People and patience, post demonetization

(The piece originally appeared in The Hindu, on 2nd January, 2017)

Patience is hardly an attribute that is associated with the Indian psyche, particularly of the male variety. Instances of road rage at the slightest pretext leading to death are far too common. A flock is way more common a formation than a queue. Even if a queue is to be formed, violators run amok in total disregard for the conscientious and often the geriatric in the waiting. The urban phenomenon of delirious honking is yet another manifestation of patience running wafer thin, perennially. The recent past, however, has thrown up a remarkable exception, namely, general attitude in demonetized India.

As we near the two-month mark, a consensus seems to be emerging among economists, from either side of the ideological spectrum, that demonetization will lead to a significantly lower real GDP growth in the transition phase than expected but will have no effect in the long run. Estimates from academics and financial analysts suggest that demonetization may lead to a decrease in annual real GDP growth of anything between 1 and 2 percentage points than expected. One of the many crucial assumptions of course is that the national accounting norm remains the same. Irrespective of what the exact number is, evidences suggest that demonetization has left behind a trail of economic consequences in terms of job loss and diminished economic activity, particularly in the informal sector and will continue to do so in the near future. Besides the pure economic cost, the psychological cost of having to wait in serpentine queues for a couple of thousand rupees is enormous. And queueing up may not yield rewards anyway as ATMs continue to run dry, especially in the semi-urban and rural areas. Initial reports suggested that the queues in the second month has been significantly shorter than the first. Now it seems the shortened queues have a different explanation - people have a fair sense of how long cash will last, if at all, and rational that they are, do not wait if they think their turn will not come. And all this for money that is rightfully theirs and this makes demonetization even more exasperating and psychologically costly.

For the pain that demonetization has inflicted, the aam aadmi has shown an extraordinary restraint and patience. There has been no major threat to public order despite considerable hardship, there has been no major protest, let alone violent ones, against demonetization. This is quite unlike other instances of sudden and unexpected economic downturn across the world – the Argentinian riots in 1989 has largely been attributed to sustained hyperinflation in their economy. The 1991 structural adjustments driven economic reforms in India led to considerable labor unrest in the mid 1990s. Arab Spring, which promised to change the political landscape in the middle east earlier in the decade, has partly been attributed to the widespread unemployment and economic hardship of the Arab youth. Further, research suggests that negative income shock across the world leads to greater conflict – in fact even scarcity of rainfall, which is entirely natural and thus exogenous, has been found to have a strong effect on violence and conflict in India.  It is remarkable that the overall sentiment post demonetization continues to be largely positive, despite its obvious immediate economic impact, so much so that there is hardly any wind in the oppositions’ sail. The moot question is why.  

Some have argued that the idea of sacrifice is seen as the hallmark of Indian civilization and the current dispensation has effectively appealed to it. It has given an impression that any act which is critical of demonetization is in effect a violation of the spirit of sacrifice, which is an elemental part of our history and culture. But this is only part true. While sacrifice in itself provides a moral tone, sacrifice for a greater common good offers the temporal foundation. And that temporal foundation was initially to eliminate black money and is now to engender a cashless society. But that is not all either. The government and its social media allies have gone a step further to situate demonetization on the tried and tested plank of nationalism. So a dissent to demonetization is being treated as a dissent to the idea of Indian nation state. So much so that the Indian military, which till now had been the most luminous emblem in the pantheon of nationalism, has been replaced, however temporarily, by the Indian bank teller. Given the automatic tellers have been rendered substantially ineffective, the hardworking, resilient and ever alert human tellers have been accorded the status of the jawan. An unfortunate death in the ranks of bank personnel has even been conveniently co-opted into the narrative of martyrdom.

It is true that the cashless, opinion making, upper-middle India has not faced the brunt of demonetization. But even the section of the people which has been directly hit as a result of the policy, has exhibited an impressive composure, often found wanting on other occasions. Understanding how human behavior can be changed is a fascinating academic discipline. Much advances have been made here in the recent past, but none as spectacular as the effect of a generous dose of nationalism, however devoid that idea may be of the very people who constitute the nation.