The first anniversary on Wednesday of India’s demonetisation drive sparked a political battle, with the government and the opposition engaging in fierce slanging matches over the scheme’s ramifications.
Rhetoric about the drive, which was announced by prime minister Narendra Modi on November 8 last year, seeped into campaign speeches in Himachal Pradesh and Gujarat ahead of elections in those states on Thursday and in early December respectively. Eighteen opposition parties also came together to hold protests in the capital, New Delhi, and other Indian cities, calling November 8 a “black day” that hurt India’s economy and its citizens.
In a shock move a year ago, Mr Modi announced that 500-rupee and 1,000-rupee notes would cease to be legal tender. Indians were given less than two months to deposit their high value currency in banks.
The tactic was intended, Mr Modi said at the time, to punish tax evaders who held large, undeclared stocks of currency known as “black money”. The guilty would be unable to deposit such money into their accounts without acknowledging that they hadn’t paid taxes on it; after the two-month deadline, the currency would suddenly be worthless.
There is little evidence to suggest the drive succeeded at achieving this objective, but Mr Modi and his ministers continue to defend it. Speaking at an election rally in the Himachal Pradesh town of Kullu on Sunday, the prime minister said: “A few people who faced the heat of demonetisation are still complaining and are planning to observe 8 November as a ‘Black Day’. [They] cannot scare me by burning my effigies.”
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Mr Modi’s ministers took to both the media and Twitter on Wednesday, claiming that demonetisation had yielded numerous benefits. Defence minister Nirmala Sitharaman said that by restricting the flow of cash “terrorism has been badly hit”.
Goa chief minister Manohar Parrikar, a member of Mr Modi's Bharatiya Janata Party (BJP), meanwhile said that demonetisation had brought about an “increase in financial inclusion & formalisation of our economy”. Cashless transactions, he implied, brought the poor into the banking network and turned the “informal”, difficult-to-track businesses into formal ones.
But those protesting against demonetisation were having none of it.
In rallies across India, Congress and other opposition parties, including the Communist Party of India (Marxist) and the Aam Aadmi Party, insisted that demonetisation had achieved none of its stated goals and had additionally wrecked the economy.
"Desh bhugat raha hai," placards proclaimed, "India is suffering". Political workers protested outside the Reserve Bank of India's office in Delhi in the morning, many wearing black. At 8pm — the precise hour when Mr Modi made his announcement last year — opposition parties held candlelight processions.
Rahul Gandhi, the vice-president of Congress, led the evening procession in Surat, a hub of diamond processing and textile manufacturing in Gujarat, Mr Modi's home state. Surat was hit particularly hard by demonetisation and then by the subsequent imposition of a new sales tax regime.
Last year, Surat produced 40 million metres of synthetic fabric daily. Now, production is down to 25 million metres. Thousands of workers who had been employed in the town’s small looms lost their jobs.
The situation in Surat mirrors that across India. In a Financial Times opinion piece published on Tuesday, Mr Gandhi quoted figures from the Centre for Monitoring Indian Economy think tank to point out that 1.5 million people had lost their jobs in the first four months of 2017 due to demonetisation.
Calling demonetisation a “tragedy”, Mr Gandhi wrote: “Demonetisation has wiped out 2 per cent of India’s gross domestic product, destroyed the informal labour sector and has wiped out many small and medium businesses.”
The macroeconomic effects of demonetisation are also reminders of the stories of individual human suffering reported in the last two months of last year. At least 80 people died standing in the long queues that formed outside ATMs, while at least one baby died because the hospital wouldn’t accept its mother's demonetised notes.
These tales of suffering are all the more worse given that the goal of eradicating black money does not seem to have been achieved. In its annual report, India's central bank stated that 15.28 trillion rupees worth of demonetised banknotes — out of a total circulating value of 15.44 trillion rupees — had come back into bank accounts.
These figures are at odds with those put forward by the Indian government when it announced the demonetisation drive. It predicted that a third of the 15.44 trillion rupees — which was thought to be held as black money — should have remained outside the banking system.
The results of the demonetisation scheme showed that the government had been mistaken in its assumptions, said C Rammanohar Reddy, an economist and the author of a book on demonetisation.
In reality, Mr Reddy told The National, most unaccounted wealth was held in the form of land or other physical goods, rather than as cash. "And what was held as cash was not going to be destroyed or revealed by demonetisation," he said, because the people who were evading taxes on a large scale were powerful enough to launder the money "and recycle it in different ways into the banking system".
Even Manmohan Singh, the former Congress prime minister and a distinguished economist, abandoned his usual reserve to speak out against demonetisation on Tuesday.
Mr Singh had warned last year — correctly, as it turned out — that India stood to lose 2 per cent of its GDP because of demonetisation.
Small businesses and citizens had been stripped of their wealth, Mr Singh told an audience of traders in Gujarat.
“Demonetisation was organised loot and plunder.”
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
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6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
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Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
Temple numbers
Expected completion: 2022
Height: 24 meters
Ground floor banquet hall: 370 square metres to accommodate about 750 people
Ground floor multipurpose hall: 92 square metres for up to 200 people
First floor main Prayer Hall: 465 square metres to hold 1,500 people at a time
First floor terrace areas: 2,30 square metres
Temple will be spread over 6,900 square metres
Structure includes two basements, ground and first floor
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Explainer: Tanween Design Programme
Non-profit arts studio Tashkeel launched this annual initiative with the intention of supporting budding designers in the UAE. This year, three talents were chosen from hundreds of applicants to be a part of the sixth creative development programme. These are architect Abdulla Al Mulla, interior designer Lana El Samman and graphic designer Yara Habib.
The trio have been guided by experts from the industry over the course of nine months, as they developed their own products that merge their unique styles with traditional elements of Emirati design. This includes laboratory sessions, experimental and collaborative practice, investigation of new business models and evaluation.
It is led by British contemporary design project specialist Helen Voce and mentor Kevin Badni, and offers participants access to experts from across the world, including the likes of UK designer Gareth Neal and multidisciplinary designer and entrepreneur, Sheikh Salem Al Qassimi.
The final pieces are being revealed in a worldwide limited-edition release on the first day of Downtown Designs at Dubai Design Week 2019. Tashkeel will be at stand E31 at the exhibition.
Lisa Ball-Lechgar, deputy director of Tashkeel, said: “The diversity and calibre of the applicants this year … is reflective of the dynamic change that the UAE art and design industry is witnessing, with young creators resolute in making their bold design ideas a reality.”
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Our legal columnist
Name: Yousef Al Bahar
Advocate at Al Bahar & Associate Advocates and Legal Consultants, established in 1994
Education: Mr Al Bahar was born in 1979 and graduated in 2008 from the Judicial Institute. He took after his father, who was one of the first Emirati lawyers
