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IPA Special

SC’s Demonetisation Verdict Fails To Consider Human Cost Of Ill-Fated Decision

By K Raveendran

 

The Supreme Court has by a 4-1 majority ruled that the demonetisation decision by the Modi government was technically valid, but apart from the concerns raised in the dissenting voice recorded by Justice Nagarathna, the verdict has failed to acknowledge the huge human cost of the draconian decision.

After declaring during the hearing of the case that the court will not be a ‘silent spectator and sit quietly with folded hands only because it was an economic policy decision’, it has refused to consider whether the heavy cost the nation had to pay in terms of both human suffering as well as economic losses was worth the results. In fact, the apex court has disappointed by stating it was not relevant whether the objectives were achieved. This is particularly so as the court has found that the reasonable nexus with the objectives of eradicating black money, terror funding etc.  If it does not matter whether the objectives were achieved or not, what is the big deal in proclaiming that the objectives were all fine?

The economy is estimated to have lost 1.5 per cent of GDP in terms of growth, which has been computed as loss of Rs 2.25 lakh crore a year. Some 15 crore daily wage earners lost livelihood as thousands of SMEs were shut. Over a hundred people died while waiting in queues to exchange their hard-earned money, while thousands had to pay with their lives in the aftermath of the crisis brought about by shortage of cash caused by the ‘orphaned’ decision.

An in terms of fighting black money, demonetisation drew a complete blank. In fact, the window provided by demonetisation offered an opportunity to regularise tonnes of black money. There was no success in reigning in counterfeiting as well. Compared with pre-demonetisation days, there was an increase of 35 per cent in counterfeit notes detected in the denomination of Rs 100, while there was a noticeable increase of 154.3 per cent in counterfeit notes detected in the denomination of Rs 50 in one year alone.

The big question that remains unanswered is who takes the responsibility for the huge human as well as economic cost, which is real as opposed to the academic interest of whether the Modi government had acted with due consideration of the consequences. If status quo cannot be restored, as reasoned by the court for not raising any challenge to the decision. Prime Minister Modi, who stunned the nation with his bolt from the blue announcement has not claimed any responsibility. In fact, he has never referred to demonetisation ever since it became clear that it was a blunder of Himalayan proportions.

The bench has taken cover under ‘restraint’ on the part of the court in dealing with administrative actions. “There has to be great restraint in matters of economic policy. Court cannot supplant the wisdom of executive with its wisdom,” the bench pointed out while stating that the decision-making process cannot be faulted merely because the proposal emanated from the central government. This is a potentially dangerous position to take and runs counter to the stand taken by court in the past in effective interventions in forcing the government to act in dealing with the human tragedy in the long march back home by migrant labourers and the covid vaccination programme.  These interventions were based on the court’s conviction that its wisdom must prevail when the government shows a lack of it.

But in the course of the hearing, the bench had made many references to the social and economic hardships and distress faced by the common people as a result of the controversial policy decision. The Centre has justified these hardships as part of the nation-building activity, but nation-building cannot be through trial and error, especially when there are safeguards against such impulsive administrative decisions. It is these safeguards that were sidestepped by Modi’s dramatic announcement.

Justice Nagarathna in her dissent held that demonetisation of currency notes was a serious matter and it could not be done by the Centre by merely issuing a gazette notification. She even declared it unlawful on legal grounds and was not quite impressed by the objectives, which any way remained unrealised. She pointed out that the RBI merely approved the government’s decision without applying its independent mind and cited the desire by the Centre as justification for the approval.

While the judgment refers to parliament and the supremacy of people in terms of the rights of the executive to issue administrative decisions, the court’s stand of a strict no-go into the domain of economic policies is not in conformity with the Supreme Court’s recent assertion of its authority for judicial review of executive decisions, although the context was different. With regards to the controversy about Collegium and the appointment of judges, the court had clearly stated that while the legislature had the power to make laws, the judiciary’s power for review was not at all contestable. (IPA Service)

 

 

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