The Supreme Court’s verdict has supported the 2016 demonetisation move in a majority judgment
The Government must have heaved a sigh of relief over the Supreme Court’s verdict supporting Prime Minister Narendra Modi’s 2016 demonetisation move. The 4-1 majority judgment said it was “not relevant” whether the objective of the ban was met. The apex court seems to have agreed with the Government’s position that it (the court) cannot decide on a case when no tangible relief can be granted. Its counsels maintained that demonetisation was a “well-considered” decision, aimed at checking fake money, terror funding, black money, and tax evasion. “There has to be great restraint in matters of economic policy. [The] court cannot supplant the wisdom of the executive with its wisdom,” Justice BR Gavai said, reading out the order. That’s a judicious remark, underlying the judiciary’s reluctance to tread on the jurisdiction of the executive. In general, it’s a good verdict, primarily because demonetisation—good, bad, or ugly—is something in the past. And the past cannot be rectified. But the Government ought to take the views of the dissenting judge, Justice BV Nagarathna, very seriously. She is critical of the note ban and the way the decision was arrived at. Her objections are very pertinent. Calling the demonetisation decision “an exercise of power contrary to law and unlawful,” she said that the entire exercise was carried out in 24 hours. She was also unhappy with the role of the Reserve Bank of India, wondering whether the central bank had even visualised problems associated with the decision. The RBI used phrases like “as desired by the Central Government.” This, Justice Nagarathna said, suggests that there was “no independent application of mind by the RBI.”
She has hit the nail on the head, for the RBI looked at deer in the headlights at that time. It was clueless and feckless, having little idea about the monetisation that was urgently needed. The new notes were not getting printed fast enough; then there was a problem with their size, which was not compatible with that of the ATMs. For weeks there were long queues outside ATMs and banks; businesses were disrupted. The majority judgment of the Supreme Court may have come in support of the Government, but it is undeniable that this was not the best decision that it has taken in the last eight and a half years. As for the objectives of demonetisation, there has been a decline in the killings related to terrorism since 2014, according to the South Asia Terrorism Portal, but it is difficult to ascertain any causality between demonetisation and the decline. Similarly, it is difficult to say if the move did check black money or corruption. Its adverse effects on the economy, however, are well-known. The growth rate, for instance, declined for two years after the decision. The lesson that not just the Government but the entire political class must learn from demonetisation is that the best decisions are those that are made after wide consultation.