India’s ‘Post-Truth’ Answer to Crisis

The publishers of the Oxford English Dictionary last week made post-truth their new word of the year.

A few days later Arun Jaitley, India’s finance minister, produced one when he declared that a cashless “new normal” was being introduced by the demonetization of Rs500 and Rs1,000 bank notes, and brushed aside the severe currency shortages and mass hardship it has caused over the past two weeks.

There was another onNov. 20 when Suresh Prabhu, the railway minister, tried to obliterate public criticism of a disastrous train crash that killed over 140 people by announcing that “enhanced amount of ex-gratia compensation to the victims of this unfortunate accident: Rs 350,000 in case of death” (about US$5,000 or £4,000.

The Oxford Dictionaries website says that post-truth is an adjective (though it also works as a noun). It defines it as “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”.

All governments of course rule with such announcements that are intended to fudge reality and stem criticism. In Britain, Theresa May’s “hard Brexit” may turn out to be a post-truth if, as some people suspect and many hope, it eventually emerges as a precursor to something softer.

India however goes further than most supposedly open democracies in the way that the government expects public opinion to be easily diverted from objective facts.Narendra Modi, the prime minister, who set the tone for Jaitley and Prabhu on both demonetization and the train crash, excels.

“Mr Modi is a master in evoking the emotional reasoning that is the essence of post-truth – as indeed is Donald Trump. Don’t confuse me with facts, what I feel is the reality”, wrote T.N.Ninan, a veteran columnist and publisher, in his Business Standard newspaper over the weekend.

The “objective fact”, to use the Oxford Dictionaries words, in the train crash is that India has more disastrous railway disasters than maybe any other country, and seems to do little to stop them. Their appalling frequency was underlined by The Times of India headlining this one as the worst “in six years” – not ten or 20 years, just six!

Every time there is a crash, railway ministers rush to the site, as Prabhu and his deputy did, and immediately deal with emotions by announcing large cash handouts to the families of those killed and injured. An inquiry is ordered that leads to broad-brush reports of what happened, but no report of any subsequent action being taken.

It is a test of how much Modi has fulfilled his general election promise of changing the way the government operates to see whether the hand-outs and promises of action remain post-truths this time or not.

The “objective fact” on demonetization is that there has been country-wide disruption of the economy and business, plus widespread personal inconvenience and hardship especially in rural areas, following Modi unexpectedly on the evening of November 8 withdrawing from circulation the Rs500 (about $7.50, £6) and Rs1000 bank notes that accounted for 86 percent of the currency – as I described on this blog on November 14. The last time there was a big withdrawal of high value currency was in 1978, but people were given a week to exchange the notes.

The Reserve Bank of India said today that banks had received Rs5.45 trillion rupees (US$80 billion) in Rs500 and Rs1000 notes by the end of last week out of the $220 billion in circulation. Banks have issued $15 billion in new Rs2000 notes.

Queues of people at ATM and bank – PTI photo Nov 21

The disruption has ranged from farmers’ shortage of money to buy seeds (they can now use the old notes) and families wondering what to do with substantial quantities of cash they routinely keep at home, to people not being able to use old notes to pay for wedding arrangements, doctors’ fees and other routine expenses. Those who got new Rs2000 notes found most shops had not got enough Rs100 notes and smaller currency to give as change.

While the situation has eased in some areas, there are still long queues at closely guarded banks and at ATMs that have to be mechanically reconfigured for new smaller-sized Rs2000 notes that are in short supply. The ATMs also quickly run out of Rs100 notes that everyone wants.

The post-truth came from Jaitley who talked at an Economic Times conference in Delhi on Nov. 19 about just “initial inconvenience,” claiming without any basis in reality that the money queues were now “extremely small.”

His bigger post-truth was that demonetization will drastically reduce India’s massive “parallel economy” which has been running outside the banking system for the past 70 years.

“Shadow or parallel economy had become a way of life. When you have a large chunk of currency outside banking system, the taxation base is narrow and the shadow economy becomes way of life…Demonetization will set a new normal for the economy,” he declared.

Taking 86 percent of the currency out of circulation obviously cuts away the parallel, heavily black, economy. It is also true that many people and businesses are opening bank accounts and switching to credit and debit cards and other forms of e-money. But cash will build up again as new Rs2000 and Rs500 notes come into circulation if for no other reason that corruption is endemic in India and relies on cash.

What the government is not talking about are the corrupt methods that political parties, real estate developers, traders, gangsters, lawyers and many others are using to clear their hordes of old notes without falling foul of official inquiries and tax demands.

Accommodation entries

I have heard that there has been a surge in accountants and bank managers colluding with clients in a system known as ‘accommodation entries’ where false loans, names, book entries and accounts are used to launder large quantities of black money. There are also stories of people in bank queues seeing people carrying suitcases being admitted into a bank while everyone else is kept outside. These and other methods will, reports suggest, involve the beneficiary losing perhaps 25- 40 percent of the notes’ value. Trading is also still taking place using old notes, albeit at a discount.

Despite all this however, there does appear to be widespread support for what Modi and Jaitley are trying to do, even though there is growing criticism and impatience over how it is being done and of insufficient advance preparations. There is also concern that economic growth, and in particular agricultural output, could be hit. Opposition political parties are disrupting parliament in protest.

Modi won the general election 30 months ago partly on the promise of cleaning up the economy and that is why there is a surprising willingness to give him and Jaitley the benefit of the doubt.

The big post-truth questions now are whether Modi will manage to introduce enough further anti-corruption measures to turn all this into Jaitley’s “new normal” reality and, in the shorter term, whether he can make his claim that people’s inconvenience will last no more than 50 days become an objective fact.

John Elliott is Asia Sentinel’s New Delhi correspondent. His blog, Riding the Elephant, can be found at the right side of Asia Sentinel’s homepage.