Thread by @aayeff1

This will be a little long. So I seek indulgence from the readers.
I am harping on demonetisation because, I believe India's problems started on 8th Nov 2016 at 8 pm.
So its imprnt to understand the context fully, esp the main characters who played a role in the whole thing. 1/n

I am not suggesting that demonetisation is the only problem created. There are ors. But it started with noteban. A pilot run to test the waters. If we understand how India lost & Modi gained immensely, we'll undestand how he became even more arrogant in his subsequent steps. 2/n

The 8th Nov 2016 announcement was a shock to Indians. I remember it was the same day Trump won the elections. Many didn't know how to react. While common people and even economists were studying the issue, many journalists started playing a very imp cheerleading role. They.. 3/n

..admitted that the impact of demonetisation could be very positive or could badly hit the economy. Thet also admitted it was a gamble. Nevertheless, they praised the "boldness" of a step they themselves seriously doubted. Almost immediately after the announcement prominent...4/n

..opposition leaders in particular Mamata, Rahul, MMS etc went public with their criticism.
There was no preparedness, the ATMs needed to be changed, notes were running short, they printed notes hurriedly, normal bank work collapsed to attend to collecting old notes.
In the..5/n

..meanwhile Modi & Govt went about conveying various benefits of demonetisatn such as
1. Cancelling around Rs 3L Cr which they expected to be unaccounted & hence wont return & will enable Govt to reduce its liability.
2. Striking at counterfeit notes
3. Making the economy.. 6/n

..cashless (later they corrected it to less cash). Immly befr Noteban the cash in circulation was around 16 odd lakhs.
4. Strangulating terror fund flow
5. Paving the way for more tax compliance and tax collection.
The underlying message by Modi constantly to the masses.. 7/n

..was that I am doing it for you all. This step will bring out the black money and hurt the filthy rich tax offenders. He made it clear that they will all lose.
Modi's message to the masses against the affluent (often seen as crooked tax evaders) was well received as the... 8/n

.. masses found it easy to attribute the reason for their woes to these tax offenders who will lose very big. The masses responded positively expecting vicarious pleasure in seeing all the rich folk on the streets like them.
This story went on for over a year and a half... 9/n

In the meanwhile, the media, journalists, some prominent businessmen and celebrities started aligning with the perceived winner of demonetisation, namely Modi.
Instead of asking experts about Noteban, journos clearly wanting to send home a political message in support of... 10/n

.. noteban spent enormous amt of time, pushing mikes towards villager, workers, white collar employees standing in queue to prove how correct the noteban decision was!
Some journalists even went to the point of dismissing the economic outcome of demonetisation so long as.. 11/n

.. the people supported it, it was popular & hence it was the right thing to do. Often, there was an air of admiration attributed to Modi for coming up with such a smart "masterstroke".
It didnt matter to the journalists whthr it was economically sound or whether it would.. 12/n

..be first step towards an economic disaster.
There were others more learned who spoke against demonetisation. Most notably, Amartya Sen, Raghuram Rajan (he confirmed later neither he nor RBI Board wanted demonetisation), Kaushik Basu, Paul Krugman.
So when all these folks..13/n

.. were opposing the idea of demonetisation, how come their voices were not heard.
Well this is where the propaganda machinery of the IT cell ably supported by pliable media & cheerleading journalists came in. The critics of Noteban were systematically targeted. Modi even.. 14/n

..mocked Nobel laureates & ors saying proudly that demonetisation will be studied by several economists in the years to come. His words were prophetic but not for the reasons he presumed. There were others like Prof Arun Kumar, Meera Sanyal (the gentle soul we miss so much)..15/n

.. who articulated thr reasons so lucidly agnst demonetisn.
Actually, it's no rocket science. Even a FY BCom student wld tell u that sucking out 86% of the currency from a economy is unthinkable. This was explained by developmnt economist Jean Dreze. 16/n
m.economictimes.com/opinion/interv…

In the end, none of the expected outcomes were achieved. But a huge cost has to be paid by way of the
1. MSME sector being hit
2. Daily wage earners being hit
3. 120 people dying in bank lines
4. Cost of printing new notes and ATMs
5. Almost all cash was returned even the.. 17/n

..even the amount of currency which was said to be in black.
But one important fact came out through the demonetisation exercise which Modi understood and latched on to very well. That was :
So long as the pple were supporting him, and he had the media he could do anything!..18/n

Now, this is the most important fact that has enabled Modi to take the various steps which succeeded demonetisation. Incl ignoring the opposition, disregarding experts, ignoring violence, lynchings rioting etc. Ignoring the opposition to EVMs.
So in short demonetisation..19/n

.. harmed the country economy. This is seen from the ICRA report which indicates that the investment crashed by 60% in the FY of demonetisation i.e.2016-17. This is contained in the article by Puja Mehra in The Hindu...20/n
thehindu.com/opinion/op-ed/…

While demonetisation harmed the economy both in the short term & long term with no real benefit but huge cost, in the short term it seemed to help Modi. Thus Modi got emboldened thinking nothing can touch him. That is his Achilles heel.
We will have to wait & see how long..21/n

I know its become long. Sorry didnt actually plan it this way.
There are two other references which may be useful. They are :
m.economictimes.com/news/economy/p…

wap.business-standard.com/article/econom…