India needed this economic shake up. Narendra Modi, in his capacity as the Prime Minister, had taken what the Indian overseas diaspora considers a brave step when on 8 November, he brought about the demonetisation of Rs 1000 and of Rs 500 currency notes. Never before has a country with a population of such scale and an economy of such proportion wiped out 86% of its currency in circulation on such short notice. What the Indian government had performed was clearly a socio-economic spectacle – a much sought after fodder to feed the voracious social class questioning inequality and injustice in the country’s landscape.
A significant and effective strategy of brand Modi has been his efforts to extend an olive branch as equally as his efforts to forge newer connections. In the larger perspective, the Non Resident Indians (NRIs) were suddenly under the direct purview and inclusion of the Indian government and especially that of a Prime Minister, for the very first time with Modi. From New York to London and Dubai to Melbourne, Narendra Modi’s message to the Indian diaspora was clear – inclusivity and integration with the rest of mainland India when it comes to the country’s decision making. This continues to be one his strong pillars, a key to attain global mileage through his ability to rally magnificent crowds even outside of India.
The televised broadcast on November 8, 2016 equally surprised NRIs as it did to the mainland Indians; however calmness generally prevailed amidst the diaspora since everyone were sure they were part of the plan. While the deadline for exchanging the old notes was capped at December 30, 2016, NRIs awaited for directions to get on with the process. Plaudits turned into panic as weeks passed nearing December 30, and there still seemed to be no clarity on how the NRIs could proceed on with converting their invalidated currency notes locally. The lack of communication from Modi’s government, which always remained vocal for the diaspora, was indeed baffling.
It was only after the deadline and fresh into the New Year that the first communication emerged of the extension until June 30, 2017. If NRIs are to travel to India within the window period to exchange their old currency, it may be tricky under the current FEMA guidelines considering the cap for bringing in Indian currency from abroad is set at Rs 25,000 per person, and it would be economically unviable to spend nearly Rs 70,000 on travel just to convert it. Expecting millions of Indians to return just to drop back dead notes is inconvenient and ineffective. Therefore, a localised solution through any of the Indian banks abroad would be a viable alternative.
Considering India is the second largest cash economy in the world after China, the demonetisation will cause inconvenience in the interim period – what Modi did had to be done. Could the government have better communicated and assured the NRIs? Perhaps.
Having visited China regularly to meet clients since 1991, one can say that the country which was in worse shape than India then, has been able to achieve a great leap forward within 25 years to become the second largest economy in the world. One of course recognises that unlike China, India is a democracy and therefore the government has to overcome many obstacles to bring about development. The next step forward for India would be to ensure a complete control of its economy by minimising its dependency on cash. This will prevent the reappearance of the second parallel economy, streamline India’s market, and save high minting costs. In countries such as Sweden and Norway, economies already operate with less than 5% in cash, while Australia’s Citibank had very recently announced to stop accepting paper currency altogether. Once the demonetisation programme is complete in India, the Prime Minister should draw inspiration from these nations and work on an outline for a progressive plan for the country to reduce its dependency on cash by the next decade, The government appears to have already begun exploring this.
Sarosh Zaiwalla is founder and senior partner Zaiwalla & Co based in London
The views expressed are personal