troops, sell more weapons to U.S. allies and push for a
renewed American preponderance in the world. It is an
illusion to see Trump as somehow less belligerent than
Hillary Clinton. How the U.S. will be able to concentrate
on the ght against the Islamic State of Iraq and Syria
(ISIS), in which Iran is a necessary ally, while it tears up
the Iran deal is hard to fathom.
After Trumps election, Mike Davis, an editor at New
Left Review, reected on the violence of Trumps populism. On the night before the 1972 election, he said, a
girlfriend and I managed to sneak into the nal Nixon
rally, a Nuremberg-like affair at the Ontario [California]
airport. We chanted Ho Ho Ho Chi Minh a couple of
times as the Reagans and Nixons walked down the red
carpet. Of course we were immediately pummelled and
tossed on our duffs. What has haunted me since, however, was not the reactionary anger and hatredwhich we
had all experienced so many times beforebut rather the
repulsive ecstasy of the mob before their deities. It reminded me of a description I had once read of the sentimental fellow feeling induced amongst cannibals as they
feasted together on their enemies: that is to say, us..
Eve Ensler, the playwright who wrote The Vagina
Monologues and the founder of StopHateDumpTrump,
told me that we are in the ght for our lives. She listed a
great many arenas where Trump will move a dangerous
agenda. But then, she said: I am also strangely hopeful
that we will see a uniting of the progressive Left, coming
out of our silos in unity. We will perhaps marshal our
forces with new strategies and tactics, and hopefully see
the emergence of either a reconstituted Democratic Party
or a new party altogether.
The progressive Congressman Keith Ellison is the
favoured candidate to take over the Democratic Party.
His ascension, with backing from Bernie Sanders, will
certainly provide an opportunity. The demonstrations
and protests, continued Eve Ensler, have been very
powerful. It is the rst time I can remember that we are
all there together marching with our various issues, but
marching as one.

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Echoes of Trump
Trumps election raises a number of questions for Europe, particularly
around the extent to which his victory will impact the politics of the
continent. BY V I D Y A RA M I N L ON D ON
was one of the primary faces. There are millions of
ordinary Americans who feel let down, feel the political
class in Washington are detached from them you can
beat the commentators you can beat Washington, he
proclaimed to loud cheering.
The parallels between the British Brexit campaign
and his own is a theme that Trump returned to over and

JONATHAN BACHMAN/AFP

ON AUGUST 24, NIGEL FARAGE, THE INTERIM

leader of the UK Independence Party, joined Donald
Trump on stage at a political rally in Mississippi to
rapturous applause. Bringing what he described as a
message of hope to the little people, the real people, he
drew parallels between Trumps campaign and the British campaign to leave the European Union, of which he

DONA L D T R UM P greeting UK Independence Party leader Nigel Farage during a campaign rally at the Mississippi

Coliseum in Jackson, Mississippi, on August 24.

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CHARLES PLATIAU/REUTERS

M A R I N E L E PE N of the National Front in front of a poster

for her 2017 French presidential election campaign in Paris,
France, on November 16. She will be mounting a challenge
like never before.

over again in his campaign. Its going to be Brexit, plus,

plus, plus, Trump declared just days before his surprise
triumph over Hillary Clinton on November 9. Both the
Leave campaigns central slogan Take Control and
Trumps Make America Great Again sought to portray
the movements as anti-establishment ones, going up
against the forces of globalisation that had left behind
many citizens of their respective nations, while at the
same time railing against migration and foreign workers.
Critics of the two campaigns would also point to the two
campaigns questionable deployment of facts and promises (the Leavers have faced much criticism for a pledge
that there would be 350 million extra for the National
Health Service (NHS) in a post-Brexit Britain, while the
United States President-elects relationship with the
truth was so ckle that The Guardian ran a weekly blog in
the run-up to the election listing the biggest lies of the
week).
Trumps election in early November raises a number
of questions for Europe, particularly around the extent to
which his victory will impact the politics of the continent.
The next 12 months are riddled with potentially significant milestonesfrom if and when Britain will trigger
Article 50, the clause that would see it exit the E.U., to
next years French presidential election, which will see an
FRONTLINE .

DECEMBER 9, 2016

emboldened Marine Le Pen of the National Front

mounting a challenge like never before. Will the Right in
Europe continue to gain ground, spurred by the developments in the U.S., or could the European Left also
make headway?
The Leave campaign in Britain certainly believes the
U.S. election result is news for the movement, even aside
from the morale boost it provides its proponents in the
wake of the High Court ruling in October that will require Parliament to have a say before Article 50 can be
triggered. Trump Boost for Our E.U. Exit, declared the
steadfastly pro-Brexit Daily Mail on November 10, while
the equally pro-Leave Daily Telegraph pointed to the
opportunities that Trump would afford a post-Brexit
Britain, such as potential associate membership of the
North American Free Trade Agreement, which Trump
has singled out for reform. While ahead of the referendum President Barack Obama famously warned that
Britain would be at the back of the queue for trade deals
should it leave the United Kingdom, Trump has insisted
the country would be better off and a contender for
strong partnership with the U.S.
ANXIETY OVER FUTURE

Still there is clearly much anxiety within the British

government over the future relationship, with a heated, if
somewhat petty, media debate on which should count
more: the fact that Prime Minister Theresa May was at
the earliest the 10th leader to be called by Trump, or that
Foreign Secretary Boris Johnson was the rst foreign

110

JONATHAN BRADY/AP

JE R E MY C O R B YN of Britains Labour Party. He has

been vociferous in his opposition to the racism, sexism
and discrimination of Trumps campaign while
recognising the disenfranchisement he tapped into.

politician Vice President-elect Mike Pence spoke to. Another one has been raging too about whether Farage will
play an intermediary role between the two administrations. While Farages critics have been castigating the
government for missing a golden opportunity, given his
links to Steve Bannon, the Far-Right Chair of Breitbart
News, who is now Trumps chief strategist, No 10 has
responded furiously, pointing to the potential of a relationship along the lines of Margaret Thatcher and Ronald Reagan, without the need for a go-between.
The U.K. government has been particularly sympathetic in its overtures to Trump, with Boris Johnson
criticising the whinge-o-rama taking place across Europe (the former Mayor has displayed a chameleon-like
ability to change his colours, having previously ridiculed
Trumps suggestion that there were no-go areas in London). And though not quite as extreme, there has also
been a certain resemblance between the rhetoric employed by the British government and Trump in the run-up to
the election in its appeal to anti-immigrant nationalist
sentiments. If you believe you are a citizen of the world,
you are a citizen of nowhere, Theresa May declared in
October to the glee of the right-wing tabloids, which
hailed her as the champion of ordinary Brits.
Nevertheless, the extent of appeal for a major trade

deal with the U.K. may be questionable, given the strong

anti-free trade stance that Trump campaigned on, says
Adam Quinn of Birmingham University. One thing that
could aid the U.K. in these ambitions, however, he adds,
is the fact that unlike other nations it would be unlikely to
pose a major challenge to the U.S. manufacturing industrythe loss of jobs from the manufacturing sector to
other countries had been a major vein of Trumps campaign.
Britains ability to establish a special relationship will
depend on what happens in the rest of Europe too. On the
continent there is clear concern about the U.S. outcome,
with Foreign Ministers of states holding a meeting on
November 13 to consider a response (it is notable that
Britains Johnson did not attend). Overall, leaders have
held back from strong criticisms with one exception:
German Chancellor Angela Merkel predicated her administrations cooperation with Trump on the values of
democracy, freedom, as well as the respect for the rule of
law and the dignity of each and every person regardless of
their origin, skin colour, creed, gender, sexual orientation
or political viewa stance that led The New York Times
to label her as the Liberal Wests Last Defender.
EUROPE AND TRUMP

The lack of willingness of other European leaders to be

more pointed in their reaction to Trump is unsurprising,
with many facing an imminent challenge from Far Right
parties. Enamed by the refugee crisisand their portrayal in tabloids across the continentthe recent terror
attacks in Europe, lacklustre economic growth, and cuts
to public services and welfare entitlements, the Right has
been gaining ground like never before. Its at record high
levels, but it can still go higher, says Cas Mudde, a
professor of political science at the University of Georgia
who specialises in the study of extremism and populism
in Europe. There are many countries that dont have
strong radical Right parties such as Ireland, Iceland,
Spain, Portugal, but in countries where there has been a
successful radical Right, they have higher levels of support than ever before and their message dominates the
public discourse. There has been a decided shift to the
rightless belief in solidarity and working through the
state collectively, while the translation of socio-economic
anxieties through sociocultural issues such as immigration, Islam, sovereignty in the E.U. has mobilised
people.
The extent of that mobilisation will be put to the test
in the coming months, starting with the rerun of the
Austrian presidential election that could see a Far Right
leader, Norbert Hofer, elected head of state (he was
narrowly defeated in the election that is now being repeated because of alleged irregularities in postal voting).
In the New Year, Marine Le Pen will stand in the
French presidential election, where she is widely expected to reach the second round at the least. The extent to
which she had propelled her party from the fringes and
widespread derision (her father, a former party leader,
once described the Holocaust as a detail of history) to

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NIKLAS HALLE'N/AFP

being a very real electoral contender

Canada. Writing in The Guardian on
was highlighted by the decision of the
November 14, Paul Magnette, the head
BBCs popular Sunday morning proof government for Wallonia, explained
gramme the Andrew Marr show to air
their decision. Our citizens increasingan interview with her on November 13.
ly doubt the virtues of international
Marr insisted the programme would
trade, not just because they are closenot be doing its job if it did not recognise
minded protectionists, he wrote.
the challenge that Marine Le Pen and
Brussels must understand that if we
other populists posed to the European
want to reconcile the E.U. with its citimainstream.
zens and avoid another Brexit, we must
Until recently people were sceptilisten to this desire for a world where
cal about politicians who set aside the
not everything is left to trade. It is also
normal rules of politicsthat norms exnotable that in the Austrian presidenisted and that if you spoke in a certain
tial election, it was Alexander Van der
way about race and immigration that
Bellen, a Green Party-supported indeyoud be shut out of the electoral success
pendent candidate with a strong probut its clearly not the case, says Quinn.
refugee stance, who won by a narrow
The parallels between the language
margin.
T H ERES A M AY , British
embraced by the Trump campaign and
Prime Minister. There is much
CORBYNS RESPONSE
on the continent are strikingattemptanxiety within the British
The recognition that the desire for poliing to rouse voters with the promise of a
government over the future
ticians beyond the establishment could
new and better nation, for its nationals
relationship with the U.S.
also mean the Left is one being considat least. The people are taking their
ered in Britain too. Since Trumps victocountry back and so are we, Geert Wilders tweeted on November 9, following the U.S. election ry Labour leader Jeremy Corbyn has been vociferous in
result. On the Marr programme, Marine Le Pen spoke of his opposition to the racism, sexism and discrimination
the evils of unfettered globalisation and a ght back by of Trumps campaign while recognising the disenfranchisement he tapped into. Trump tapped into real probthe people against the elites.
However, despite their similarities there has been lems: stagnating or falling wages, underfunded public
little sign of coordination of the Right across Europe, services, insecure work and housing, years of being left
notes Mudde, pointing to the fact that many of the parties behind and neglected, frustration that your childrens
belonged to different groupings in the European Parlia- prospects look bleaker, and anger at a political elite that
ment, one of the key forums for coordinated action. He is doesnt listen, said Corbyn. But instead of offering real
also sceptical of Trumps willingness to work through solutions or the resources to make them work, he offered
such a network, no matter the similarities in rhetoric. only someone to blameeveryone, that is, apart from
Trump is a loner and he has occasional collaboration, those who are actually responsible for a broken economy
but hes not going to build an international alliance of and a failed political system.
Some within Labour have begun to ask the question
radical Right parties, says Mudde. He works alone and
will work with anyone he can usehe will work mostly of whether the similarities between Britain and Trumps
with establishment forces and only reach out to non- victory apply to the Left as much as to the Right, pointing
establishment forces when the establishment forces to the failure of the Hillary Clinton campaign to enthuse
disenfranchised voters. Why did the Democrats not beat
dont cooperate.
Of course, while the most dominant, the Right has him? For many on the British Left this morning, the
not been the only force gaining ground on the anti- answer is clear: they needed a candidate who was less
establishment agenda. In Italy it has fallen to the populist establishment and more left wing. But it is in times of
Five Star Movement to challenge Prime Minister Matteo crisis that true political leaders createopportunity. Last
Renzis reform agenda for the country, and call for a night compounded a growing feeling: Jeremy Corbyns
referendum on Italys membership of the Euro. The par- time is either now, or he does not have one, wrote Conor
tys poll ratings are close to those of Renzi, who could quit Pope, often a critic of Corbyn, in the party publication
as leader should he lose a referendum on constitutional Labour List. Corbyn has also recognised the importance
of allying with other socialist parties in Europe and is set
reform in December.
In Spain, the anti-austerity Podemos Party had a to host a conference in the U.K. for like-minded parties
strong showing in a general election last December, be- across Europe in early February.
Much remains uncertain, but one thing is clear:
fore losing a sizable share of the votes in the election that
whichever direction the continents politics takes, it is
was held in June.
In other parts of Europe socialist parties have tapped clear that the appeal of Western European liberalism
into the anti-globalisation agenda: for example, in Belgi- already under assault since the 2007 nancial crisis
um it was the socialist-dominated legislature that tempo- and ensuing economic downturnis under pressure like

rarily blocked the trade deal between Europe and never before.
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Fig leaves and

champagne
THERE IS, POST-ELECTION IN THE UNITED
States, a scramble for g leaves by the big-league liberal
news media establishment. These worthies putting another spin or construct on what they got so horribly wrong
does not change the fact. A g leaf calls attention to, as
much as hides, the embarrassment, the shame. It does not
really help to be indignant or exasperated that what they
got wrong was what they hoped should have been; that
Hillary Clinton should have defeated Donald Trump; that
what they consider democratically decent should have
trumped what is demagogical and abominable. It is bad
enough that they took sides and lost. What complicates
matters is that the side which lost was as much a lost cause
from the point of view of democratic values as that which
won is going to be a danger to them.
The side which lost has inicted predatory wars on a
host of weaker countries, forcibly dismantling nation
states, killing and maiming hundreds of thousands of
civilians and bringing unending misery and blight into the
lives of those who are fortuitously spared to just about
survive. It has been a regime specialising in drone attacks
which, again, have indiscriminately taken the lives of
innocent men, women and children. It has invented and
perfected a practice of wartime capitalism as its mode of
neoimperialist self-perpetuation. The same big media
have unabashedly served as the cheerleaders of all these
execrable acts, justifying them by invoking the alarmist
threat of terrorism, or on the enlightened pretext of civilising and democratising the world. When they bemoan
Hillary Clinton losing the election, they do not, of course,
bemoan any of this wanton death and destruction that she
and her administration authored, because they have abetted these acts as willing messengers and spin doctors of
this abrasive form of U.S. exceptionalism.
The side that won, going by Trumps campaign rants,

SHANNON STAPLETON/REUTERS

The American liberal media bemoan Hillary Clintons loss, but they do not,
of course, bemoan the wanton death and destruction that she and her
administration authored. B Y S A S H I K U M A R

A M AN hands a newspaper to a customer in New York,

on November 9.

promises to be far worse for many ethnic minorities in

the U.S. and at least as bad for the people in the rest of the
world who are at the mercy of its economic and military
might. So, it is really a Hobsons choice between bad and
worse, and that worse has bettered bad at the elections
hardly extenuates what is, and what has been for so many
years, real plain bad. But what is plainly bad thus becomes almost sanitised and redeemed in the media game
of compare-and-contrast. That is what comes across
when even the liberal-minded and long-standing doughty editor of the reputable The New Yorker, David Remnick, employs felicitous obloquy to vent his anger at
Trumps triumph. An American Tragedy is what he
titles his piece because the election result is a tragedy for
the Constitution, and a triumph for the forces, at home
and abroad, of nativism, authoritarianism, misogyny,

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and racism. He nds it difficult to reconcile to what has

happened, it being impossible to revert to this moment
with anything less than revulsion and profound anxiety.
Remnick does not mince words in characterising
President-elect Trump as a con and a marginal selfpromoting buffoon in the jokescape of eighties and nineties New York; as one whose level of egotism is rarely
exhibited outside of a clinical environment. He does not
seem a whit deterred by the man who routinely threatens
critics in the media with libel proceedings. Trump, he
fulminates in full ow, is vulgarity unbounded, a knowledge-free national leader who will strike fear into the
hearts of the vulnerable, the weak, and, above all, the
many varieties of Other whom he has so deeply insulted.
Numerous Americans, including all those across the U.S.
protesting against Trump as President, and indeed large
sections of people across the world, will probably heartily
agree with him about all this.
There would be far less agreement, though, even
among Trump detractors, about his sympathetic casting
of Hillary Clinton, by contrast, as a victim of, rather than
as one deserving, the distrust of the people. She was, in
what he seeks to make out in an even-handed estimation,
a awed candidate, but a resilient, intelligent, and competent leader, who never overcame her image among
millions of voters as untrustworthy and entitled. He
insinuates that she was the victim of one bogus scandal
after another so that no matter how long and committed her earnest public service, she was less trusted than
Trump, a im-am man who cheated his customers,
investors and contractors; a hollow man whose countless
statements and behaviour reect a human being of dismal qualitiesgreedy, mendacious, and bigoted. This
varnishing of Hillary Clintons egregious blunders and
dubious corporate and international political connections, including with Arab potentates who liberally funded her foundation, this glossing over the bogeys she kept
lobbing during the campaign, including of a Russian
conspiracy to hack away her election chances, make
Remnicks vituperation skewed and invidious, compromising the ethical power and detracting from the emotional appeal of the case he was making against Trump.
Remnick, in this piece as well as in an interview on
CNN, also seems to want to guard himself, and those like
minded, against normalising what the election has
thrown up, including perhaps by the media in reconciling
to the obtaining reality; to guard against whitewashing
Trump, now that he will be President. That would, again,
be a rigorous and principled self-imposition of an uncompromising conviction, were it not for the fact that the
regime Hillary Clinton represents, which has gone about
sowing war and made the world a more conicted and
dangerous place, is, to his mind, implicitly part of normal
American politics. He sees only the one as abnormal, not
the other; and that can be an acutely insular view.
While accepting the election verdict, he thinks a reality check on the so-called collective wisdom of the people
is pertinent and recalls George Orwells cautionary insight that public opinion is no more innately wise than
FRONTLINE .

DECEMBER 9, 2016

THE AUTHOR AN D FI LM - M AKE R John Pilger speaks

to mediapersons after visiting Julian Assange at the

Ecuadorian embassy in London. A le picture.
humans are innately kind. People can behave foolishly,
recklessly, self-destructively in the aggregate just as they
can individually. He alludes, not surprisingly, to the
Brexit voters as another example of a people voting
against the larger public interest. It may well be that the
Trump vote was largely a lumpenised, disaffected and
jobless white Amercian affair. It seems, nevertheless, to
have been an anti-establishment vote in which not just
Washington and Wall Street, but the mainstream and
dominant news media were also seen as a culpable part of
the establishment. That Remnick and others seize on the
Brexit example to rubbish this vote as self-destructive is
telling because it kind of discountenances the other side
of the coin. There is, after all, a Brexit narrative which
captures its essentially anti-London and anti- globalisation-on-EU-terms character. When the Labour party
leader Jeremy Corbyn saw the merit of this resentment
he was roundly excoriated, including by many of his party
leaders and MPs, but re-elected by the larger party mass
base with an increased margin.
BREXIT COMPARISON

In an interview to RT News (the English language global

channel launched by the Russian government in 2005),
the author and lm-maker John Pilger too compares the
shock and awe produced by the U.S. election result to
that of the Brexit vote. The refrain in both cases, he says,
was on the lines of how dare these people. Of course,

114

NEIL HALL/REUTERS

populist candidate with a large following. The predetermined media standpoint on Sanders slim prospects
emerges from a dogged little piece of investigation by
Thomas Frank in the November 2016 issue of Harpers
Magazine, into the short shrift the democratic socialist
candidate got from the leading press, including The New
York Times and particularly The Washington Post. I
have never before, says Frank by way of setting the
framework and rationale for his study, seen the press
take sides like they did this year, openly and even gleefully bad-mouthing candidates who did not meet with their
approval. The Washington Post, for all its track record of
path-breaking journalism, set out to systematically chip
away at Sanders campaign in its edit and opinion pages.
The reason, Frank thinks, was because for the sort of
people who write and edit the opinion pages of the Post,
there was something deeply threatening about Sanders
and his political views. And the sort of people he is
talking about are the comfortable bunch at The Post,
the well educated and well connected, who, when they
look around at the comfortable, well-educated folks who
work in government, academia, Wall Street, medicine,
and Silicon Valley, see their peers.
BERATING BERNIE SANDERS

the fact that he says this on RT makes it susceptible to

being seen as one of a piece of the conspiracy charge,
getting a lot of media traction, of Russia interfering in the
U.S. election to defeat Hillary Clinton. For Pilger, the
writing was on the walla Trump was bound to come
along and dislodge the liberal class and its corrupt warmongering status quo. This class created Trump, he
says, because there already was a monstrous situation
in the U.S. and journalists enabled it. He sums up the
reporting of this political year in the U.S. as a black
satire and castigates those responsible for it as being
not journalists but anti journalists: They are not
independent. They are echo chambers. They amplify and
echo that which is handed down to them (of course the
irony of this being stated on RT is not to be missed).
Pilger points to the big media (and that includes ABC,
CNN, BBC, The New York Times and The Guardian)
being stacked, along with Hillary Clinton, the Pentagon,
the CIA and even the Republican party itself, against
Trump, so much so that no one really listened to
Trumps narrative as it were. They only saw Trumps
salacious side. There may be too much benet of doubt
bestowed on Trump here, but the real point Pilger is
labouring is that Hillary Clinton and her government,
which represented great rapacious power, got away
lightly in the process of the demonisation of Trump, and
startling facts like her being backed by all but one of the
10 leading arms manufacturers in the world were lost, or
conveniently overlooked, in the dreaded xation on
Trump.
There really was, in Pilgers view, no one to vote for;
perhaps Bernie Sanders early on, but he was a minority

The paper, inter alia, berated Sanders for his lack of

political realism, for not pursuing decit reduction, for
not cracking down on social security spending, and for
suggesting that there was an anti-progressive billionaire
class, mockingly observing that billionaires have done
more to advance progressive causes than Bernie Sanders
has. Among its telling headlines was Nominating Sanders would be insane, and a commonsensical advice to
readers was that socialists dont win national elections in
the United States. Frank sums up The Post offensive
thus: The paper hit every possible anti-Sanders note,
from the driest kind of math-based policy reproach to the
lowest sort of nerd-shamingfrom his inexcusable failure to embrace taxes on soda pop to his awkward gesticulating during a debate with Hillary Clinton (an
unrelenting hand jive, wrote Post dance critic Sarah
Kaufman, that was missing only an upright bass and a
plunky piano). Bloggers and columnists buttressed the
papers anti-Sanders campaign. A columnist set out to
dispute a photograph of his from a 1962 protest action
and even after the person who took the picture said that it
was Sanders preferred to continue to cast doubt on it
saying: This is a story where memory and historical
certitude clash.
The Post and other news media in that league must
have been discomted by the unprecedented standing
and showing of a near-socialist candidate in this election
process. Imagine their occupational shock and predicament if, or when, what the Marxist Hungarian philosopher Istvan Meszaros forecast even in 1992 comes to
pass: The future of socialism will be decided in the
United States, however pessimistic this may sound. That
may be when a Trump becomes the darling of the press in
the U.S.

115

FRONTLINE .

DECEMBER 9, 2016

U .S . E LE CTIO NS

FAR RIGHT CAPTURES

All forces of the Right recognise Donald Trump as a soul mate. On issues of
imperial wars, loyalty to Israel and confrontation with Russia and China,
Hillary Clinton would have certainly not been better, possibly far worse.
That is the real extent of the imperial hubris in todays U.S. B Y AI J AZ A HM A D
THIS IS A HISTORIC MOMENT OF GREAT
danger, not only in the United States but also, thanks to
the power of the U.S. over the rest of us, across the world.
The proto-fascist movements of the Far Right that
have been swirling around the world since the dismemberment of the Soviet Union have nally found in Donald
Trump, the President-elect of the U.S., its unifying centre
and its global gurehead. I hesitate to say leader for the
simple reason that about Trump himself and his leadership qualities we know rather little beyond his limitless
personal greed, his view of women as fodder for sexual
predation, his hatred of all who are not of white European
extraction, his demagoguery and cynicismnot to speak
of his vast and somewhat ridiculous megalomania, rather
analogous to Indias Narendra Modis and Turkeys Recep Tayyip Erdogans but on the grand American scale,
even more evil than theirs, something of a Captain Ahab
writ large.
But at least he undoubtedly has become a provisional
gurehead of all that is vicious in global politics and
power, thanks to his recent election to the one office in
the world that can do the most damageand has consistently done over the last several decades. Noam Chomsky
summarised this side of the equation succinctly: On
November 8, the most powerful country in world history,
which will set its stamp on what comes next, had an
election. The outcome placed total control of the governmentexecutive, Congress, the Supreme Courtin the
hands of the Republican Party, which has become the
most dangerous organisation in world history. We shall
return to this characterisation of the Republican Party
and to Trumps own relationship with his party.
CHANGING GLOBAL EQUATION

Meanwhile, the essential shock of this situation arises

from the fact that even though the Far Right has been
growing in the U.S. over many yearsthe process going
back to the presidential bid in 1964 by Barry Goldwater
who gained 40 per cent of the popular vote even theFRONTLINE .

DECEMBER 9, 2016

nand even though such forces have been gaining momentum across continents, the U.S. had seemed to be the
last place where such a takeover could come so very
swiftly. Some taste of it has come already in India and,
considerably more ferociously, in Turkey; smaller European countries such as Austria, Hungary and Poland
have been teetering on the verge. Such forces have been
inuential in France and have gone from strength to
strength throughout these neoliberal times; they played
the key role during the Brexit campaign in the United
Kingdom, and they are ascendant in virtually all corners
of Europe, from Greece to Denmark and Sweden. The
fear was that they might come to power in the smaller
countries of Europe and then grow further into its central
formations. Their coming to power in the U.S. alters this
global equation altogether. That power mainly resides, in
my view, not in the person of Trump per se but (a) in the
kind of people who are likely to run the government on
his behalf and (b) the simultaneous Republican control
over the Supreme Court as well as both Houses of the
Congress.
An analysis of the host of contradictory factors that
led eventually to this one fatal outcome shall be attempted in some sections of this article. The full story of how a
political non-entity who seemingly had little else going
for him save his bluster and self-praise got catapulted
into a position of such power shall unfold very slowly,
over the years. What is clear is that the campaign was
crafted very carefully to portray him as a man opposed to
the political Establishment as a whole, Republican as
well as Democrat; ercely independent of the media as
well as corporate power; a great champion of the American working class; a foe of the neoliberalism with its free
trade policies and globalised nance that had wrecked
Americas own productive economy; a sober patriot opposed to wars in West Asia with its expenditure of trillions of dollars that had led to nothing but mountains of
debt; a sagacious statesman who understood the perils of
a New Cold War and the confrontation with nuclear-

116

IMPERIAL HOMELAND
armed Russia. On this side of his public persona he
seemed to be as opposed to neoliberalism and deindustrialisation of the U.S. as Bernie Sanders, who had
mounted a challenge to Hillary Clinton from the Left,
and distinctly more anti-war and anti-Establishment
than Sanders. Both were vying for the working class vote.
This side of the electoral ambiguity in the U.S. was

expressed to me most vividly by a fellow passenger on an

international ighta white American female schoolteacher, probably in her late thirtieswho thought that
problems in her country could be xed only if Trump and
Sanders would ght the elections together, on a bi-partisan ticket. Respectable opinion attached the word populist to both.

supporter
celebrates as
election results
come in, at
Manhattan,
New York, on
November 8.

JONATHAN ERNST/REUTERS

A DONALD
T R UMP

Trumps calculated, obviously cynical appeal to political rationality and working-class interest was carefully
balanced, however, against the much more visceral, atavistic appeals to the darkest sides of U.S. society: with
off-hand promises to use nuclear weapons against the
enemies of America; with rampant, vulgar, he-man misogyny (at age of 70, no less); with unbridled racist
rhetoric against all non-white immigrants, portraying
Latinos as rapists, drug pushers and generally criminals,
and with promises to deport millions of them and to build
a wall on the Mexican border to keep them out in the
future; with constant appeals to Islamophobia by equating Muslims with terrorism and promising to force
Muslim citizens in the U.S. to register with anti-terrorist
law enforcement agencies as well as to control further
entry of Muslims into the U.S.
Trump is, in other words, a classic demagogue. And
yet, he contradicts himself so often and seems so unable
to either think clearly or talk cogently that it is hard to
know if he has any convictions at all, beyond a narcissistic
pursuit of power and money for himself. It would be
charitable to recall Mussolinis famous dictum: we fascists are super-relativists. In other words, lack of conviction is the road to power. That of course is not an attribute
of fascism alone. It is equally an attribute of liberal
politicians, particularly so these days among the ones
whose political personae incline towards the social democratic. That you will betray your campaign promises is
the norm which applies to Obama and Trump equally.
What Trump is likely to do in office can, therefore, be
surmised less by what he said or did on his road to the
presidency but from the company he keeps.
We shall return later, at some length, to the question
of the kind of company he keeps, that is, the reality of his
affiliations beyond the rhetorical effects, the kind of government that is likely to emerge, the policies that might
get pursued while he serves as gurehead President. The
broader question that needs to be addressed in the rst
instance is this: what was the broader eld of force within
which a presidency of this kind could emerge? With their
planetary wars, their brutish nancialisations, and their
destruction of the productive fabric of the U.S. economy
itself, what role have Democrats and Republicans alikethe political Establishment as suchplayed in creating this new eld of force that swerved so very sharply
towards the Far Right?
FRACTURED AND RACIST

The rst thing to be noted, before getting into substantive

analysis, is that the U.S. has become a deeply polarised,
even fractured society. This polarisation is reected in
the election results as such. The fact of the matter is that
Hillary Clinton won marginally more votes than Trump,
who became President-elect only because of the distorted
nature of the Electoral College that elects the President.
In other words, it is the macabre nature of the American
electoral system, and not some apocalyptic, irreversible
change in the political predilections of the electorate,
that has given power to the Far Right in such a concenFRONTLINE .

DECEMBER 9, 2016

S P A N I S H- S P E A KI N G I M M I G R AN TS , many of them
undocumented, gather at a school on Staten Island on
November 14 to coordinate a response to the election of
Donald Trump.

trated, unchallengeable form. This kind of structural

distortion is of course widespread among other liberaldemocratic systems as well, especially of the Anglo-Saxon variety and their colonial offspring.
Another way of putting it is this: Virtually half of the
eligible voters, 43 per cent or so, did not vote. Of the 57
per cent participants, each party took halfroughly 27
per cent of the total eligible voters for each side. Give or
take a few percentage points, just over a quarter of the
electorate elects the government. All liberal democratic
governments are by their very nature minority governments and therefore profoundly undemocratic. Close to
$7 billion are said to have been spent on organising the
Spectacle, but the minority that actually elects the government is too small to represent the real views and
inclinations of the electorate as a whole. The Spectacle is
designed to create a massive ideological effect, while
distribution of power among ruling castes and elites gets
reorganised in an entirely peaceful manner. Whatever
violence may erupt is then suffered by random individuals from among the permanently excluded. In this particular case, the violence that accompanied the election,
before and after, was largely concentrated on the nonwhite immigrants, Mexicans and Muslims in particular;
attacks on hijab-observing Muslim women were fairly
widespread.
In this circumstance, a view has been popularised
that race and gender were the decisive factors in the

118

Similarly, Trumps nauseating and relentless display

of the most vulgar kind of misogyny was undoubtedly
related to the fact that he was being opposed by a woman.
The unstoppable washing of Trumps and Bill Clintons
dirty laundry in public, so characteristically American in
its prurient fascination with the sexual misadventures of
its politicians, not only brought the usual inanities of
electoral contests to a new low but also catered, specically, to the aggressivity of the males whose own social
lives have been destroyed so very deeply.

DAVE SANDERS/NYT

THE IRRESISTIBLE POWER OF A DREAM

success of Trump, a hate-spewing and half-literate white

supremacist male, over Hillary Clinton, a politically accomplished, liberal, sophisticated female candidate.
That race and gender were signicant matters is unquestionable; that they were in any manner decisive in
obtaining that electoral result is not so clear. The U.S. is
and has always been a racist society. Likewise, patriarchy
and the whole range of gendered bigotries have been
entrenched in this society. These are permanent features
of U.S. politics, increasingly so in response to feminism
and unprecedented access to higher education and professional jobs for middle class women; the rise of a black
middle class as a result of the Civil Rights Movement,
black nationalist militancy, and subsequent affirmative
action; the dramatic demographic gains for non-white
immigrants in the overall U.S. population as a whole,
especially in such States as California, Texas, New Mexico; and, above all, the disproportionate suffering of the
white working class as a result of deindustrialisation,
since white workers had most of the jobs in manufacturing while new immigrant workers were mostly absorbed
in agriculture and services.
In this situation, Trumps hate-lled speeches about
Mexicans, Muslims and others of darker skin were an
instance of a very familiar kind of bourgeois rhetoric in
times of crisis that shifts the blame from the oppressing
capitalist class to the fellow worker of a different skin
colour or ethnic background; as Jean-Marie Le Pen, the
founder of the French neo-fascist National Front, used to
say: two million immigrants are equal to two million
unemployed among the French. Le Pens racism was
more shrewd and urbane; Trumps is much more crude
and vicious. But the effect is similar.

We need not doubt that the darkest forces in the American underbelly have been greatly energised in the process, with a feeling of new empowerment on the national
scene. Only a small minority needs to be thus encouraged
and activated to start producing quite large and farreaching social effects. But that this minority, so active
and visible, had immediate electoral effects of any decisive nature is doubtful. Let us consider two simple facts.
Fact number One: Trump won 53 per cent of white
womens vote as against Hillary Clinton; Obama had won
among white women with almost exactly the same percentage against Romney, a white male, only four years
ago. Why did Hillary Clinton not win among white women the same percentage of votes as Obama? Race? Gender? Or something else? Hillary Clinton won 54 per cent
of the total womens vote, thanks to the non-white vote
but Obama had also won, by 55 per cent. Meanwhile,
Trump did 2 per cent better among black voters than
Romney four years earlier, while Hillary Clinton did 5 per
cent worse than Obama. Why? Race?
Fact number Two: As everyone else has pointed out,
Hillary Clinton lost six States that Obama had won twice:
Florida, Pennsylvania, Michigan, Iowa, Wisconsin,
OhioStates that included some of the most devastated
centres of U.S. manufacturing that has been liquidated.
Why? Race? Gender? It is more plausible that the suffering poor who had reposed their trust in the Democratic Party for so long nally lost that faith and turned to the
alternative, in the spirit of anyone but . . . What needs
further explanation is a third fact: Hillary Clinton polled
ve to six million less votes than Obama, in an enlarged
electorate. Who are these millions who would vote for a
black man but not for a white woman whom that very
black mannot to speak of his very popular black wife
has wistfully endorsed? How much political work can
race or gender do by itself?
We do not have reliable enough, extensive enough
facts to answer these questions rigorously. It is quite
plausible, though, that Trump is a gift from the combined
Establishments of the Republicans and the Democrats
who have given us endless wars and mass destitutionthe gift of a power structure led in recent years by
Obama and Hillary Clinton.
The U.S. does not have a conscript army whereby the
young of all classes are required by law to do military
service. It has a volunteer army so that the soldiery is
overwhelmingly drawn from the most destitute classes.

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FRONTLINE .

DECEMBER 9, 2016

JOHN MOORE/AFP

CIVIL I A N PA R A MI L I T A RI ES with Arizona Border Recon

search for illegal immigrants and drug smugglers at the
U.S.-Mexico border on November 14, days after the
presidential election. Border security issues are a top
national issue for the incoming administration.

Two million of them have fought in Afghanistan and

Iraq. Relatively few die but a huge number of them are
injured. Between 30 and 40 per cent of those who return
from these wars are said to then suffer from some kind of
psychological disorder; countless remain jobless or work
for subhuman wages. Does it not make sense that perhaps a majority of them get attracted to the presidential
candidate who says that the six trillion or so dollars that
have been spent on these wars have been wasted; that he
is going to take care of the veterans; that he will seek
peace with Syria, Iran and Russia?
Then, there is the promise of tearing up free-trade
policies, to impose tariffs on imported goods, to rebuild
U.S. manufacturing capacities, to restore dignied jobs
to the working poor, to repair American infrastructure
and create millions more of jobs. Whether or not he, or
anyone else, can really do it is somewhat besides the
point. The promise itself creates the irresistible power of
a dream. Obama, too, had said so, in a voice that created
conviction, and the white working class had voted for a
black man, thus provisionally healing at least some of the
racial wounds that had accumulated over centuries. But
the black man then betrayed the promise; he might have
failed anyway but he did not even try. Trump is the
product of that treason. And, yes, the racism that had
receded provisionally also resurfaced, more aggressive
now than before.
RECESSION AFTERMATH

Obama became President of the U.S. at the height of the

2007-09 crisis. Corporate and investor taxes since 2009
FRONTLINE .

DECEMBER 9, 2016

have been cut by more than $6 trillion, more trillions

have been made available as free money through policies
of quantitative easing and zero bound rates, and U.S.
corporate prots have more than doubled since then,
with 97 per cent of all gross domestic product (GDP)
income gains going to the top 1 per cent. At the other end
of the class spectrum, millions among the 13 million who
had faced home foreclosures and lost trillions of dollars
in home value are still struggling to cope with debt and
income insecurity. Loss of manufacturing jobs meant not
just income squeeze but also drastic social consequences
such as widespread depression, repressed rage, alcoholism, drug abuse, family breakups, early deaths and suicides.
It is well to recall that the fascisms of the inter-War
periods were the product of extreme economic dislocation, from which countries like Germany and Italy never
quite recovered until after the Great Depression. There is
no reason why somewhat similar movements should not
develop in response to the ravages of global militarism
and neoliberal economic devastation for the majority of
the people in most industrialised countries. Virtually all
the countries that succumbed to some variety of fascism
at that timeSpain and Portugal in addition to Germany
and Italyhad powerful working-class parties and
movements. It was necessary to abolish the formal freedoms guaranteed by the liberal-democratic form of the
capitalist state in order to unleash full-scale terror and
even military operations against those parties and movements. Today, the working classes are supine across the
industrialised world, and middle-class radicals typically
neither have any organic connections with the working
class nor see the revolutionary organisation of the working class as the necessary bulwark against neoliberal
capitalism. Thus abandoned by the self-styled Left,
shrunk in its social weight and beaten down both economically and politically, the working class is particular-

120

ly susceptible to populist demagoguery that promises

them reindustrialisation and protectionism, and which
provides them outlets for a release of their rage, in one
form or another. Many of them gravitate towards the
likes of Trump. Having no need to unleash state terror
against working-class organisations, the Far Right has
no reason to disturb the institutions of the liberal state. It
simply takes them over, making explicit the underlying
compact between liberalism and the politics of extremity
and cruelty.
TRUMPS OWN CLAIMS

Let us return, then, to some of the shibboleths of Trumps

own claims. First, his boast that he is so wealthy that he
can nance his campaign himself and thus be free of the
nancial oligarchy. In reality, he received uncounted
millions from the likes of Sheldon Adelson, the sinister
casino king who also plays a key role in keeping Benjamin
Netanyahu in power. Months before the elections, Steven
Munchin, the former Goldman Sachs partner and Soros
Fund employee, became the nance chair in the Trump
campaign, raking in millions from the corporate elite;
there is a faint possibility that Munchin may become
Treasury Secretary. Trumps campaign was previously
headed by the former lobbyist Paul Manafort, and wellestablished corporate lobbyists are said to be ling into
Trumps presidential transition team. Then the campaign command was taken over by Steve Bannon, a
former Goldman Sachs executive, investor in the sitcom
Seinfeld, a Washington insider and chair of the Far
Right website Breitbart News. This website is well known
for headlines like would you rather that your child had
Feminism or Cancer? and Birth Control Makes Women
Unattractive and Crazy. More recently he has been appointed Trumps chief strategist and senior counsellor,
one of the two key posts Trump has created in his White
House. This appointment has been criticised widely, and
the extremity of his racist politics and his propagandist
skills are so well known that some Europeans are already
describing him as Trumps Goebbels. He wants to build
up a network of European and American leaders of the
Far Right. That Nigel Farage, the leader of the UK Independence Party (UKIP), was the rst foreign leader to
meet Trump after his electoral victory seems signicant
in this context.
Second, Trumps supposed independence fromindeed contempt forthe Republican Party elite. The fact
of the matter is that the party itself has been going
through a great churning since the Reagan days, with
power slipping out of the hands of the wealthy, patrician
leadership, much of which was once drawn from the
Eastern Seaboard, while other motley forces capture the
party from the Far Right: the Christian Right, the Gingriches and the Ryans, the neocon and not so neocon
warriors who have given us the post-9/11 war-withoutend, the competing billionaires like Adelson and the
Koch Brothers, the Tea Party crowd, and much else
besides.
It is this restructured Republican Party that Chomsky

describes as the most dangerous political organisation in

the world.
Trump is deeply entrenched among this new party
elite that has displaced the old. The very rst appointment he has made is to elevate Reince Priebus, the 44year-old chairman of the Republican National Committee and key campaign manager for Trump, to the position
of the Chief of Staff at the Trump White House. People
who are getting prominently named as possible members
of what some have dubbed as Trumps incoming Cabinet
of Horrors tend to be either serving or former State
Governors (from Christie to Giuliani), former presidential hopefuls (Ted Cruz, Ben Carson), former House
Speaker and key architect of the Far Right in the U.S.
(Newt Gingrich), and prominent neocon warmonger
(John Bolton). A key gure in the new administration is
the former Indiana Governor Mike Pence, Trumps running mate who will now be Vice President and, most
probably, more powerful than the gurehead President,
as Dick Cheney was most of the time more powerful and
purposeful than Bush Jr. Writing for The Intercept, Jeremy Cahill observes:
Christian supremacist militantswould not have
been able to win the White House on their own. For
them, Donald Trump was a godsend. Trump is a Trojan
horse for a cabal of vicious zealots who have long craved
an extremist Christian theocracy, and Pence is one of its
most prized warriors. With Republican control of the
House and Senate and the prospect of dramatically and
decisively tilting the balance of the Supreme Court to the
Far Right, the incoming administration will have a real
shot at bringing the re and brimstone of the second
coming to Washington.
Cahill then goes on to catalogue a whole range of
Pences hair-raising positions on foreign as well as domestic issues, and then says of his essential outlook:
Mike Pence was raised Catholic, in a Kennedy Democrat household, but he has been a devout evangelical
since being converted at a Christian music festival in
Kentucky while in college. Pence now describes himself
as a Christian, a Conservative, and a Republican, in that
order. Pence has described himself as a born-again,
evangelical Catholic.
We still do not know what the nal shape of his
government will be, but there is sufficient reason to
believe that he will be fully surrounded by Christian
zealots, racist bigots, warmongers, and seasoned politicians capable of keeping his incoherence and bombast in
check.
HOW POWERFUL IS THE PRESIDENT?

The capacity of the President of the U.S. to act independently and pursue his own policy is in any case greatly
exaggerated. He is restrained, rst of all, by key members
of his own Cabinet who run the major Departments
State, Defence, Treasuryand by other officials such
as the Attorney General or the Chairman of the Federal
Reserve, all of whom act nominally on his behalf but
actually command independent efs. It is quite doubtful

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that Rumsfeld or Greenspan really waited for guidance

from the President they served. Trump is at least as
ignorant about the affairs of the state as Bush Jr was.
Others will decide for him.
But the real restraint comes from the Deep State,
which is not entirely part of the state as such: bureaucracies of the Pentagon, the armed forces, the vast network of intelligence agencies, but also the countless
private corporations that are intertwined with those bureaucracies, and, above all, the nancial oligarchy of
globalised capital. Hillary Clintonthe queen of boutique feminism, the golden girl of Goldman Sachs and the
military-industrial complexmay have been vanquished, but the Oligarchy lives. The stock market went
into spasms of ecstasy at the election of Trump, quite
forgetting the defeat of its own orating lady whom it used
to pay hundreds of thousands per hour for churning out
forgettable rubbish.
That Oligarchy, in collusion with other agencies of
the Deep State, can always stage a nancial crisis to
pressure a President to adopt certain policies, or stage
false ag acts of terrorism inside the so-called Homeland
in order to obtain particular policy shifts toward particular states.
The classic recent example of a President having been
derailed by his own subordinate (with no retribution, I
might add) is that of a recent ceasere in Syria that U.S.
Secretary of State John Kerry and Russian Foreign Minister Sergey Lavrov negotiated painstakingly and which
simply evaporated when Defence Secretary Ash Carter
and his Pentagon bureaucrats decided to sabotage it and
bombed a Syrian airbase relentlessly for close to two
hours, with dozens of fatalities, to drive home the point
that the bombing was not an accident.
That was relatively a minor intervention to derail the
policy of a sitting President. Other such interventions,
large and small, are a routine matter for various power
centres that surround the gurehead in the Oval Office.
Trump should be taken seriously, but not too seriously. Structure is always more determining than the individual agency, even if the agency is that of the President
of the United States. That the whole cabal of the Far
Right that has been gathering force for half a century has
nally taken power in Washington is far more signicant
than the perverse fascination with Trump that grips the
Land of the Free and, indeed, grips much of the TVwatching world.
FOREIGN POLICY

What about foreign policy, then?

Part of Trumps populist appeal was that he repeatedly described Americas wars in West Asia as futile and
promised to terminate them. He called for a normalisation of relations with Russia, which would avert the
possibility of a nuclear confrontation. He also called for a
coalition with Russia for ghting all factions of the jehadis, including Al Qaeda, whom the U.S. has been nursing
as part of the anti-Bashar al-Assad coalition in Syria. At
one point he even said that the U.S. could not play a
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DECEMBER 9, 2016

constructive role in bringing peace to Israel/Palestine if it

continued to favour Israel and it should therefore adopt a
truly neutral stance towards both parties in the conict.
Finally, he questioned the very relevance of the North
Atlantic Treaty Organisation a quarter century after the
collapse of the Soviet Union. In short, he positioned
himself radically as a peace candidate across the spectrum. Then, perhaps under the inuence of Adelsons
millions, he abandoned his former stance on Palestine
and became a rabid advocate of Israeli interests, even
promising to move the U.S. embassy to Jerusalem, thus
becoming the rst Western power to hold out such a
promise, thereby implicitly recognising Israeli jurisdiction over East Jerusalem.
Meanwhile, Giuliani and Bolton have emerged as the
chief contenders for the post of Secretary of State. Giuliani is reputed to have taken money from Mujahideen-eKhalq, the shadowy Iranian terrorist outt that is sheltered by the U.S. while also being listed as a terrorist
organisation; and Bolton is known to have advocated a
bomb Iran policy. Unlike his other positions, his position on Iran has always been belligerent, calling for a
renegotiation of the nuclear territory that Obama concluded with that country. Now, that re-negotiation
would be very difficult not only because Iran would not
except it but also because the European Union has officially accepted that treaty. Moreover, it is not plausible
that the U.S. could adopt so hostile an attitude towards
Iran but also seek normalisation with Russia or peace in
Syria.
In these circumstances, it is really not clear what kind
of foreign policy one can expect from the incoming
Trump administration. The other great problem, already
visible from the earliest phase of his campaign, is his
unremitting hostility towards China, the pivotal country
in the emerging world order alongside Russia, Iran and
others. Trumps positions have thus been contradictory
from the outset. It seems more than likely that his eventual positions would revert to the familiar ones, dictated
by the Oligarchy, the neocons, the Israelis.
The reaction of the Israeli state is always a good
barometer for judging the likely future of U.S. behaviour.
On the morning after Trumps electoral victory, Israeli
Education Minister Naftali Bennet, the rising star of
Israels own Far Right, exulted: The era of a Palestinian
state is over.
Meanwhile, top Israeli Ministers voted unanimously
in favour of a Bill that would allow Israeli settlements and
outposts that were built on property owned by Palestinians to avoid court-ordered demolitions. The calculation clearly is that Trump will not oppose the move while
the opposition from the lame-duck Obama administration can be ignored.
All forces of the Right thus recognise Trump as a soul
mate. On issues of imperial wars, unquestioning loyalty
to Israel and confrontation with Russia and China, Hillary Clinton would have certainly not been better, possibly
far worse. That is the real extent of the imperial hubris in
todays United States.

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U.S . E LE CTIO NS

To friends in the U.S.

JASON REDMOND/AFP

We understand and empathise with you because in our own way we have
been there. Do not be afraid: fear is what the newly powerful groups want to
instil in you, but like all bullies, they retreat in the face of determined and
unied opposition. B Y J A Y A T I GH O S H

BELIEVE ME, WE UNDERSTAND WHAT YOU

are going through. We share your shock, horror and pain.
Not just because we, like everyone else in the world, are so
hugely affected by politics in the United States and by the
nature of the U.S. leadership. Not just because we are
now on completely uncharted terrain internationally.
Not just because the cavalier and cynical approach to
global warming that has been embraced by the next
President of the U.S. has the capacity to destroy our
planet. Not just because the geopolitical implications of
the spoken and unspoken attitudes of the incoming U.S.
regimewhich clearly abhors any kind of multilateral-

A M AR CH in protest against President-elect Donald Trump

in Seattle, Washington, on November 14.

ism and seems most comfortable with tyrannical and

repressive leaders in other countriesare likely to be
devastating for progressive internationalism and for
democratic movements everywhere. Not just because, as
reality TV merges into reality and social media is taken
over by ghastly and raucous forces, the huge inroads
made by the export of cultural products of the U.S. create
awful replicas of what is happening in your society in our
own countries.

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TERESA CRAWFORD/AP

CH ICA G O M A YO R R A HM EM A N U EL at a news
conference on November 14. He said that the outcome of
the presidential election would not impact Chicagos
commitment to serve as a sanctuary city for immigrants.

UNEXPECTED U-TURNS

We understand and empathise with you also because,

in our own way, we have been there. Two and a half years
ago, something similar happened in India. So you can ask
us what it is like: we can tell you, midway into the tenure
of our current government, what to expect and what you
should really watch out for.
As the shock of the U.S. election results settles in this
year of unpleasant surprises, many international comparisons are being drawn. The most obvious analogy is
with Brexitdown to the inability of elites, analysts and
liberal media to see it coming. It is now beyond doubt
that across the world people are reacting to the inequality, insecurity and social hollowing out brought about by
neoliberal globalisation and its votaries. And they are
reacting in angry, aggressive and exclusionary ways,
blaming other victims of the same processes rather than
the broader policies responsible for the crisis, and reinforcing the worst kinds of prejudices in that process.
But in fact, this has been happening for a while in
several other parts of the world, often with similar electoral outcomes. In India, we faced a similar situation in
May 2014, when Narendra Modi led the Bharatiya Janata Party (BJP) to an absolute majority in Parliament,
which had been expected by no one. Modi, like Trump,
came to power on the promise of change, away from an
establishment widely seen as corrupt, distant and out of
touch with the masses and their problems. He also had to
ght the old guard within his own party, which was
already a party rmly on the right of the spectrum but still
found him to be too extreme. He also promised economic
growth that would deliver more jobs, but on a very vague
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DECEMBER 9, 2016

platform. He too was a master of social media, using

Twitter and Facebook to attract followers. Like Trump,
he preyed on the insecurities of people, their dissatisfaction with the existing order that did not deliver. He
also drew upon and appeared to justify chauvinistic and
backward-looking attitudes, making them look respectable. He, too, was powered by a Far-Right and revanchist
set of groups that became part of an increasingly aggressive political movement. He also campaigned in a very
macho, divisive and even threatening manner, targeting
immigrants and Muslims.
Like many of you, some of us in India were also in a
state of denial until the very last moments of the election,
refusing to believe or accept that our fellow citizens
would vote to power a person who exploited peoples
insecurities to increase hate and divisions in society. So
we know what it is like to wake up with that fearful
combination of despair and dread, unsure of what the
future brings but sensing that it is going to be bad.
Despite all the manifest differences between the U.S. and
India, we can provide you with some insights into what
may be ahead.

First, expect to watch in bemusement as leaders from

across the world, as well as other public gures and
commentators, do a quick about-turn from their earlier
positions and discover the many virtues of Trump. All
past sins and transgressions will be forgotten or ignored
as the most unexpected leaders drop their opposition or
criticism. We still have a clear memory of how quickly
President Obama moved to discover a friend and kindred
spirit in Prime Minister Modi; no doubt Modi, along with
most other world leaders, will also nd much to praise
and admire in Trump. Indeed, we can already hear some
of the paeans of praise to his energy, his dynamism, his
transformative zeal, his ability to connect with people
because we have heard all this about our own Prime
Minister from Obama and other leaders.
Expect also that the world will forgiveor at least not
bother too much aboutvarious transgressions of democracy and trampling of human rights inside your
country, as long as external relations (and particularly
business relations) work to their favour. At least from
global leaders and foreign governments, expect very little
solidarity with those inside the U.S. who will be harmed
or suppressed or victimised by the policies of the new
administration in unfair and unjust ways.
Do not be too surprised when, inside your country, all
sorts of people from unlikely quarters agree to work with
the new administration and even start jockeying for power and position within it. Do not be disappointed when
they and others simply ignore evidence of unpleasant
things going on and focus instead on looking on the
bright side of what positive changes can be achieved.
ATTACKS ON INSTITUTIONS

Prepare for a histrionic government, one that can master

the art of symbolic actions without real content and use

124

Expect also that the world will forgiveor at least not bother
too much aboutvarious transgressions of democracy and
trampling of human rights inside your country, as long as
external relations work to their favour.
various forms of media to suggest that it is doing all kinds
of great things even when the opposite is true. Expect a
new apogee in doublespeak, which so confuses the public
that they celebrate measures that contribute to their own
impoverishment. Anticipate a weird new personality cult
that will be developed around this unexpected leader,
fuelled by both the aggressive use of social media and the
caving in of the mainstream media.
Expect a government that will be unconstrained by
the fact that only a minority of voters in the country voted
for Trump. (In India, less than one-third of the electorate
voted for the BJP; they still ended up with an absolute
majority in the Lok Sabha because of the electoral system.) Instead, be ready for a condent all-out attack on
various institutions: by replacing their heads with those
seen to be more amenable, by undermining others and
attacking their legitimacy, and by distorting their purposes and methods of functioning. In your case, Trump
and the Republicans are entitled to choose judges of the
Supreme Court; in our case, Modi and his party have
simply delayed the official ratication of judges nominated by the judiciary until they can force in more of their
own sympathisers.
Next, expect growing controls on the media in direct
and indirect ways. Do not be surprised when major mainstream media outlets become more prone to self-censorship and are unwilling to give too much time and space to
dissenting views or perspectives, and eventually reduce
news coverage of many developments that may be awkward for the administration. Understand that smaller
independent media will face both nancial and physical
attacks. Be ready to deal with various kinds of harassment and intimidation of anyone with different opinions
from those now emboldened by their new proximity to
power, ranging from Internet and social media trolling to
actual physical threats. Expect those in charge of controlling such behaviour to be quietly indulgent of it and
express only subtle and tangential disapproval in public.
DISDAIN FOR HUMAN RIGHTS

Expect a focus on human rights to become passe, something no longer espoused openly by people who matter
and met with bored disinterest and even disdain by
officialdom. Expect active suppression of all kinds of
dissent, including by starving civil society groups of
funds, as well as by embroiling them in expensive and
time-consuming responses to legal and official action
against them. Prepare to deal with a slew of offensive
actions against civil society activists and human rights

campaigners. Expect a clampdown on those who ght for

the rights and justice of marginalised people, and prepare to watch as theyand youare demonised by a
hostile media. Especially be aware that nationalism and
patriotism are going to become the favoured sticks with
which to beat any opposition and that the ght against
terrorism, which will be suspected to lurk in every corner,
will be used to justify major attacks on democratic practice as you have known it.
But do not expect any controls or constraints at all on
the right-wing crazies who will be emboldened by the
new dispensation. Instead, expect to have to deal with the
dogs let loose on the ground yourself, in the form of
gender-based, racist, ethnic, religious, political and other
hate crimes, as well as threats and violence faced by
women, minorities, immigrants and other groups whom
it will be all right to discriminate against once more.
Be prepared for a sharp increase in anti-intellectualism and much more vitriol in public discourse, not necessarily in the top echelons of government that will
suddenly appear to be more civilised than before, but in
society in general. Brace yourself for a real coarsening of
language, of expressions of prejudice and usages that
were earlier considered to be unacceptable becoming
more mainstream and openly used. Realise that facts and
reasoned arguments will give way to a cacophony that
breeds unthinking and irrational hysteria.
Expect unwelcome changes in the way that justice is
administered and delivered, with police and security
forces being encouraged to be more openly aggressive
and unafraid of undemocratic behaviour in the name of
law and order and national security, and courts becoming less sympathetic to their victims. Be aware that
the ultimate leader, your new President, is likely to follow
Modis example in maintaining a studied public silence
on such matters (despite excessive garrulity in general) or
at best to mouth a few general prepared platitudes after
much delay.
But despite all this negativity, know that there will
also be a remarkable persistence of democratic and progressive tendencies within your society, examples of extraordinary courage and resilience on the part of
individuals and groups. Do not be afraid: fear is what the
newly powerful groups want to instil in you, but like all
bullies, they retreat in the face of determined and unied
opposition.
Bear in mind that their bluster gets louder as their
fragility increases. And remind yourselfas we do every
daythat this, too, shall pass.

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C OVER STO R Y

Deadly disruption
The chaos following the move to remove notes from circulation
exposes the countrys lack of preparedness in the bid to shift to a
cashless economy. B Y SESHADRI KUMAR
WAS THE MOVE TO TAKE THE RS.500 AND
Rs.1,000 notes out of circulation and replace them with
new notes carefully considered in light of the existing
infrastructure? Are there any alternatives?
The decision to remove Rs.500 and Rs.1,000 notes
has left most Indians in the lurch because 86 per cent of
all the currency printed by the government was in the
form of Rs.500 and Rs.1,000 notes (by value). According
to the annual report of the Reserve Bank of India (RBI)
dated August 29, 2016, as of March 2016 the currency
notes in circulation had a total value of Rs.16.42 lakh
crore. Of these, 86.4 per cent, or Rs.14.18 lakh crore, was
in Rs.500 and Rs.1,000 notes. This was the amount
sucked out of the system from November 8 midnight. It
was estimated that of this amount, about 25 per cent, or
Rs.3.5 lakh crore, was black, meaning that people possessing it would not deposit it in the bank for fear of
attracting huge penalties or jail time. That would mean
that the amount of money in circulation that would now
need to be deposited in banks and exchanged for new
notes is approximately Rs.10.64 lakh crore. This is to be
done entirely through bank branches and ATMs.
In press interactions since the demonetisation move
was taken, Finance Minister Arun Jaitley informed the
people that this move was part of a larger plan to move to
a cashless economy and urged them to start using electronic banking, mobile payment, and credit and debit

Banking density

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DECEMBER 9, 2016

cards. The attempts by people to exchange their money

for new, usable notes hit another roadblock as ATMs
needed to be recalibrated to accept the new notes, a
process Jaitley estimated will need another three weeks.
In an interaction, Prime Minister Narendra Modi informed the nation that he expected the hardship to continue until December 30 at the latest.
But is this realistic? Are the two major legs on which
the demonetisation scheme stands, viz., for citizens to
deposit old notes in banks and withdraw their money
through bank account or ATM withdrawals, or the transition to a cashless economy for 50 days, relying only on
ATMs, bank branches, smartphones, credit and debit
cards, realistic at this time? What percentage of Indians
actually have access to these options?
Data from the Global Financial Inclusion report prepared by the World Bank show that while things are
improving, they are nowhere near where they need to be.
For instance, the percentage of people aged 15 years
or above who had a bank account rose from 35 per cent in
2011 to 53 per cent in 2014.
The number of ATMs per 100,000 Indians, on average, was around 18. This compares unfavourably with
other countries such as South Africa (66), Brazil (129),
and Russia (184).
Clearly, India is a lot more unprepared to deal with a
situation where 86 per cent of the cash vanishes overnight than any of these nations.
Credit and debit card usage does not fare much better
either. The report says that in 2014, only 11 per cent of
Indians aged 15 years or above made a payment using a
debit card, and only 3.4 per cent used a credit card, only
2.2 per cent used a mobile phone to make payments.
Further, it says that in 2014, only 6.4 per cent borrowed
from a nancial institution, whereas 12.6 per cent borrowed from a private lender; 6.6 per cent borrowed from
a store by buying on credit; 5.4 per cent borrowed from
an employer; and 32.3 per cent borrowed from family or
friends. The Indian economy is, therefore, dominated by
cash and unaccounted transactions and most people are
quite unfamiliar with electronic means of payment and
withdrawal. Only 20 per cent received their wages
through a bank account. Fewer than 0.2 per cent of

128

Indians used a mobile phone to pay utility bills; just over

4 per cent of all citizens used a bank account for business
purposes; just under 4 per cent of Indians used a bank
account to receive government transfers; and only 6.7 per
cent used cheques to make payments.
BANKING EXCLUSION

What is very clear from these gures is that a large

majority of Indians are not even in the formal banking/

nancial net, let alone specialised forms of it such as

Internet banking and mobile banking using smartphones. Further, it should be kept in mind that these
gures, dismal as they are, do not reect the true desperation of the current situation because they are average
gures for India and do not reect the urban/rural
divide.
The Reserve Bank of Indias Report of the Committee on Medium-Term Path on Financial Inclusion, dated December 28, 2015, shows that the bank branch
density in rural areas is less than half of what it is in urban
areas. Rural India is largely cash-driven. One reason for
this is that agricultural income is exempt from income
tax, and a lot of transactions are done with cash alone.
This is not black money. So the irony of the situation is
that bank branches and ATMs are far fewer in rural
areas, but the percentage of wealth that is held in cash in
rural India is much greater than in urban India, where
people use banks to store their money. Now these rural
Indians will have to contend with getting their larger
stores of money in and out of banks, with little experience
in doing so, and this during a liquidity crisis.
The Jan Dhan Yojana created a lot of new bank
accounts in India but a lot of them are zero-balance
accounts and people have not yet taken to using them.
It is clear that rural India was woefully unprepared
for the shock of the withdrawal of 86 per cent of liquid
currency on November 8 and is unlikely to recover from
this situation any time soon.
One of the main thrusts of the economic policy of this
government is the JAM troika, standing for the Jan Dhan
Yojana, Aadhaar unique identication, and mobile. The
RBIs Economic Survey of India 2015-2016 discusses, in
Chapter 3, the JAM approach in detail and presents a
JAM preparedness index, which measures how ready
India is for a world in which benets will be transmitted
electronically to bank accounts, veried by Aadhaar
cards and accessed by mobile phonesin other words a
cashless economy of the kind that people have been
forced to confront themselves today.
A JAM preparedness index of 100 per cent indicates
full preparation while 0 per cent indicates complete unpreparedness. Maps 1 and 2 show that India, especially
rural India, neither is ready for a JAM world nor was
ready for the world of November 9.
This is going to lead to unbelievable suffering in the
next 50 days. People are going to starve and diemany
already have; people are going to continue to be refused
medical treatment for life-threatening illnesses and
pregnancies for lack of liquid cash; and farmers are going
to suffer as they cannot sell their produce or buy seeds.
Business is going to come to a standstill in both rural and
urban India. The worst effects of this measure will be felt
by those with the least capacity to absorb these shocks.
Seshadri Kumar is an R&D Chemical Engineer with a
B.Tech from IIT Bombay and an M.S. and a PhD from the
University of Utah, U.S. He writes regularly on political,
social, economic, and cultural affairs at http://
www.leftbrainwave.com.

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L ETTE R S
Encounter deaths

THE killing of eight SIMI undertrial prisoners who were lodged in the high security Central Jail in Bhopal raises more
questions than answers (Cover Story,
November 25). It reads like a script for a
Bollywood thriller. The jail officials explanation that the prisoners used toothbrushes, aprons, spoons and bed sheets
to escape from the prison cell and then to
scale the 35-foot prison wall sounds ridiculous. It is baffling that all the CCTV
cameras in the jail premises were inoperative at the time of the escape and that
none of the guards in the watchtower saw
the prisoners escaping. It is tragic that all
the prisoners were killed, though none of
them were carrying rearms, as eyewitnesses testied. An impartial inquiry by a
sitting Supreme Court judge will reveal
the truth behind this grisly episode.
Meanwhile, we can see that a police raj is
spreading its tentacles rapidly in Maharashtra, Madhya Pradesh, Gujarat,
Jharkhand and Chhattisgarh.
N.C. SREEDHARAN
KANNUR, KERALA

Tata crisis
THE article on the crisis in the Tata group
(A coup in the House of Tatas, November 25) shed light on the murky complexities, the managerial inadequacies, the
traditional traps, the organisational manoeuvres, the invisible resistance to
change, the wars for functional supremacy, and the hidden hands at the powerlevers in the organisation. Cyrus Mistry,
the former chairman of Tata Sons, is accused of trying to prop up the bottom line
by shedding unproductive ventures,
though it is not perceived as the Tatas
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DECEMBER 9, 2016

traditional way of doing business. It is

forgotten that the decision-making right
is with Mistry as per the norms of corporate governance. Functional authority
and organisational decisions are a CEOs
right and he cannot work properly under
the constant threat of interference from
the family.

kept in the dark over the goings-on in all

the companies in the group. It is therefore imperative that a thorough investigation is carried out by outside experts
on allthe questions Mistry raised in his
ve-page mail so that the functioning and
governance of the group known for honesty and integrity do not suffer.

B. RAJASEKARAN
BENGALURU

K.R. SRINIVASAN,
SECUNDERABAD, TELANGANA

IT is indeed the rst time in the Tata

groups history that dirty linen has been
washed in public. Though the blame
game will continue, the least the board
could have done was to have given Mistry
a fair chance to present his case before
deciding his fate. After all, he was appointed by Ratan Tata himself, and if
nothing else, it is a clear case of ineffective succession planning. Though Mistry
was officially at the helm, it seems Ratan
Tata was still controlling the group from

behind the scenes. It is very difficult to let

go of power, more so when one has created and built an institution like the Tata
group through blood and sweat. Ideally,
after an initial period of hand-holding,
Ratan Tata should have given complete
control to Mistry. Now, considering how
Mistry has been treated, it will be vey
difficult to nd a successor. There is no
doubt that this episode has dented the
Tata groups reputation, which has been
blemishless so far, barring the Radia
tapes controversy.
BAL GOVIND
NOIDA, UTTAR PRADESH

THE allegations Mistry levelled against

Ratan Tata and the Tata Board are serious in nature and cannot be brushed under the carpet as the emotional outburst
of a disgruntled individual sacked by the
board. He must be given a chance to
defend himself and prove his integrity to
the board. Mistrys removal has not only
shocked the corporate world but also the
stakeholders, who believe that they were
130

Uniform civil code

LAST year, the Supreme Court asked the
government to consider the idea of introducing a uniform civil code (Dubious
moves, November 11).Indian Muslim
women are speaking up against the practice of triple talaq and the injustices inherent in Muslim personal law. When
members of the Indian Muslim community ask for justice, it is erroneous on the
part of the leaders of the community to
dismiss their demands as misplaced or
accuse them of being the lackeys of the
Rashtriya Swayamsewak Sangh. Such an
approach aligns the Indian Muslim leadership against justice for the members of
its own community. Laws that originated
1,400 or 2,000 years ago for a group of
people may not be just in todays changed
context. Regardless of ones faith, the
law should be the same for all. Indian
Muslims are a small part of the larger
Indian state in which many communities
are ghting for justice and against historical inequities.
H.N. RAMAKRISHNA
BENGALURU

Death of a child
THE death of Aradhana Samdariya, a
Class VIII girl in Hyderabad, after a strenuous fast lasting 68 days can only be
termed as a case of brutal murder
(Child rights and faith, November 11).
What is more pathetic is that the parents
were asked not to mourn her death but
celebrate it. It is a strange to justify the
death on religious grounds when Jainism
stresses that life is precious. No scripture recommends such a severe penance. Such practices should be
condemned and prevented from happening again.
A.J. RANGARAJAN
CHENNAI
ANNOUNCEMENT
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