Environmental Take-aways from Demonetisation

Prime Minister Modi’s demonetization has been roundly criticized on various counts by politicians, economists, social organizations and general public. The abrupt ban on the two high value currency denominations of Rs. 500 and Rs. 1000 caught the people by surprise and many of those who had stashed away sizable hoards of them were naturally the first to raise an outcry in opposition. True, the proverbial common man, the aam aadmi, was put to a lot of inconvenience, having had to stand in queues for hours in front of banks or ATMs for cash, sometimes repeating the same process on succeeding days. They had the best reasons for criticizing Modi’s move; but it was not they who, though suffering its consequences, criticized it as most of them realized it was a good way to catch the corrupt and the unscrupulous black money barons.

That the political opposition criticized the measure was understandable but many intellectuals, especially the economists – well known or not so well known – also found it amiss. The former economist Prime Minister Dr Manmohan Singh called it a “monumental disaster” and said that the GDP would take a hit of 2 basis points. Others said that the poor, daily wagers and farmers would be hit rendering them jobless as most of their transactions were in cash. And yet it would, they said, hardly make any dent on those who had the dirty money.

All that and much more can be elaborated and dilated upon but not many ever looked at the gains of “note-bandi”, as demonetization has since come to be known as. One finds that a massive take-away from demonetisation was that those who, despite having had opportunities, shunned illegal wealth and found virtue in being ethical and honest.  Even it found resonance with the Finance Minister who said the measure accorded a semblance of dignity to them.

That was, however, for the people but there was something greater for their physical environment as well. Soon after the measure was announced headlines in newspapers screamed cash crunch “brings auto industry to a screeching halt”, auto industry faces “30% drop in November sales”, “auto sector for a rough phase” and so on.

On the face of it, the harsh impact on the sector may look unfair. After all, in the 1990s it was on the auto sector that the economy took a ride to some spectacular growth in the new century. But then it grew so much that it became something like a Frankenstein, threatening the very people for whom it was to work for. The reforms, in due course, created an upsurge in the middle classes raising their standard of living and aspirations that generally centred around an automobile and a house – both of which everyone coveted.

The banks fed the market with cheap loans and before one realized what was happening there were far too many automobiles choking and clogging urban India, emitting tons of carbon into the atmosphere with all its lethal components threatening the lives of everybody around. The expanded market attracted manufacturers from almost all European countries and the US as also from Japan and Korea.

Before the 1991 reforms the country used to produce passenger vehicles only in thousands, today it produces them in millions (2.8 million by the last count in 2015). This apart 16 million two wheelers were also manufactured. It has been a great jamboree for the middle classes, fed as they were by the saying “have money, buy car”. Families that had space for only one car and, maybe, a two wheeler had half a dozen cars – some of them spilling over to the public spaces, narrow lanes, colony roads. While jams became common even in tier 2 and tier 3 towns, providing parking spaces became a mammoth problem for the civic bodies.

The urban air went for a toss leading to diseases and deaths. The black economy has had no mean role in boosting up of this sector by fostering demand for the highly polluting diesel-driven SUVs that rule the roads. With a check on this sector, hopefully, Indian urban air will be somewhat cleaner enabling citizens to breathe easy. Thankfully the government is also in the process of framing laws to inhibit reckless purchases of cars – a measure that will be widely welcomed.

Another Sector that has taken a hit because of demonetization is the realty sector. Reports say housing sales dipped 44% after demonetisation. This is one sector which was pump-primed by black money and has, therefore had a swift fall – if not permanently, at least temporarily. This is the sector in which most of the illicit wealth is invested; this is where the action is. Here there are endless opportunities as it, by itself, generates black money. Ministers and bureaucrats are indulgent in handing out building permissions and all, together with the engineers and contractors, partake off the pile. Everyone knows what kind of games the politicians play with wealth so generated.

The urban sprawl has, therefore, been marching out in almost all directions of most of the cities gobbling up farmlands, forests, wetlands and their catchments or whatever comes in its way. While this has been largely responsible for damaging the urban environment, it has also, in many cases, exposed the inmates to nightmarish insanitation and filth. The civic bodies, already stretched to provide necessary services, have abstained themselves from such unplanned rapid urban expansion.

Most of the expanding fringes of the Indian urbanscape draw underground water in the absence of the piped municipal water. Thus, while levels of underground aquifers dip there is very little scope for their recharge, given the ceaseless drawal and the increasingly truant monsoons. Depletion of sub-soil water threatens water security as well as the over-ground greenery – the trees that sustain the environment and mitigate air pollution as well as harsh impacts of unkind seasons.  

Fallout of the uncontrolled urban expansion has been creation, like in China, of over-capacity in housing. Noida or for that matter, Bhopal have reportedly recorded over-capacity with thousands of units awaiting buyers. And yet Awaas Melas are held in Bhopal where green hills, farmlands and wetlands have been colonized. It is the illegal money that fed the real estate boom in their unplanned growth leading to civic mayhem and chaos. Stripped of black money the sector should cool for a while and in the meantime the government could move in to restrict urban growth drawing up “Urban Growth Boundaries” like they do in the US. If that were to be done the increasingly degrading environment around cities and towns would be saved.

Demonetisation has given a push to a cashless society where financial transactions will be paperless and carried out electronically. Modi has been promoting, even incentivising cashless transactions even in rural and semi-rural markets. This will surely reduce the need for cash, which in any case, is currently in short supply. With less cash, there will be lesser need of paper for printing currency. A report recently said that as the local sources were not able to provide paper for the need to replenish the diminished cash in the system 16 million tonnes of paper was going to be imported. With the likely proliferation of electronic transactions the demand for this kind of specialized paper will surely fall and that will be a gain for the environment on the one hand, savings for the government on the other.

If “notebandi” is successfully taken to its logical conclusion, with certain administrative measures people are likely to have a more hassle-free life, led in an environmentally cleaner India.


More by :  Proloy Bagchi

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